New sanctions: what share of Russia's foreign trade has come under restrictions

After the EU decision to ban the import of 90% of oil from Russia, Russian exports of goods worth over $100 billion may be subject to sanctions .and the European Union

In 2021, the EU was Russia's largest trading partner (EU countries accounted for almost 36% of Russian trade), and the US was in the top 5 trading partners. But the Western sanctions that followed the special military operation in Ukraine, including those affecting the supply of goods to Russia and Russian exports to the EU and the US, will change the picture of foreign trade.

After the introduction of an embargo on the supply of oil and petroleum products from Russia to the EU, agreed by European countries on May 30 with exceptions, restrictions based on the results of all sanctions rounds by the end of 2022 will affect 23% of all Russian exports of goods to the EU and the USA, or supplies worth $115.3 billion (based on data for 2021), follows from RBC calculations. Only direct restrictions were taken into account, without taking into account the effects that add a ban on the entry of Russian ships into European ports, restrictions on the movement of trucks or sanctions against the financial sector.

Earlier, the Ministry of Economic Development estimated that the sanctions affected 20% of annual Russian exports and at least 10% of imports into the country. Based on these data, the decision to impose an oil embargo, which, as Brussels said, will affect 90% of Russian oil imported into the EU by the end of the year, will increase the volume of Russian exports subject to sanctions to a third of the total, RBC calculated.

How we thought

RBC has collected data on how much imports and exports Russia will lose as a result of EU and US sanctions that directly affect trade in goods. If, for example, we are talking about a US ban on the import of Russian mineral fuel ( oil, oil products, LNG, coal), then the volume of imports of these goods from Russia to the United States in monetary terms for 2021 was taken as an effect. As sources, data from the EU and the US were used (either downloaded by RBC from the relevant statistical databases of these countries, or taken directly from the reports of European and American authorities about the imposed sanctions). The data was adjusted to the US dollar at the average annual exchange rate for 2021. Information on the total volumes of Russian exports and imports was taken from the materials of the Federal Customs Service (FCS) of Russia.

The choice of sources was due to the fact that if the European Union, for example, banned the import of seafood, vodka, caviar from Russia according to certain codes of the international commodity nomenclature, then it would be more correct to focus on the EU's own data on the import of these products. EU import data cover deliveries of goods of Russian origin (even if they are imported, for example, through the territory of Belarus). All such goods will be prohibited from being shipped to Europe. If Russian export data were taken into account, the effect of sanctions would be underestimated, since in the above example, part of the supplies would not be reflected in exports to the EU countries.

Direct estimates of the European Commission were also used, which, based on the results of previous sanctions rounds, assessed the direct effect of trade sanctions: according to its data, the total volume of imports from Russia to the EU that fell under the bans reached €17 billion, the volume of exports to Russia was €22.8 billion.

What the given calculations on restrictions do not take into account

To simplify the task, the calculation did not include trade restrictions imposed by other countries, including the UK, Japan, Canada. But these restrictions are also quite significant: for example, London reported that as of May 9, the total value of goods in bilateral trade between Russia and the UK, subject to British export or import sanctions, exceeded £4 billion ($5.05 billion at the current exchange rate). In addition to direct trade restrictions, Russian exports and imports are affected by blocking sanctions against a number of individuals (for example, due to sanctions against Alexei Mordashov, Severstal stopped deliveries to the EU) and against banks that financed foreign trade, as well as restrictions on transportation (the EU also banned Russian ships to enter their ports, and Russian trucks to move through the territory of the bloc). Also, the effect of sanctions affecting trade in services was not taken into account. Thus, Washington banned its companies from providing accounting and consulting services to Russian residents. According to the US Department of Commerce, in 2020 the volume of professional services (audit, consulting) exported to Russia amounted to $190 million. The European Union has banned Russian airlines from flying to Europe, which will affect the decrease in the flow of Russian tourists to the EU countries. In pre-pandemic 2019, visitors from Russia spent $15.8 billion in the EU, according to data from the Bank of Russia. The US and EU have also stopped deliveries of paper dollar and euro banknotes to Russia (not included in the export/import statistics of goods). According to the US Department of Commerce, in 2020 the volume of professional services (audit, consulting) exported to Russia amounted to $190 million. The European Union has banned Russian airlines from flying to Europe, which will affect the decrease in the flow of Russian tourists to the EU countries. In pre-pandemic 2019, visitors from Russia spent $15.8 billion in the EU, according to data from the Bank of Russia. The US and EU have also stopped deliveries of paper dollar and euro banknotes to Russia (not included in the export/import statistics of goods). According to the US Department of Commerce, in 2020 the volume of professional services (audit, consulting) exported to Russia amounted to $190 million. The European Union has banned Russian airlines from flying to Europe, which will affect the decrease in the flow of Russian tourists to the EU countries. In pre-pandemic 2019, visitors from Russia spent $15.8 billion in the EU, according to data from the Bank of Russia. The US and EU have also stopped deliveries of paper dollar and euro banknotes to Russia (not included in the export/import statistics of goods). 8 billion, follows from the data of the Bank of Russia. The US and EU have also stopped deliveries of paper dollar and euro banknotes to Russia (not included in the export/import statistics of goods). 8 billion, follows from the data of the Bank of Russia. The US and EU have also stopped deliveries of paper dollar and euro banknotes to Russia (not included in the export/import statistics of goods).

The actual effect of trade sanctions will differ slightly from the estimated effect due to transitional periods and exemptions. For example, the European embargo on the import of Russian coal comes into force in August 2022. In the case of an oil embargo, Bulgaria will be able to continue importing Russian oil in 2023-2024. In other words, the full effect of trade sanctions will, in some cases, begin to be felt only from 2025. Specific European countries may, as an exception, issue separate permits for supplies that run counter to the sanctions regime.

Estimated trade effects are not estimates of actual future losses of Russian exports or imports. Net losses are likely to be smaller, as Russia is likely to divert some of the sanctioned trade flows to countries that have not joined the sanctions. The degree of success of such a reorientation will depend, among other things, on possible future decisions of the EU and the US (for example, with regard to the so-called secondary sanctions, the pace of decarbonization, etc.).

For example, if we hypothetically assume that the entire volume of Russian exports of oil and oil products will be redirected to Asian countries, but will be sold there at current discounts (30% to world Brent quotations), then export losses (while maintaining the level of oil prices) will be reduced to approximately $20 billion a year.

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