The countries of the former USSR increased supplies to Russia against the backdrop of sanctions

The countries of the Eurasian Economic Union (EAEU) and some states of the former USSR that are not members of the union increased the EXPORT of goods to Russia in the summer, not only compared to the spring lows immediately after the start of the military operation in Ukraine, but also relative to the pre-crisis levels of 2021, follows from the trade statistics of these countries, collected by RBC.

For example, the EAEU block (Belarus, Kazakhstan, Kyrgyzstan, Armenia), in March-June 2022 (the period after the start of the conflict) shipped goods worth over $9.4 billion to Russia - 15% more than in the same months of 2021 ( about $ 8.2 billion), follows from RBC's calculations according to foreign trade statistics, data from Belarus and Kazakhstan and the UN Comtrade database. Basically, such a result was provided by Belarus (this is a special case, since the country, like Russia , is also under tough Western sanctions), but not only: Armenia over the same period increased supplies to Russia by more than one and a half times in annual terms, and Kyrgyzstan — more than doubled.

The expansion of trade with the countries of the EAEU, and indeed with the countries of the former USSR, naturally, parallel imports definitely play a role in increasing supplies (deliveries without the consent of the original copyright holder. -), says member of the Presidium of Opora Rossii, HEAD of the organization’s committee on international relations Nikolai Dunaev .

Kyrgyzstan exported $124 million worth of goods to Russia in June, 4.7 times more than in June last year, according to the UN Comtrade database, where the countries themselves submit data. In January-July, Kyrgyz exports to Russia amounted to about $396 million, up 88% from the same period a year earlier, the republic's National Statistical Committee reported on September 13.

Following the imposition of tough US and EU sanctions in February, the Federal Customs Service (FCS) and the Bank of Russia stopped publishing statistics on exports and imports. Their example was followed by the Eurasian Economic Commission (the regulatory body of the EAEU). Belarus closed the statistical data on trade with Russia in the context of product categories, but the total import-export indicators remained. However, Kazakhstan, Kyrgyzstan and Armenia separately continue to disclose data on trade with Russia.

Strong ruble factor

For goods that are localized and produced in the countries of the former USSR, incentives are created primarily due to the fact that the ruble is now exceptionally strong against national currencies - this is especially true for Kazakhstan, Uzbekistan and Belarus, whose currencies are extremely low against the ruble compared to long-term trajectory, explains Sofya Donets, chief economist at Renaissance Capital for Russia and the CIS. On the evening of September 13, the DOLLAR was trading at the level of 59.9 rubles on the Moscow Exchange.

The weakening of the currencies of Belarus, Kazakhstan, Armenia and Kyrgyzstan against the ruble means that goods supplied to Russia from these countries will become more price-competitive, which will support local industrial and agricultural exporters, analysts at the Eurasian Development Bank noted in July.

“There are also logistical reasons: Russia for them [these countries] is a close, accessible market, where there are “trodden” routes,” Donets adds.

Belarus and Kazakhstan as the main suppliers

Belarus, under sanctions against Moscow and MINSK, has overtaken Germany in terms of exports to Russia since the spring of 2022 and has become the second largest supplier of goods to the country after CHINA . In June, Belarusian supplies to Russia exceeded $2 billion (Belstat data), an increase of almost one and a half times compared to June 2021 and by 22.8% compared to the previous month. In 2021, about 23% of all supplies from Belarus to Russia accounted for equipment, mechanical devices, electrical machines, electrical equipment, cars, trucks, wheeled special equipment (groups 84, 85 and 87 of the foreign trade nomenclature). The composition of the current supplies is not disclosed.

Kazakhstan's exports to Russia, after a three-month decline in the spring (yoy), returned to growth in June (plus 1.6%) and accelerated in July (plus 13.9% compared to the same month of 2021). In June, Kazakh President Kassym-Jomart Tokayev said that the country was not going to violate the Western sanctions regime against Russia, because “in case of violation of sanctions, so-called secondary sanctions from the West will follow” [against the Kazakh economy].

Kazakhstani exports to Russia are dominated by iron or steel flats ($109 million in July out of a total of $716 million) and inorganic chemicals, mostly natural uranium ($75 million in July), according to the country's Bureau of National Statistics. Deliveries to Russia of vehicles and related devices and equipment in July amounted to $36 million, plastics - $14 million, bearings - $8 million. Coca-Cola, produced in Kazakhstan, began to appear in the assortment of Russian retail chains, RBC wrote in early September.

Kyrgyzstan has significantly expanded exports of clothing and footwear to Russia - $57 million in June (46% of total deliveries) against $5 million in June of the previous year.

Costs for Russian importers

The EAEU countries are helping Russia by importing necessary imported components and components for the manufacturing industry, Natalia Milchakova, an analyst at Freedom Finance Global, said on September 7. At the end of August, the heads of government of the EAEU countries, at the initiative of Russia, approved recommendations on expanding the use of their national currencies in mutual trade and ensuring the ability to do without the use of the European SWIFT system in mutual settlements.

However, the restructuring of logistics chains in the direction of neighboring countries entails increased costs for Russian importers, Dunaev notes. “Partner countries set margins on products: on average, they are 5%, but in some cases they can reach 15–20%,” he says.

Ukraine in April announced a complete cessation of trade with Russia. According to Comtrade, in June Ukrainian exports to Russia were zero, while imports from Russia amounted to about $76 million. For comparison: in June 2013, the trade turnover between the two countries reached $2.5 billion.

Growth of deliveries from other countries of the former USSR

Not only the EAEU countries are increasing the supply of goods to Russia, but also other states of the post-Soviet space. For example, Georgia, which left the CIS in 2009, increased exports to Russia to $82.6 million in July 2022 from $46.2 million in June and from $59 million in July last year, according to Comtrade data. The main share of July deliveries from Georgia fell on alcoholic and non-alcoholic beverages - $39 million (a year ago it was $23 million).

Export of Uzbekistan to Russia in July increased by 1.7 times in annual terms, to $258 million, more than $100 million of which were cotton and fruits. Operational data on exports to Russia from Azerbaijan, Tajikistan and Turkmenistan are not available.

The organization of re-export of goods from unfriendly countries through neighboring countries also takes place, Donets believes. “The statistics of the EAEU countries show that, for example, deliveries of cars, components and other non-food products [to Russia] are growing. At the same time, it does not mean that sanctions are being circumvented: consumer goods are not limited by them,” she said. The assortment in the shopping centers of the Volga region began to be filled with goods imported under the parallel import mechanism; car dealers in Siberia have resumed cheaper imports through neighboring states, the Bank of Russia notes in its September review of the regions.

The factors of logistics and the exchange rate have their ceiling, Donets warns: a new equilibrium has yet to be found when the new logistics are built and the ruble exchange rate corrects.