Russia Trading Inc still in profit as imports fall more than exports

Russia Trading Inc still in profit as imports fall more than exports
Even at the current depressed prices, Russia Inc is still earning a healthy profit from oil exports and had a $150bn balance of trade surplus in 2015.
By bne IntelliNews February 18, 2016

The value of Russia’s exports tumbled by a third in 2015 as oil prices crashed, but imports have crashed just as hard, leaving Russia Inc with a net trade surplus of about $150bn, according to Rosstat.

The collapse of oil prices has whallopped Russia’s trade regime extremely hard, chopping a massive $223.6bn off the value of Russia’s exports in 2015 y/y. However, the concurrent collapse of the ruble means that slightly more was chopped off the value of imports ($239.1bn), still leaving Russia Inc well in the black.

Even at the current depressed prices, Russia Inc is still earning a healthy profit from oil exports because the spike in cost of imported goods has led to an even heavier collapse in imports, which were down 40% y/y.

Sanctions on imports to Russia of European agricultural goods have also helped as Russians switch en masse to the cheaper but less good domestically produced products. In addition the travel-happy Russian have been forced to stay home by a de facto doubling of the cost of foreign holidays in ruble terms which also stops them exporting their hard currency on binges in Turkey and Egypt. This has all helped the overall current account balance to end with a  $65bn surplus in 2015.

Pharmaceuticals imports have proportionally increased their share of inbound goods and are now Russia’s biggest import item from the West – one of the few things it can’t source elsewhere and doesn't make itself.

Measured in US dollars, the value of both goods exports and goods imports contracted by 30% y/y in the fourth quarter of 2015, reports Bank of Finland Institute for Economies in Transition (BOFIT), citing the state customs data. The rate of contraction for both imports and exports, however, slowed slightly as the end of the year approached. Most of the drop in the value of exports reflected low commodity prices. The fall in imports came mainly from lower import volumes.

For 2015 overall, Russian goods exports contracted a bit over 30% and had a value of about $340bn. Crude oil, oil products and natural gas accounted for 64% of total goods exports (a slight drop from earlier due to the sharp decline in oil prices). The volume of crude oil exports rose 9%, oil products 4% and natural gas 8%. Export volumes were also up for certain metals, fertilisers and wood products. Metals accounted for nearly 10% of exports, while chemical products and machinery & equipment each accounted for over 7% of exports.

The value of goods imports was $190bn, down nearly 40% y/y. Again, the largest import category (45%) was machinery, equipment and transport equipment, even if imports in this category have fallen dramatically for a while due to weak investment demand (e.g. the volume of imported passenger cars fell by half last year). As a result, pharmaceuticals became the largest single import category, and chemical products overall accounted for nearly a fifth of all imports. Foodstuffs rose slightly to nearly 15% of imports.

EU countries saw their share of Russian foreign trade shrink slightly last year. Just under half of Russian exports went to the EU and just under 40% of imports came from the EU. Asian countries, in contrast, saw slight increases to nearly 20% of exports and 30% of imports. China accounted for over 8% of Russian exports and nearly 20% of imports. The shares of Eurasian Economic Union countries rose slightly (due in part to the accession of Kyrgyzstan) to about 8% for both exports and imports.