Page 52 - RusRPTMar21

The value of Russian merchandise exports fell by 21% last year, driven by the collapse in energy raw material prices and demand caused by the corona pandemic. But that was offset by rising gold and grain prices to leave Russia’s balance of payments comfortably in the black, reports Bank of Finland Institute for Economies in Transition (BOFIT) in its weekly update on February 19.
Crude oil prices crashed in March after Russia withdrew from the OPEC+ production cut deal. A new OPEC++ production cut deal that reduced production of oil by 9.7mbpd was eventually agreed on April 13 that supported prices and is now contributing to a recovery in prices; oil prices topped $65 this week again for the first time in a year.
The fall in oil prices combined with the collapse in demand due to the coronacrisis hurt Russia’s trade position and oil exports fell by 13% and natural gas by about 8%. The situation with gas exports was made worse by a gas glut caused by an exceptionally mild winter in 2019/2020 and the uncertainty over a new Russian ga transit deal with Ukraine that lead both countries to store large amounts of gas. In the end a new transit deal was signed at the last minute.
However, the impact of the various shocks turned out to be less damaging than they could have otherwise been. Despite the fall in crude exports, those of refined petroleum products decreased by only about 1% as export volumes of both petrol and diesel increased. Oil and gas accounted for about half of Russia's merchandise exports.
Russian exports were also supported by precious metals and grain exports, both of, which accounted for around 10% of exports.
Given the severity of the crisis investor’s knee jerk reaction was to buy gold, which makes up about a third of Russia’s hard currency reserves. The Central Bank of Russia (CBR) has been following a policy of building up its gold reserves since 2007 and holds about 2,000 tonnes of the yellow metal. The central bank ended its policy of buying gold last year after international reserves passed its “comfort level” of $500bn and ended 2020 at just under $600bn. The value of precious metal exports doubled in 2020, driven by gold.
Grain exports also fared well, partly as Russia brought in a good harvest of 133mn tonnes – only slightly down from the peak year of 2017 – and partly as grain prices also jumped due to coronacrisis related problems in other markets and a drought in Ukraine, Russia’s main grain export rival, that depressed yields.
The value of Russia’s food exports in 2020 increased by 20%, as exports of cereals and vegetable oil in particular grew briskly, reports BOFIT.
“Last year, the volume of wheat exports rose to all-time highs, and Russia has
52 RUSSIA Country Report March 2021 www.intellinews.com