Page 36 - bne IntelliNews monthly magazine December 2023

36 I Cover story bne December 2023
investment or planning and stifles innovation. Following the sanctions, Russia’s growth potential has fallen to a mere 0.3-0.5% as a result, say economists. That’s stagnation.
But Ukraine can’t wait for the long term. It needs results now after the much vaunted summer counter-offensive
led to a stalemate which is fuelling the already palpable Ukraine fatigue.
Apart from slow growth, the most obvious cost to Russia has been the
(€8.1bn, 8.1%), electrical equipment and machinery (€7.57bn, 7.6%) and plastics (€4.38bn, 4.3%).
But in 2022 most of Russia’s leading export products were sanctioned and by the start of 2023 all oil and gas imports stopped entirely, cutting just under €100bn out of mutual trade
by themselves. The Russo-EU trade turnover halved to €171.4bn in 2022
as EU exports fell by a third to around €40bn, even though Russian exports to
Russia’s growth of 2.2% this is an aberration caused by the military spending, but once that wears off the economy will stagnate.
Russia’s share of GDP/per capita as a share of the world is already falling, reports The Bell. Since 2013, Russia's GDP per capita has only increased
by 5%, which is lower than the world average and most developing countries. Prior to the Ukraine conflict, Russia's GDP per capita was just 2% below the global average, but this gap has now widened significantly.
The annexations of Crimea and four more Ukrainian regions last September are also a heavy burden as they are amongst the most heavily subsidised regions in the Federation.
And all this is not counting the cost of the war itself. In Russia’s 2024 budget
the Kremlin is for the first time ever spending more on security than on social spending. This year Russia is expected to spend RUB15 trillion on the war ($168bn), or some 10% of GDP.
“Expenditure on this scale leads to the expansion of groups that benefit from war (soldiers and their families, the military-industrial complex, military officials) and a reduction in income
for everyone else. Extending the war will result in a gradual decline in living standards in Russia,” the Wilson Centre said in a recent note.
“The most obvious cost to Russia has been the collapse of bilateral trade between Russia and the EU, formerly Russia’s biggest trade partner”
collapse of bilateral trade between Russia and the EU, formerly Russia’s biggest trade partner. Trade with China has more than doubled in the same period and is on course to top $200bn this year, but that doesn’t come close to replacing the trade lost with the EU.
After a slowdown in trade between
2013 to 2016 caused by the first round
of sanctions, Russo-EU trade recovered rapidly in 2017 according to the Russian customs to just under €250bn and stayed pretty constant at that level until 2021. In this period Russia was running an annual trade surplus with Europe on the order of €80bn a year of which over a third were oil and gas in value terms.
In 2021, the total trade in goods between the EU and Russia amounted to €257.5bn, according to Eurostat.
The EU’s imports were worth €158.5bn and were dominated by fuel and mining products – especially mineral fuels (€98.9bn, 62%), wood (€3.16bn, 2.0%), iron and steel (€7.4bn, 4.7%) and fertilisers (€1.78bn, 1.1%).
The EU’s exports in 2021 totalled €99.0bn. They were led by machinery and equipment (€19.5bn, 19.7%), motor vehicles (€8.95bn, 9%), pharmaceuticals
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the EU were up two thirds to €137bn in value terms (due to the energy crisis).
Trade between Russia and Europe this year is down more than 3-fold after EU exports to Russia fell to under 2% of total EU trade in the first nine months of this year, from 9.6% in 2022 in the same period, according to Eurostat.
The EU now runs a trade deficit with Russia of only €400mn a month or less, down from the pre-war average of about €8bn a month. Russia’s mutual trade with the EU is on course to fall below €100bn this year.
EU trade in goods with Russia, January 2021 - June 2023
% share in extra-EU trade, seasonally adjusted
Source: Eurostat