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bne March 2023 New Europe in Numbers I 83
China steps into the sanctions trade hole to supply Russia
bne IntelliNews
China was already Russia biggest individual trade partner before the war in Ukraine started, but since then it has expanded its role and stepped into the gap created by sanctions, especially in providing Russia with crucial access to microchips, the Institute of International Finance (IIF) reported in a note.
The sanctions were supposed to cut
off Russia’s access to revenues used
to fund its war machine. However, because of massive leakage, the opposite happened: Russia earned twice as much cash in 2022 than in 2021, already an all-time-record year. Russia’s current account rose to an unprecedented $227bn in 2022, more than doubling the previous record of $120bn.
The strong expansion of exports, including oil and gas and other commodities, was the main driver of this growth. Despite a contraction of 16% in imports in 2022, this marks
a recovery after a decline of 35% was seen in the early weeks of the war following the imposition of
a “massive package” of sanctions.
Russia stopped reporting trade data after the war started, but IIF looked
at mirror customers data of Russia’s leading partners and validated this data by comparing the pre-war Russian data with the partners customs data. The correlation was good and if anything the partners data probably underestimates the level of imports
to Russia since, says IIF.
China's trade with Russia has seen significant growth since Russia's full- scale invasion of Ukraine. Sino-Russia trade has been growing explosively since the $5bn of mutual trade the two had in 1991. Trade between Russia and China reached a new all-time high in 2022, with a 29.3% increase compared to the previous year, totalling
$190.27bn, according to the General Administration of Customs (GAC) of China. China's exports to Russia saw a 12.8% increase,totalling $76.12bn. Meanwhile, Russia's imports from China climbed by 43.4% to $114.15bn.
Russia's surplus in the trade relationship with China amounted
to $38bn, a three-fold increase from 2021. The trade turnover between the two countries equalled $17.8bn in December 2022, which is a decrease of 3% compared to November.
China is now Russia's most significant trade partner, as Russia increasingly relies on China to supply goods banned by sanctions. Despite export controls, Russia has increased its imports of semiconductors and electronic circuits. The total value of chip imports rose from $1.8bn recorded for January- September 2021 to $2.45bn over the same period in 2022.
Russian trade barely impacted by sanctions As trade with China increased significantly
Source: BoR, Russia customs data, National authorities
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