Michael_Luenen/PixabaySince the outbreak of the war (late February last year), November was the first month in which the value of EU imports from Russia was lower than in the same month in 2021. Until then, the EU was spending more cash than before the conflict. Reason? Energy dependence on Russia and soaring energy prices. But that’s not all: while some EU countries quickly reduced trade flows with Moscow, others, on the contrary, increased them.
The war did not stop trade with Russia
Before the war, Russia was the third largest importer to the EU and the fifth largest export destination. The value of imports from Russia steadily increased as the continent recovered from the pandemic. The trade peak was reached in March 2022; in the month following the start of the war in Ukraine, and steadily declined thereafter. The EU first hit Moscow with sanctions after Russian troops occupied Crimea in 2014, and after the invasion, imposed a series of sanctions packages aimed at increasing economic pressure on Vladimir’s regime Putin and limiting his ability to pay for the war.
In its early days, the EU took action to prevent Russia from accessing EU capital markets, and leaders quickly agreed on sanctions targeting Russia’s financial sector, energy and transport, and goods that could be used for military purposes. Transactions with the Russian central bank have been banned and several banks have been cut off from the international SWIFT payment system. Successive rounds of sanctions have tightened restrictions on Russian energy – Moscow’s main source of income. Coal imports are banned and oil restrictions were agreed in June 2022 and came into effect in December for oil imports by sea. Another EU ban on imports of Russian petroleum products, such as diesel and jet fuel, entered into force on February 5 this year. As for gas, although pipeline flows have fallen sharply, there are no real EU sanctions on Russian imports, and Russian liquefied natural gas (LNG) shipments to Europe were higher in 2022 than in 2021. Not all EU members to the same extent lowered trade relations with Moscow. While some began to reduce imports just a few weeks after Putin launched his invasion, some continued to see increases in November. It should be emphasized that in as many as 12 EU countries, the value of imports of goods from Russia in November 2022 was higher than their average for this month in 2017-21. We are talking here about: Slovenia, Austria, Hungary, Greece, Bulgaria, Spain, Italy, France, Slovakia, Belgium, Estonia and the Czech Republic. Moreover, in as many as 19 countries (including Poland) the value of imports from Russia was higher during the war compared to the average imports from February-November in 2017-21. The total value of EU imports of goods from Russia during the war (February-November 2022) amounted to €173 billion.
There is one key factor explaining why imports from Russia to the EU have not decreased: energy and its price. In the five years leading up to the war, energy-related products accounted for two-thirds of all Russian imports in monetary terms. European countries had to find alternative suppliers before they stopped buying from Moscow – and even as they cut back on energy purchases, the surge in prices meant that cash flows to Russia did not decrease proportionately. Since the start of the war, some EU countries have cut Russian energy imports much more than others. In the case of gas, limiting imports was not necessarily a political decision of EU governments, but something that was imposed on them by Russia. Russia’s state-controlled Gazprom significantly reduced gas flows to Europe in the spring and summer, either because of a failure to pay for raw materials in rubles, or allegedly for technical reasons. September’s – still unexplained – sabotage on the Nord Stream gas pipeline put a final end to the flow of gas to Europe via this route. EU exports to Russia halved within weeks of the outbreak of the war (a slowdown much faster than trade flows in the opposite direction). However, not for everyone – four EU members (Slovenia, Latvia, Croatia and Ireland) from February to November exported more to Russia than the average in this period in 2017-21. Germany – both before and during the war – is responsible for about 30 percent. EU exports to Russia.