Russia’s Export Windfall Catapults Key Trade Barometer to Record
- Current-account surplus is biggest in decades thanks to export
- Imports plunge as sanctions and ruble weakness cripple demand
Russia recorded the largest current-account surplus since at least 1994, as revenues from oil and gas exports surged and imports plunged after the U.S. and its allies imposed sanctions over President Vladimir Putin’s invasion of Ukraine.
The proceeds have become a critical source of hard currency during the war, enabling authorities to pay for imports, support the economy and restore confidence in the ruble.
The surplus in the current account, the broadest measure of trade and investment flows, reached $58.2 billion last quarter, more than double the $22.5 billion reported a year earlier, the Bank of Russia said Monday.
Dollar Lifeline
Russia is set for another year of higher energy earnings
Source: Bloomberg Economics
Note: * Revenue calculated for 2022 based on current prices
Sofya Donets, economist at Renaissance Capital in Moscow, estimates the surplus was at $19 billion in March, the first full month of the conflict with Ukraine. “The effect of sanctions had yet to manifest itself on exports in March,” she said.
While the sweeping sanctions are expected to trigger the deepest recession in decades, the restrictions so far don’t extend to Russia’s key energy exports, which have benefited after prices jumped since the invasion began on Feb. 24. Capital controls imposed to limit the drop in the ruble mean that investment outflows are all but cut off.
Bloomberg Economics expects Russia will earn nearly $321 billion from energy exports this year, an increase of more than a third from 2021. It’s also on track for a current-account surplus that the Institute of International Finance says may reach as high as $240 billion.
What Bloomberg Economics Says...
“Russia’s ballooning current account surplus reflects the surge in oil-and-gas prices but also a collapse in imports. While energy exports are keeping the economy afloat, sanctions have required a painful adjustment from households and businesses.”
--Scott Johnson.
High energy prices in the first quarter also helped Russia’s budget, generating 273.4 billion rubles ($3.4 billion) that the government putin its special stockpile for social programs, economic support and other needs.
Russia has for years stowed away windfall energy earnings in its international reserves, which peaked at $643.2 billion days before the war. It also embarked on a multi-year effort to reduce exposure to the U.S. currency.
Away From Dollar
Russia boosted share of euro, yuan, while cutting dollar in its international reserves
Source: Bank of Russia
In a separate report on Monday, the central bank said it cut the share of dollars in reserves to 10.9% as of Jan. 1, from 21.2% a year earlier. Euro holdings rose to 33.9% from 29.2% and the yuan’s proportion reached 17.1% from 12.8%. Gold was down slightly at 21.5%.
But the invasion of Ukraine prompted an international response that including sanctioning Russia’s central bank, leading to the seizure of about half of its reserves. Governor Elvira Nabiullina said in the annual report that it still has enough left.
“After the freezing of reserves in their currencies by western countries, Russia continues to have a sufficient amount of reserves in gold and yuan,” she said.
Spreading the Wealth
Russia shifted bigger share of reserves to Germany and China last year
Source: Bank of Russia
Some other EU nations may be in the segment of 'other countries' as well
In the course of last year, the Bank of Russia added to the share of its assets held in Germany, bringing their proportion to 15.7% at end-2021 from 10.8% a year earlier. China accounted for 16.8%, up from 14.2%.
— With assistance by Benjamin Harvey
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