Despite sanctions, Russian economy posts record current account surplus in first quarter –

High energy prices and continued purchases of Russian gas and oil in the first quarter of 2022 allowed Russia to post the highest current account surplus in recent history, indicating that the sanctions of the EU against the country have only a limited effect.

According to figures from the Central Bank of Russia, the country exported goods and services worth $58.2 billion more than the value of its imports, exceeding more than two and a half times the surplus of the current account he had in the first quarter of 2021.

Over the past 12 months, Russia’s current account surplus totaled $157.8 billion. This is a higher current account surplus than in any previous year, according to World Bank data.

The current account surplus appears to be driven by high gas and oil prices, allowing Russia to demand a higher price for its own fossil fuel exports that a number of EU countries continue to charge. ‘to buy.

While the United States has banned Russian energy imports, the EU has not restricted the purchase of Russian energy in the short term, as some member states are heavily dependent on Russian fossil fuels.

The EU plans to phase out Russian coal imports within four months, but the value of Russian coal is only around 4% of the value of EU imports of Russian gas and oil.

At a meeting on Monday April 11, foreign ministers from EU member states discussed an oil embargo but failed to get started.

“We don’t want to take sanctions that harm the EU more than Russia,” EU officials have repeatedly said when asked about European reluctance to impose further sanctions.

Although Russian energy supplies are important for many member states, they are also the most important lever the EU has on the Russian economy, as the figures below show.

Eurostat data. Graphic by Esther Snippe.

The continued purchase of Russian energy is also supporting the Russian ruble. After the United States and the EU sanctioned the Central Bank of Russia on February 28, the national currency plunged for the first time in the foreign exchange markets.

But capital controls imposed by the central bank as well as the constant inflow of foreign currency from energy exports have helped the ruble recover to levels close to before February 24, when Russia began its invasion of the EU. ‘Ukraine.

“The ruble is strengthening due to exceptionally strong foreign exchange inflows from energy sales, tight capital controls on ruble convertibility and low market liquidity,” the deputy chief economist wrote. Institute of International Finance, Elina Ribakova, in a recent analysis.

Although the exchange rate was not set by the free market, the ruble’s stability was nevertheless “real” as it was “boosted by Russia’s unprecedented current account inflows”, she explained.

Moreover, Ribakova pointed out that the sanctions should be adjusted over time to continue hurting the Russian economy.

Any adjustment that would seriously harm the Russian economy would have to take into account the ability of the Russian state to finance itself through energy exports.

Last week, the European Parliament overwhelmingly approved a motion to ban Russian energy imports.

“Our energy addiction, our money, allows Ukrainians to be killed,” said Liberal MP Luis Garicano, arguing for the ban. “Isn’t it clear that our gas is stained with blood and that we are the culprits who finance this monster?” he added.

However, Parliament has no formal power to decide on such an import ban, which would have to be approved by EU member states.

The European Commission, meanwhile, argues that EU sanctions are effective.

“EU sanctions cripple the Kremlin’s ability to finance the war,” a Commission spokesperson told EURACTIV in emailed comments, adding that “we continue to work on new sanctions.”

[Edited by Zoran Radosavljevic]

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