Russia’s current account surplus – a broad measure of the country’s trade, investment earnings and transfer payments with the rest of the world – widened to USD 58.2bn in Q1 2022 (Figure 1), equivalent to nearly 10% of the Central Bank of Russia (CBR)’s USD 609bn of international reserves as of 8 April (including sanctioned and frozen reserves), which are down from a record high of USD 643bn on 18 February, before the full-scale invasion.
The wider surplus reflects soaring revenue from Russia’s oil and gas exports – largely spared from international sanctions for the present.
Absent broader EU sanctions, Russia’s current account surplus could end the year above USD 200bn
Without broader EU sanctions of Russian oil and gas, Russia’s current account surplus could end the year well above USD 200bn, up from about USD 120bn in 2021, due to collapse of imports and the surging value of its commodity exports. This would essentially enable the CBR to rebuild a large segment of international reserves that sanctions have frozen.
Russia will speed up “de-dollarisation” of its reserves and foreign trade, including via increasing its exposure to Chinese renminbi, while maintaining exposure to euro. Russia currently conducts trade with China more in euro than in dollar, with EUR being the settlement currency with respect to half of Russian exports to China, compared with around one-third for USD.
Germany records 1st export deficit in over 30 yrs due to high import costs
Germany recorded its first monthly trade deficit since 1991 in May as a result of higher import prices, figures released Monday show.
The Federal Statistical Office said exports reached 125.8 billion euros ($131.5 billion) last month, while imports came in at 126.7 billion euros.
The seasonally adjusted figures resulted in a foreign trade deficit of almost 1 billion euros a psychological blow to Europe’s biggest economy, which prides itself on its strong export industries.
Analysts attributed the rise in imports to inflation.
Germany also saw exports to Russia recover by almost 30% in May compared to the previous month, following a 60% drop in April due to the war in Ukraine and related sanctions. The volume of exports to Russia last month remained less than half of what they were in May 2021.
Entire industries in Germany could collapse due to Russian
natural-gas supply cuts
Entire industries in Germany could collapse due to natural-gas supply cuts from Russia, said Yasmin Fahimi, the country’s top union official.
“Entire industries are in danger of collapsing permanently because of the gas bottlenecks: aluminum, glass, the chemical industry,” Fahimi, the head of the German Federation of Trade Unions, told Bild am Sonntag. “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”
The chemical industry, which employs about 346,000 people, is the third-largest industry in Germany, according to Germany Trade & Invest, the country’s investment promotion agency.
Germany — Europe’s largest economy — is reliant on piped natural gas from Russia, which accounts for 35% of its imports of the fuel. The industrial powerhouse imports almost all of the natural gas it uses, which accounts for about a quarter of the country’s total energy mix, according to the economy ministry.
The country’s energy crisis is already driving inflation to record highs, which threatens social stability, Fahimi told Bild am Sonntag.
Russian state gas giant Gazprom has already cut gas flows to Germany via the key Nord Stream 1 pipeline by 60% from last month, citing an equipment hold-up in Canada as a result of sanctions over the war in Ukraine.
Berlin fears the situation may get worse after the pipeline’s scheduled shutdown for maintenance from July 11 to July 21. Germany’s economy minister Robert Habeck said last week natural-gas flows may not resume after the scheduled works, which would in turn impact fuel storage ahead of winter, when demand spikes.
“We aren’t dealing with erratic decisions but with economic warfare, completely rational and very clear,” Habeck said at an event on Saturday, Bloomberg reported.
Germany — Europe’s largest economy — moved into the second stage of its three-stage emergency gas plan last month after Russia slowed supplies to the country. If the situation worsens, the country may start rationing natural gas in the last of the three-stage plan, as outlined by Germany’s economy ministry.
Under the country’s emergency plan, industry would be first in line for supply cuts. The move could devastate the economy and lead to job losses, Germany business leaders and unions have said.
Germany faces 5 billion euros a year hit from Russian gas sanctions
Russia’s sanctions against Gazprom Germania and its subsidiaries could cost German taxpayers and gas users an extra 5 billion euros ($5.4 billion) a year to pay for replacement gas, the Welt am Sonntag weekly reported, citing industry representatives.