Russia: Trade surplus narrows drastically in November as exports continue to plunge, EU prolongs sanctions
December 30, 2015
In November, Russia’s trade surplus registered USD 8.6 billion. The result was well below both the USD 11.1 billion observed in October and the USD 13.7 billion observed in the same month of the previous year. November’s result, together with the reading registered in August, marked the smallest trade surplus in over five years. Consequently, the 12-month rolling sum of the trade surplus up to November fell to USD 148.7 billion (October: USD 153.7 billion), which marked the lowest surplus since 2011.
The narrowing of the trade surplus continued to reflect the notable fall in merchandise exports. Russian overseas sales recorded USD 25.3 billion in November, which represented a 31.2% annual plunge. The contraction in November marked the 13th consecutive month with exports falling at a double-digit rate and followed the 31.4% decrease registered in October. Meanwhile, imports recorded USD 16.7 billion in November, which were down 27.8% compared to the level observed in the same month of the previous year.
On 21 December, the European Union (EU) announced that it will prolong economic sanctions against Russia until 31 July 2016 over its actions in Ukraine, stating Moscow has failed to implement its obligations under the Minsk ceasefire agreement. The sanctions were initially introduced for one year on 31 July 2014, in response to Russia’s annexation of Crimea. On 22 June 2015, the EU prolonged the duration of the sanctions for an additional six months, until 31 January 2016. The duration of the measures was linked to the complete implementation of the Minsk agreement, which was expected to take place on 31 December 2015. Meanwhile, Russia itself extended sanctions against Turkey on 28 December. The measures aim to implement unenforced sanctions initially imposed on Turkey on 28 November along with a set of new measures that came into force on 1 January 2016.
In the past weeks, global oil prices fell to fresh lows and the price of Urals oil touched a new multi-year low on 22 December, when prices closed the trading day at USD 33.6 per barrel. The drop—and continued oil price weakness—is the result of Saudi Arabia’s reiteration of its policy of not cutting production in response to lower oil prices and despite announcing a radical austerity program. The drop was also exacerbated by Russia’s decision to give a heavier discount for its Urals mix of bled oils to its European markets.
Author: Ricardo Aceves, Senior Economist