Russia: Trade registers highest surplus in seven months at the beginning of 2016
February 29, 2016
In January, the trade surplus totaled USD 12.6 billion, which came in below the USD 15.4 billion registered in the same month last year. January’s print represented an improvement over the surplus registered in December and marked the highest surplus since June 2015. In the 12 months up to January, the trade surplus totaled USD 143 billion (December: USD 146 billion), which marked the smallest accumulated trade surplus in nearly six years.
The mild improvement in the trade surplus was mainly the result of a more moderate contraction in exports. Russian shipments contracted 18.1% annually in January, which was a relatively softer drop than the 26.0% decrease registered in December. January’s contraction marked the smallest contraction in 15 months. Meanwhile, imports recorded USD 10.1 billion in January, which represented a 17.7% contraction over the USD 12.3 billion registered in the same month last year.
In 2015 as a whole, the country’s trade volumes fell by over a third relative to 2014, due to international sanctions over Russia’s annexation of Crimea and the economic impact of plummeting commodities prices. Russia’s trade with EU’s eastern countries—Bulgaria, the Czech republic, Estonia, Latvia, Lithuania and Poland—for which full data are available, deteriorated notably in 2015 as Russia banned imports of food products from the European Union in response to the sanctions over Crimea. The downturn in Russia’s trade was also exacerbated by the economy’s deep recession, as well as falling oil prices, which have reduced the value of its energy exports.
Global oil prices—and Urals oil were not the exception—registered continued drops at the onset of the year, reflecting higher inventory accumulation and weak demand, particularly from emerging economies. Oil prices touched an all-time low in January and rebounded in the following weeks as a result of the announcement made by Qatar, Russia, Saudi Arabia and Venezuela that they were willing to freeze production at January levels. The nations announced the agreement on 16 February, which prompted a rally in oil prices.
On 29 February, Urals oil prices closed at USD 34.0 per barrel, returning to the levels last seen in the first days of January. The rally has been fueled by hopes for an official deal to freeze glut supplies, which is seen as the first step to the sort of output cuts needed to rebalance an oversupplied market. On 2 March, Russia’s Energy Minister reiterated the country’s position to freeze oil output saying that a “critical mass” of producer nations were now signed up to the agreement. Nonetheless, the recovery in oil prices has been slow and disappointing as the deal does not include all OPEC members and doubts remain whether Iran, the main regional rival for Saudi Arabia and a renascent oil behemoth with the world's third largest reserves, will join the agreement. Although rumors have emerged that Iran could join the deal and cap its production at a higher level, reaching an agreement with Tehran is likely to prove more difficult as Iranian leaders are seeking to return production levels that allow the country to return exports to their 2012 levels.
Author: Ricardo Aceves, Senior Economist