Ivanov is Wrong: Sanctions Hurt Russian Exporters

Russian daily Vedomosti writes about decreasing Russian exports to the EU in the period 2013-2015.  Some Russian government officials, most notably President’s Chief of Staff Sergei Ivanov, stated that the international sanctions imposed after Russia’s annexation of Crimea are hurting the EU more than Russia.  However, the data indicates that total Russian exports to the EU dropped from USD 275 billion to USD 150 billion, mainly due to falling oil and gas prices.  The EU now sources only 7.9% of its imports from Russia, compared to 12.3% in 2013.  The EU is still the biggest export market for Russia, accounting for close to half of its total exports.

While Russia boosted its exports of copper, fertilizers and wheat, its vehicle exports dropped by 26%.  It turns out that the only exporters benefiting from the falling ruble are those that have little need for processing; Russian production with a higher share of processing is actually becoming less competitive in foreign markets. This is because the international sanctions and falling ruble are preventing Russian exporters from sourcing the most competitive production equipment and raw materials from abroad, leaving them with domestic suppliers as the only choice. Although this conclusion sounds counterintuitive at first, Russian exporters that create higher added value are actually benefiting from the ability to import competitive raw materials and processing equipment.

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