"There will be no collapse of the Russian economy"

Almost exactly one year to the day after the start of the Russian war of aggression in Ukraine, the Committee on Eastern European Economic Relations draws a sobering conclusion on the impact of the sanctions against the Russian regime. "There will be no collapse of the Russian economy," said CEO Michael Harms. "And Putin will not run out of money for the war either."

Although the sanctions imposed by the West had had an effect, the Russian economy did not grow by around three percent, as expected before the start of the war, but shrank by three percent. But a rapid, massive slump in economic output is not to be recorded.

In the long term, the economy in Russia will become “primitive”, but in the short term President Vladimir Putin's regime has managed to stabilize Russia's energy exports with a “clever policy on the part of the central bank” and other markets. Above all, countries like China and India stepped in as buyers. Overall, the countries that account for around 30 to 40 percent of global economic output would not participate in the sanctions.

It was always about putting a "price tag" on Russia's war of aggression with the sanctions, said Harms. "That price tag was pretty big." Looking at the development of foreign trade between Germany and Russia, however, the crash last year was by no means as big as one might have assumed.

The volume of goods traffic fell from almost 60 to almost 50 billion euros. As a result, Russia only slipped from 13th to 16th place in the ranking of Germany's most important trading partners.

However, there are very different developments in exports and imports: while exports to Russia fell by more than 45 percent from 26.6 to just 14.6 billion euros, imports even increased. In 2022 they were a good two billion euros higher than in the previous year. This was partly due to the fact that the imports of energy sources such as gas and oil, which continued for many months last year due to the Ukraine war, were significantly more expensive than in previous years.

In addition to the general decline, there have also been significant shifts in exports, said Harms. With more than three billion euros, pharmaceutical products made up the majority of exports from Germany to Russia. Compared to the previous year, 17.6 percent more goods were exported in this category.

The increase in agricultural and forestry products is even clearer, with growth of more than 45 and a good 48 percent, respectively. Trade focuses primarily on areas that are deliberately excluded, such as agriculture, food and medical products, said Harms.

Exports of vehicles fell sharply (minus 76 percent), significantly fewer machines and furniture were sold from Germany to Russia (each a good 50 percent less), exports in the data processing equipment category even fell by almost two thirds.

On the import side, there was growth above all in energy sources. The value of the Russian oil and natural gas supplies imported by Germany fell slightly by a good five percent. On the other hand, coal imports increased by more than 50 percent, and imports of mineral oil and coke oven products even doubled in value.

However, the fact that the statistics for individual product groups show a sharp decline in the export of German goods to Russia does not necessarily mean that they do not actually get there. It is repeatedly reported that sanctions are sometimes circumvented via other routes.

Some trade balances of other countries, especially in Central Asia, can at least be read as an indication of this. For example, exports of German vehicles to Kazakhstan quintupled. Overall, foreign trade with the Central Asian country almost doubled last year, with both imports and exports increasing sharply. Other countries, such as Armenia, also benefited particularly. Trade with countries such as Poland, the Czech Republic, Hungary, Romania and Slovakia each grew by double-digit percentages.

The Eastern European Committee does not believe that some countries are circumventing the sanctions on a large scale. "We categorically rule out deliberate circumvention of sanctions by German companies," said Harms. If they do exist from individual companies, they are a case for the public prosecutor.

The Eastern Committee, which has had a strong focus on Russia in the past, does not expect relations to return to normal in the short term - even if the Ukraine war comes to an end. "There will be no normal trade relations with Russia in the foreseeable future," said Harms.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.