30/1/16: Russian Trade Balance in Goods: 2015

On foot of my note covering Russian preliminary estimates for external trade, some readers asked if the figures provided (see here: http://trueeconomics.blogspot.com/2016/01/23116-russian-external-balance-2015.html) were indeed in Rubles. The answer is no - these are US Dollar amounts at the exchange rate posted time of data release (so preliminary figures are subject to change due to exchange rates effects as well as data updates).

As with all national statistics everywhere, Russian data has better coverage of goods trade, than services trade. Services trade generally lags goods trade in terms of reporting for a range of reasons that are reflected in all countries accounts. While we have only estimates for services trade through November 2015, we have actual figures for goods trade through the same period. These are reported by the Central Bank of Russia and provided below.

For 11 months (January-November) of each year, Russian exports of goods (only) fell from USD459.381 billion in 2014 to USD311.934 billion in 2015 - a decline of 32.1% y/y and a drop of 34.9% on comparable figure in 2012. Meanwhile, imports of goods (only) fell from USD283.541 billion in 2014 to USD176.652 billion in 2015 -a decline of 37.7% y/y and a drop of 41.9% on 2012 levels.

As the result, Trade Balance (goods only) for 11 months of 2015 fell from USD175.84 billion to USD135.582 billion - down 23.1% y/y. The Trade Balance (for 11 months cumulative) was down 22.8% on 2012 levels.

We can, with some stretch of imagination, extrapolate 11 months figures to full year. To do this, we adjust the figures for seasonality (December imputed weighting in trade volumes across both exports and imports).

If we do so, full year exports of goods for Russia come in at around USD342.9 billion down 31.1% y/y, while imports come in at USD194.32 billion, down 36.9% y/y. Trade balance for the full year 2015 (goods only) comes in at around USD147.6 billion, down 22.2% y/y, making 2015 the lowest trade surplus year (goods only) since 2010 when trade balance stood at just under USD147.0 billion.

Charts to illustrate the dynamics based on imputed full year values (note: horizontal lines are period averages):

For what it is worth, it might be interesting to make a comparative between 2015 levels of external trade and pre-2000 era. Average exports of goods in 1994-1999 were USD79.4 billion and 2015 levels were 4.3 times higher. Average imports of goods in 1994-1999 were USD58.45 billion and these rose 3.3 times in 2015 figures. As the result, average 1994-1999 trade balance was USD20.95 billion. 2015 trade balance was 7 times larger than that.

Not too shabby numbers, event though 2015 was a tough year of trade for Russian exporters.

23/1/16: Russian External Balance 2015

At the end of 2015, based on the preliminary estimates of 2015 balance of payments statistics from the Central Bank of Russia, Russian trade volumes with the rest of the world stood at just under 2010 levels. This is hardly new, as 2010 values of trade - both for exports and imports of goods and services - have been breached back in 3Q 2015. This erases gains between 2010 and 2013 (with 2013 posting all-time record high volumes and values of trade flows)

In 2015, exports revenues fell more than 30% in USD terms and 17% in Euro terms year on year. Imports expenditures fell 35% in USD terms and 22% in Euro terms. Perhaps somewhat surprisingly, 4Q figures came in broadly in line with annual figures. This is surprising due to imports and exports-lifting seasonal effects.

As exports shrunk less than imports, current account surplus actually rose both in level terms and relative to GDP. At the peak trade year of 2013, current account surplus was USD35 billion, rising to USD58 billion in 2014. 2015 preliminary estimate puts full year current account surplus at USD66 billion. Relative to GDP, current account surplus rose from 1.7% in 2013 to 5.4% in 2015.

These are remarkable figures, reflective of both devaluation of the ruble, the ability of the economy to take on imports contraction, and the relative resilience of exporters. Exports of goods and services were down massively, still, from USD593 billion in 2013 to USD389 billion in 2015. While trade balance in Goods fell from USD182 billion in 2013 to USD146 billion in 2015, trade deficit in services shrunk from USD58 billion in 2013 to USD37 billion in 2015.

The key to overall balance improvements, however, was in the category of “Other Current Account” - covering foreign earnings expatriation from Russia - here the deficit of USD89 billion in 2013 fell to USD76 billion in 2014 and to USD43 billion in 2015. Similarly, on the balance of payments side, “Fictitious Transactions” line of balance - covering Russian corporates exports of capital from Russia - fell from USD27 billion in 2013 to USD9 billion in 2014 and USD 1 billion in 2015. Balance of payments for Private Sector also improved, dramatically, with deficit of USD63 billion in 2013 ballooning to a deficit of USD152 billion in 2014 before falling to a deficit of USD57 billion in 2015.

BOFIT provides a neat summary table of latest Balance of Payments breakdown figures for 2013-2015:

Source: BOFIT

21/10/15: By Current Account Fetish Theory, Russia is Doing Quite Fine...

In charts we live... and in charts we delight.

Here is a neat summary of global current account balances (horizontal axis) against the rate of change in the current account over 12 months through 2Q 2015.

Source: @NickatFP 

6th largest surplus: Russia. Fastest growth in surplus: Russia.  So that petrodollar economy, then... like, say Saudi Arabia?..

Now, think of the favourite theory of 'sustainability' advanced by the likes of the Euro-centric Bruegel and its followers. The said theory rests on sustainability being equivalent to medium-term or long-term external balances... either that theory (underpinning most of the official EU economic mantra) off the rocker or... take a look at the chart again.

No comment beyond.

20/7/15: Of 'Break-Even' Oil Prices & Russia

An interesting chart via Deutsche Bank Research putting break-even (fiscal budget) figures on oil prices for major oil producers:

Which puts Russian break-even at USD105 pbl.

Reality is: Russia has capacity to increase oil output further and has done so already (note that it is now world's largest oil producer). It can also raise some other exports volumes, though general global conditions are not exactly supportive of this. Which underpins revenue side of the budgetary balance somewhat.

Meanwhile, Russian Government own budgetary estimates put break-even price of crude at around USD80-85 pbl, not USD105 pbl, closer to UAE, than to Oman.

Worse, for Deutsche, Russian budget is expressed in rubles, not USD, which means that FX valuation of the Ruble to a basket of currencies (Russian exports are not all priced in USD) co-determines the break-even price. Moderating (albeit still very high) inflation and EUR trend, compared to USD trend, suggest falling 'fiscal break-even' price of oil for Russia.

There are too many variables to attempt to estimate effective and accurate 'break-even' price for oil for Russia.

What is, however, clear is that Russian current account (external balance) is in black and it is improving, not deteriorating. Latest Balance of Payments data shows current account surplus of almost USD20 billion in 2Q 2015. Over 12 months through June 2015, current account surplus is at 4% of GDP. The driver here: decline in imports (down 40% in dollar terms in 2Q 2015 y/y) outpacing drop in exports (down just under 30% y/y). In January-June 2015, trade surplus was USD70 billion (USD210 billion in exports, USD140 billion in imports).

Balance of payments is also being supported to the upside by a decline in capital outflows. 2Q 2015 capital outflows amounted to ca USD20 billion, predominantly comprising banks repayment of maturing foreign debt (remember, this improves banks' balancesheets and deleverages the economy). However, direct investment from abroad into Russian non-fianncial corporations rose over the 2Q 2015, resulting in an increase in foreign debt held by the non-financial sector.

Overall, Russian Central Bank shows foreign debt position at ca USD560 billion (or 30% of GDP) at the end of 2Q 2015 - basically unchanged on 1Q 2015 and down from USD730 billion at the end of 2Q 2014.

And another reminder to fiscalistas:

• Russian public (Government) external debt currently stands at USD35 billion. 
• State-controlled banks hold further USD90 billion in external debt (total banking sector external debt is USD150 billion and 60% of that is held by state-owned banks).
• State-controlled NFCs firms hold ca 40% of USD360 billion foreign debt written against Russian NFCs, or USD144 billion. 
• Accounting for cross-holdings and direct equity-linked debt, net foreign debt that has to be repaid at maturity or refinanced by NFCs and Banks owned by the Russian Government is probably around USD150-160 billion. 

Sizeable, but less than 12% of GDP even after including the official public debt and state-owned enterprises debts.

25/1/15: Russian Current Account Improved in 2014

I have remarked on a number of occasions just how rapidly Russian current account can adjust to an external shock. This time around, the adjustment is via decreasing imports to compensate for both - the ruble devaluation effects and the sanctions/counter-sanctions effects, as well as the traditional economic recession pressures.


Based on the preliminary data from the Central Bank of Russia, Russian exports of goods and services fell 19% in dollar terms in Q4 2014 and were down 12% in euros. Russian imports of goods and services fell at the same rate.

Full year 2014 preliminary estimates show exports down 6% and imports down 9% in both dollar and euro terms. In 2013, exports of goods and services run USD593 billion or 28.3% of GDP. In 2014 exports of goods and services slipped to USD560 billion, but stood at 29.4% of GDP (these are dollar-denominated GDP figures). Trade balance in goods stood at USD182 billion (8.7% of GDP) in 2013 and this rose to USD186 billion (9.7% of GDP) in 2014. Trade balance in services also improved, from a deficit of USD55 billion in 2013 (-2.8% of GDP) to a deficit of USD55 billion (-2.9% of GDP) in 2014.

While goods imports contracted 10% over full year 2014, in Q4 2014, goods exports fell a whooping 19% in USD terms. Q4 2014 imports of tourism services (travel by Russian residents abroad) fell 20% compered to Q4 2013.


On the Financial Account side, State accounts excluding the Central Bank were in a healthy surplus of USD30 billion for the full year 2014, up on USD 5 billion in 2013.

Private sector accounts, however, were abysmal. Total Private Sector financial accounts finished 2014 with a deficit of USD150 billion (-7.9% of GDP) which is far worse than USD62 billion (-3.0% of GDP) in 2013. The USD150 billion figures is what we usually attribute to capital flight from Russia. This figure consisted of USD50 billion of financial deficit in the banking sector (against USD7 billion deficit in 2013) and USD 100 billion deficit on ex-banks private sector accounts (against USD55 billion in 2013).

Good news is: fictitious transactions (basically a shell-game with company money involving foreign offshore holding firms) shrunk dramatically in 2014: falling from the net outflow of capital via such transactions of USD27 billion in 2013 to net outflow USD 9 billion in 2014.

Another interesting note: as noted by me on numerous occasions, part of capital outflows was down to aggressive dollarisation of the economy at the end of 2014, which saw build up of private sector forex cash deposits held in Russia. Based on CBR data, in 2013 such deposits shrunk by USD0.3 billion, while in 2014 they rose by USD34 billion (USD18 billion of that increase took place in Q4 2014 alone).


Overall, Russian current account surplus improved significantly in 2014 despite all the cash outflows and decline in exports. In 2013, Russian current account surplus stood at USD34 billion (1.6% of GDP), and in 2014 this increased to USD57 billion (3.0% of GDP), with USD11 billion of that accruing in Q4 2014 alone.

We can expect more dramatic declines in both, oil and gas revenues on exports side and imports of goods and services in 2015. One key parameter to look at is exports and imports of services. The reasons for this are simple, albeit not easy to gauge or forecast.

Firstly, significant share of Russian exports of services (and also some associated imports) is down to effectively Russian companies producing services using (in accounting and also contracting sense) off-shore affiliates. We might see some of this activity being on-shored in Russia, with resulting decrease in imports and a rise in exports.

Secondly, Russian enterprises and investors are likely to cut back on imports of key financial, ICT and business consultancy services as the Russian economy suffers from downward pressures on investment and growth.

17/12/2014: Some Ruble-Heavy Reading: Contagion, Reserves & Fundamentals

Some interesting set of articles on the topic I mentioned earlier on Irish radio and in the post here: http://trueeconomics.blogspot.ie/2014/12/16122014-russian-inflation-hot-but.html  - the topic of contagion from the run on Russian ruble to the global economy:

• First off, the Guardian on the destabilising effects of playing brinksmanship with Russia (not to excuse the equally destabilising effects of Russia playing its own brinksmanship): http://www.theguardian.com/commentisfree/2014/dec/16/russia-economy-west-vladimir-putin?CMP=twt_gu
• Second, RT article on subject of spillovers: http://rt.com/op-edge/215031-russian-ruble-crisis-aftershocks/ Note: the article quotes myself on the topic
• Third, FT Alphaville piece - tongue-in-cheek - on Russian external liabilities http://ftalphaville.ft.com/2014/12/16/2074181/russian-foreign-liabilities-in-perspective/ Give that a thought - these are owed to someone in the West (mostly in Europe).
• Fourth, Bloomberg View piece on spillovers: http://www.bloombergview.com/articles/2014-12-16/russias-problems-are-everyones-problems - not much in the way of factual, but on the money in general
• Fifth, a bit over-the-top, but important question of potential geopolitical response from Moscow here: http://www.businessinsider.com/what-will-happen-next-2014-12?IR=T
• Sixth, factual report on PIMCO effect from the Russian crisis: http://www.bloomberg.com/news/2014-12-16/russia-crisis-hits-pimco-fund-wipes-out-options-as-ruble-sinks.html
• Seven (update): WSJ on Ruble spillover to European companies: http://www.wsj.com/articles/rubles-decline-deepens-concerns-for-european-companies-1418760793

As an aside to the menu of options available to Russian Government, here is one of a 'limited capital control': http://www.nakedcapitalism.com/2014/12/how-putins-fealty-to-the-washington-consensus-made-his-currency-crisis-worse.html aka de-dollarisation of the retail deposits. Surely, that would just amplify pain for ordinary savers.

And another aside: in-depth analysis of the reserves position and demand for debt redemptions for Russia here: http://www.nakedcapitalism.com/2014/12/oil-ruble-ideology.html. Key quote from the article:

"We notice that the strong depreciation of the Rouble corresponds to a peak in repayments, but that the situation will loosen up in early 2015. It is sure therefore that the exchange rate will reverse its tendency in the first semester of 2015. The question is, up to what point? If the Rouble stabilizes around 50 roubles for 1 USD, inflation will be strong next year and could reach 12%. If we witness a rise in oil prices and the Rouble stabilizes around 40-42 roubles for 1 USD, the inflation rate could amount to merely 10%. Still, this implies that the Central Bank of Russia keep an eye on such establishments which could be tempted to speculate on the exchange rate, dragging it farther down than it should normally be. Explicit threats were made by President Putin at the occasion of his declaration of general policies before the chambers of parliament on December 4th. However spectacular it has been, the depreciation of the Rouble by no means puts into question the financial stability of Russia. The trade balance remains in excess, with an amount outstanding of 10 billion dollars a month. This is largely sufficient to face up to coming payments. The budget is actually profiting from this depreciation, which should allow the government to spend a little bit more in 2015. Russia will therefore remain one of the least indebted countries in the world, which is not necessarily an advantage and goes to show that, provided it takes up debts internally, the country wields over a strong potential for investment and development."

Another update: a must-read from Bloomberg's @Bershidsky on why sanctions are at best secondary when it comes to the run on the Ruble:  http://www.bloombergview.com/articles/2014-12-17/lift-sanctions-now-to-humiliate-putin