High energy prices and continued purchases of Russian oil and gas in the first quarter of 2022 led Russia to post the largest current account surplus in recent history, reflecting the limited effect of European Union sanctions. against the country.
According to figures from the Central Bank of Russia, the country exported goods and services worth $58.2 billion more than the value of its imports, exceeding Moscow’s current account surplus by more than two and a half times in the first quarter of 2021.
Over the past 12 months, Russia’s current account surplus has reached $157.8 billion. This is a higher current account surplus than any previous year, according to World Bank data.
The current account surplus appears to be helped by high oil and gas prices, allowing Russia to demand a higher price for its own fossil fuel exports that several EU member states continue to buy.
While the United States has banned imports of Russian energy, the EU has placed no restrictions on Russian energy purchases in the short term, as some member states rely heavily on Russian fossil fuels.
The EU plans to phase out Russian coal imports within four months, but Russian coal only accounts for about 4% of the value of Russian oil and gas imports from the EU.
At a meeting on Monday (April 11), the foreign ministers of the EU member states discussed an oil embargo, but have yet to agree on the issue.
“We do not want to impose sanctions that harm the EU more than Russia”EU officials have repeatedly responded when asked why Europe is reluctant to impose new sanctions.
While Russian energy supplies are important to many member states, they are also the most important lever the EU has on the Russian economy, as the figures below show.
Eurostat data. Esther Snippe graphic.
Continued Russian energy purchases are also supporting the Russian ruble. After the United States and the EU sanctioned the Russian Central Bank on February 28, the national currency initially plummeted on the foreign exchange markets.
However, capital controls imposed by the Central Bank, as well as the constant inflow of foreign exchange from energy exports, have allowed the ruble to recover to levels close to those prior to the start of the Russian invasion of Ukraine on 24 February.
“The ruble is strengthening due to exceptionally high foreign exchange inflows from energy sales, tight capital controls on ruble convertibility, and weak market liquidity”Institute of International Finance (IFI) Deputy Chief Economist Elina Ribakova wrote in a recent analysis.
Although the exchange rate was not fixed by the free market, the stability of the ruble was nonetheless “real”because she was “driven by Russian current account inflows that have never been higher”she said.
Furthermore, Ms. Ribakova underlined that sanctions should be adapted over time in order to continue to penalize the Russian economy.
Any adjustment that could seriously harm the Russian economy should focus on the ability of the Russian state to finance itself through energy exports.
Last week, the European Parliament overwhelmingly approved a motion to ban Russian energy imports.
“Our energy dependency, our money, allows us to kill Ukrainians,” Liberal MEP Luis Garicano said, advocating a ban on Russian energy imports. “Isn’t it clear that our gas is stained with blood and that we are to blame, the ones who finance this monster? »he continued.
However, Parliament does not have the power to formally decide on such an import ban, which would have to be approved by EU member states.
The European Commission, for its part, maintains that the EU sanctions are effective.
“EU sanctions cripple the Kremlin’s ability to finance the war”a spokesman for the EU executive told EURACTIV in emailed comments. “We continue to work on new sanctions”also added.