“...Characteristic of what Putin is doing with Russia’s wealth, economy and the standard of living for Russians. Burning it all...”
Imports from Russia are substantially increasing with China, Indian and other countries in South America and Africa.
Russia trade with Mexico, for instance, has increased 20% per my FR post yesterday.
“…Characteristic of what Putin is doing with Russia’s wealth, economy and the standard of living for Russians. Burning it all...”
“Imports from Russia are substantially increasing with China, Indian and other countries in South America and Africa. Russia trade with Mexico, for instance, has increased 20%.”
Total export volume from Russia has declined, but the huge price increases in its main exports (oil and gas), masks that, when you look at the dollar value of the exports - especially among smaller trade partners.
The dollar value of exports to Mexico increased 20%, but how much of that was due to price increases (during a period of high inflation, and surging oil and gas prices)?
Most importantly, it is a change from a low baseline ($1 billion per year), that is below what would offset the declines in Russian exports to its major customers. Total Russian exports are down in volume.
When it comes to natural gas, it is an epic collapse, as highlighted by this huge flare off. The physical infrastructure does not exist to transport the great bulk of the gas that Russia sold to Europe through fixed pipelines,to any other customer. Last year, the EU (including Turkey) bought 85% of Russia’s gas exports. The great bulk of that is going away for good. Natural gas was 25% of their GDP.
90% of Russian oil exports to the EU went on tanker ships, which can be re-routed, although with some additional delay and expense. As tanker shipments to the West declined, Russia heavily discounted the price (like30% off), to offload more cargoes to far flung customers like China and India. It takes two months to China and requires a ship to ship transfer at sea, versus a week round trip to Rotterdam, on the same ship.
As Russia tried to narrow the fire sale discounts it was offering, India reduced its purchases of Russian oil a bit in July (around 7%) as compared to June. Russia is inherently challenged on cost competition with other producers, because it has the highest lifting cost of any big producer, and much longer transportation distances for any customer other than Europe. Europe is phasing out all Russian tanker deliveries by 5 December.
When global oil prices decline back to pre-COVID norms (around $60/barrel), Russian margins will be crushed by their high costs. Oil Prices have already declined about 1/4 from their wartime peak.
Outside of oil, gas, agriculture and mining; the Russian economy is in free fall. Auto manufacturing declined 97%. The airline industry dropped 70%. Inflation, unemployment and bankruptcies are rising. The Government is running growing deficits while it is now cut off from foreign credit, after defaulting on foreign debt for the first time since 1917. So they are printing money at an excessive rate (M2 ruble money supply grew over 50% in under six months). There is now an historic exodus of the best and brightest, emigrating out of Russia.
Russia’s economy is burning in for a crash landing. The sugar high of temporarily high oil prices and the surge in money printing masked the degree of the damage for a few months, but the whole thing is coming apart in many fundamental ways.