With The West Imposing Sanctions, Russia’s Trade With China Increases
Any escalation of the Ukraine crisis by Russia will result in the United States imposing a much wider range of sanctions against Moscow, which essentially will be aimed to prevent access to the U.S. dollar for transactions for critical Russian financial institutions and companies, as well as their access to global markets for trade, energy exports and financing.
This would be the first occasion for the U.S. and its Western allies to cut off the $1.5 trillion Russian economy from global commerce. However, it is not yet clear the extent to which Moscow would be impacted by unified Western sanctions and the extent of those sanctions.
According to an analysis of World Bank and United Nations trade statistics, China has emerged as Russia’s largest export partner after less severe sanctions were imposed in 2014 following Moscow’s annexation of Ukraine’s Crimea.
According to Harry Broadman, a former U.S. trade negotiator and World Bank official with China and Russia expertise, new sanctions might drive Russia to increase its non-dollar denominated economic connections with Beijing to circumvent the limits.
“The problem with sanctions, especially involving an oil producer, which is what Russia is, will be a leakage in the system,” Broadman said. “China may say, ‘We’re going to buy oil on the open market, and if it’s Russian oil, so be it.'”
The White House said that under an executive order signed by President Joe Biden on Monday, any establishment in Russia’s financial services sector targets additional sanctions, noting that more than 80% of Russia’s daily foreign exchange transactions and half of its trade are conducted in dollars.
In announcing the first batch of penalties on Russia for ordering soldiers into two separatist districts in eastern Ukraine on Tuesday, Biden stated that he would “take vigorous steps to ensure that the pain of our sanctions is focused at the Russian economy, not ours.”
That may be easier said than done, given Russia’s position as one of the world’s leading suppliers of oil, natural gas, copper, aluminium, palladium, and other vital commodities.
On Tuesday, oil prices reached fresh highs not seen since 2014 because of Russia-Ukraine tensions.
According to World Bank figures, Russia contributed 1.9% of world commerce in 2020, down from 2.8% in 2013. As a result, its 2020 GDP was placed 11th in the world, between Brazil and South Korea.
According to an analysis of Russian trade statistics in the World Bank’s World International Trade Solution database, Russia’s reliance on trade has decreased over the last 20 years.
Russia’s export destinations have also shifted. Due to the oil trade, the Netherlands was the main export destination a decade ago, but China has since surpassed it. Germany and the United Kingdom’s purchases from Russia have remained relatively stable, while Belarus’ imports have increased.
China continues to be Russia’s top importer, with mobile phones, laptops, telecommunications equipment, toys, textiles, clothes, and electronics components among the top categories. Since 2014, it has increased its percentage of Russian imports while decreasing its share of German imports. Ukraine’s exports to China have declined significantly over the last decade, whereas Belarus’ sales have remained stable.
According to World Bank data, Ukraine’s major exports to Russia in 2020 include aluminium oxide, railway equipment, coal, steel, and uranium.