The Russian war against Ukraine is a turning point for the economy. Figures from the Eastern Committee show the concrete consequences for trade with Russia, Belarus and Ukraine.
According to the Committee on Eastern European Economic Relations, trade with countries in Eastern Europe has been robust despite the war in Ukraine. Only the trade turnover with Russia, Belarus and the war-torn Ukraine has declined, in the case of Russia by 16.5 percent, the association said. “In our estimation, normal economic relations with Russia will no longer be possible in the foreseeable future,” said Managing Director Michael Harms in Berlin. “That will only change if a fundamentally different policy is adopted in Moscow.”
According to the association, the numerous sanctions against Russia are having an effect, including the price cap for Russian crude oil. “The price cap idea works,” Harms said. “What we are hearing from the companies involved is that above all Arab, Turkish and Chinese banks are very reluctant to trade Russian oil products.” Russia apparently has to sell its diesel below value.
Price cap for Russian oil
Supported by the countries of the largest industrial nations (G7), the EU set a price limit for Russian crude oil at 60 dollars per barrel (159 litres) in December. This means that deliveries at a higher price, even to third countries, may not be cleared by Western insurance companies and shipping companies. The measure serves to deprive the Kremlin of revenue for its war of aggression against Ukraine. Since the beginning of February, the EU member states have also stopped importing refined products such as diesel, petrol and lubricants from Russia.
“We were afraid that the price of diesel would increase sharply,” said Harms. “That hasn’t happened at all so far.” However, the association’s managing director emphasized that the Russian economy would not collapse despite all the sanctions. Russia will gradually slip further into an economic crisis and become technologically uncoupled. But: “Putin will not run out of money for the war,” said Harms. The sanctions put a price tag on Russia’s political decisions – and the price is quite high.
According to the association, the trade volume of the 29 countries associated with the Eastern Committee of German Business was around 562 billion euros in 2022 and thus 11.5 percent above the level of the previous year. The values are also influenced by the increased costs for individual goods and especially for energy. “Eastern trade accounts for 18 percent of all German foreign trade,” said Harms. The most important trading partner among these countries was Poland with a trade volume of almost 168 billion euros (plus 13.5 percent).
Trade turnover with Russia plummeted
Trade turnover with Russia collapsed by 16.5 percent, especially the export of goods from Germany to Russia fell drastically by 45.2 percent. The statistics showed that “essentially the businesses that were deliberately not sanctioned by the EU will remain: agriculture, the medical and the humanitarian sector.” The most important export goods were accordingly pharmaceutical products.
The good news is that the relevant German companies that were active in Ukraine before the start of the war stayed there. Trade with Ukraine has collapsed less than feared. He couldn’t say exactly how many German companies are still active in Russia, “because it’s very difficult to define what else is in Russia?” says Harms. “I would basically state that the topic of Russia has been strategically written off in the executive floors of the majority of German companies.” Harms ruled out a deliberate circumvention of the sanctions by German companies.
The Eastern Committee of German Business is a German foreign trade association for promoting economic relations between Germany and 29 countries in Eastern Europe, East Central Europe, Russia, Southeast Europe and Central Asia.