- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Chart Gallery: Russia in the World Economy
March 10, 2022
Russia's place in the global economy has been called into question following its choice to invade Ukraine at the end of February. Economic sanctions have been the strongest response by nations who have voiced their disapproval, and the magnitude of the restrictions could collapse the Russian economy (the ruble is down around -64% vs the USD in 2022 as of March 9th). Given how interconnected the global economy is, the looming question is how impactful will the shockwaves from the sanctions and a wounded Russian economy be? Here are 10 charts that describe Russia's place in world markets and which markets could be most affected.
Russia is one of the largest exporters of oil and gas in the world. OPEC estimates that it produced oil and gas at a rate of about 11.2 million b/d, or 10.0 million b/d of crude oil and 1.2 million b/d of condensate/natural gas liquids. As of the time of this report, OPEC estimated Russia would add another 700,000 b/d of oil and gas production by the end of the year.
Russia was China's second largest crude oil supplier in 2021, accounting for around 15.5% of China's total imports, and delivering 1.6 million b/d of crude oil. The immense consumption of Russian oil and gas by China means it is Russia's largest purchaser of energy goods. Pipelines between the two nations run near full capacity and continue to be upgraded.
Russia's next largest energy customer is to the West. It supplies about 36% of the total EU natural gas supply through pipelines that run through Eastern and Central European nations. That supply has recently come into question as European nations have taken a position against Russia's invasion of Ukraine with some even fearing invasion themselves. Allianz sees the largest energy risks in Hungary, Slovakia, and Czechia where a reduction in Russian supply could threaten consumption and, at the very least, cause a surge in prices.
The risk that this war brings to energy markets through a decline in Russian energy exports has become abundantly clear through the recent surge in oil prices. Brent crude oil contracts threatened to trade above $140 for a moment before settling in the $110-115 range as of March 9th.
Commodities: Food & Metals
In addition to energy commodities, Russia is also a major player in the food and metals markets. Russia produces around 18% of the world's wheat and around 15% of the world's fertilizer chemicals. Its actions are also likely to have an impact on the massive amount of wheat and corn that Ukraine is responsible for producing. A prolonged conflict will have significant ramifications in those respective markets.
While Russia's food production is significant on a global scale, the brunt of the pain will be felt by its regional trading partners. In particular, nations in the Middle East and Asia Pacific will likely feel the most pain from supply disruptions in Russian food production. The same can be said about Ukraine's top food trading partners which include the Middle East, Asia Pacific, and the EU. This table also suggests that Africa and North/South America are unlikely to be impacted at the same magnitude.
Several metals markets will be impacted by supply disruptions that come from conflict or the impending economic sanctions. Palladium is vital for automotive production and is already up 26.9% in the last month. Titanium is a critical component of jet engines in the aerospace industry.
Goldman Sachs' chart puts into perspective how significant Russia is to the food and metals markets. While the large, resource-rich nation is most popularly heralded as an oil and gas behemoth, its contribution to precious metals, industrial metals, and wheat markets are comparable in terms of global importance. However, in terms of GDP and overall world trade, the contributions are smaller.
Trading Partners: EU
The EU is Russia's largest trading partner, accounting for 37.3% of the country’s total trade in goods. The largest component of the trade is EU's import of Russian energy goods (outlined in charts above). However, another significant component of the EU-Russia relationship is EU exports of machinery, vehicles, and manufactured goods which include vital technology like electronics and energy machinery. The relationship has shrunk in the last decade, but it would still be a devastating economic casualty if sanctions blocked trading between the two nations.
Of all nations to be affected by a stop in EU-Russia trade, Germany and its strong manufacturing sector would be one of the largest. The goods it receives from Russia in its sea ports is almost equivalent to receipts from Sweden and receipts from China combined.
Trading Partners: US
LPL Financial points out that "Ripple effects from the Russian invasion of Ukraine will be minimal in the U.S. Russia only accounts for roughly 1% of US goods imports." However, this would only protect it from the direct adverse effects of a halt in trading, while surging commodity prices would cause more pain indirectly.
Trade between Russia and the US is mostly one way Russian exports of (energy) minerals totaling about $8.5 billion. Like EU-Russia trade, there is a significant export of machinery, transportation equipment, and other high-tech goods from the US to Russia. However, the size of those exports is around $3 billion, much lower than the EU exports of similar goods worth €58.6 billion.