Belarus beats Germany to become biggest exporter to Russia

Sales to Moscow from trading partners, which together accounted for about half of its imports in 2021, were down about 40 per cent in April

A container ship leaves the harbour of Hamburg in Germany. The EU has imposed strict sanctions on trade with Russia. AFP

Russian efforts to rewire trade flows and bypass sanctions imposed because of the war in Ukraine cannot make up for the collapse in imports that is crippling its economy.

One stark result so far: for the first time, Belarus, a neighbouring country, in April leapfrogged Germany — an economy more than 60 times bigger — in terms of the value of imports to Russia, according to a Bloomberg analysis of the latest data.

“The market practically crashed” this spring, said Andrey Pobezhimov, head of international logistics at SDEK, one of Russia’s biggest express delivery companies.

“Today, it is very difficult to bring cargo from Europe; sometimes almost impossible.”

Russia has made it harder to obtain an accurate reading of its economy because it stopped publishing some key statistics, including a detailed breakdown of imports and exports.

However, a picture that emerges from figures made available by Russia’s biggest counterparts is one of a commercial pecking order turned upside down.

Sales to Russia from trading partners that together accounted for about half of its imports in 2021 were down about 40 per cent in April from a year earlier, Bloomberg calculations show.

Even those, such as China, which have not joined the US and its allies in imposing sanctions, are cutting shipments of merchandise.

Russia's military offensive in Ukraine, which began in late February, was a moment of whiplash for an economy so woven into global commerce after three decades that its imports as a share of gross domestic product in the years before the war were notably higher than in such emerging markets as Brazil, India and China.

But since a global backlash against the war disrupted supply chains and prompted numerous multinationals to pull out, Russians have had to make do or learn how to navigate a new obstacle course — sourcing ingredients from alternative foreign suppliers, scouring the world for new routes or finding other loopholes to haul in the wares.

Otkritie Research estimates the value of imports in April may have plunged to as low as $5 billion, down from about $27bn a year earlier.

As trade with much of Europe dries up, Belarus is emerging as one of the main beneficiaries. Its exports to Russia, of items ranging from construction materials to pet food, surged by more than 100 per cent in April when measured by value.

Boris, who asked to be identified only by first name, owns a large supermarket chain and factories across Russia. He said processing payments was initially an even bigger challenge than the delivery of shipments.

Enough workaround solutions are now available to ensure more shipments trickle through and imports start to recover, he said.

But another major threat looms as the EU’s fifth package of sanctions goes into effect in full next month.

Mr Boris, whose company relies on imports for about half the goods it sells, expects 5 per cent of its products to vanish from store shelves.

“We have dropped a few steps but that doesn’t mean we are at the landing yet,” he said. “The staircase down will be a long one.”

The collapse in imports has been one of the forces warping Russia’s wartime economy and driving it towards what its central bank called “reverse industrialisation”.

Car factories employing tens of thousands ground to a halt for lack of components and simple paper became scarce because manufacturers did not have enough whitening agent.

The Bank of Russia even expects some imports to shift to the “shuttle trade” of the 1990s, when people en masse travelled abroad to bring back goods to sell on open markets.

In the search for new ways to deliver consumer goods from abroad, Fesco, a major Russian cargo company, has launched a new maritime line between Vietnamese ports and its Vladivostok terminal on the Pacific coast.

Its other new initiatives in April included the start of a container service between Istanbul and Novorossiysk on the Black Sea, and rail shipments to western Europe.

Yet, even in the government’s telling, the outlook is bleak. Under the main official forecast, goods imports are set to decline by more than a quarter in real terms in 2022.

Besides cheap credit and subsidies for struggling industries, the government has also responded by cancelling customs duties on numerous products and legalising grey market sales, also known as parallel imports.

Countries such as Turkey may increasingly become conduits for imports, according to Andrej Golubchik, professor at the Russian Foreign Trade Academy. Shipments have restarted to India and the Gulf by way of Iran, he said.