Maritime & Trade Blog

The Trade Numerologist: Russia Reboots Trade Ties




As President Trump faces an investigation into his campaign’s alleged collusion with Russia to win the 2016 election, US trade with Russia is surging.

However, as Moscow reengages economically with the rest of the world, especially by selling it oil and gas, it’s expected to turn more toward Beijing and Brussels than Washington, according to analysts and a review of trade data.

In the first eight months of 2017, despite a fresh round of tension and trade sanctions, total US-Russia trade rose 18.8% to $14.5 billion from $12.2 billion, putting it on a pace to reach $22 billion over a full year, according to data from IHS Markit’s Global Trade Atlas. Total US trade with Russia had declined to $19.9 billion in 2016 from $26.1 billion in 2008, the year before President Obama took office .

Although Trump promised to protect US manufacturers of industrial goods like steel and aluminum, imports of Russian steel have more than doubled under his administration.

Top US imports of Russian goods, first eight months of 2017

Oil, gas, etc. $5 billion (+8.8%) Inorganic chemical, rare earths $376.4 million (-47%)
Iron and steel $1.8 billion (+107.3%) Fish $341.4 million (+29%)
Aluminum $1 billion (+15.6%) Base metals $190.7 million (+29%)
Stones, coin $689.4 million (+82.1%) Nuclear reactors, parts $149 million (+12%)
Fertilizer $436.8 million (+24.4%) Aircraft, aircraft parts $145 million (+18%)

 

A couple Russia steelmakers, Novolipetsk Steel, or NLMK, and Evraz, have plants in the US, and these shipments are part of their supply chains. In May, Evraz won a contract with natural gas producer Cheniere Energy to make the steel pipe in a pipeline built between Oklahoma and the Gulf Coast.

Meanwhile, US shipments to Russia are led by makers of aircraft and aircraft parts, nuclear power plant components, and cars and trucks.

Top US exports to Russia, first eight months of 2017

Aircraft, aircraft parts $1.5 billion (+67%) Pharmaceuticals $145 million (+45.4%)
Nuclear reactors, parts $797 million (-14.4%) Chemical products $104.2 million (+30%)
Cars, trucks $394 million (+0.8%) Inorganic chemicals $96.6 million (+3.3%)
Optical, medical equipment $318 million (+16.8%) Plastics $89.6 million (-6.9%)
Electric machinery $279.7 million (-5.7%)

 

The increase of US-Russia trade under Trump is part of a bigger trend of Russia reintegrating the global trading system after its 2014 invasion of Ukraine led to widespread trade sanctions and sour relations. Total Russian trade with the rest of the world declined to $468 billion in 2016 from $784 billion in 2011. In the first eight months of this year, it increased 27% to $385.2 billion.

Russia’s trade ties are uniquely tied to politics, choices made by the Kremlin and the oligarchs who run its industrial empires. When it joined the World Trade Organization in 2011, it was the last G20 country after China to do so. With the world’s largest internal market by geographical area, it can easily turn inwards.

But its abundant natural resources controlled by handful of men, and capacity to produce prodigious amounts of steel, aluminum, zinc and nickel, make it a formidable competitor when it chooses to ramp up exports, as it has this year. 

Top 10 Russian trading partners, Jan-Aug 2017

China $54.4 billion (+35%) US $14.5 billion (+19%)
Germany $31.3 billion (+25%) South Korea $13.2 billion (+35%)
Netherlands $26.3 billion (+29%) Turkey $12.9 billion (+31%)
Belarus $19 billion (+25%) Japan $11.8 billion (+17%)
Italy $15 billion (+20%) Kazakhstan $11 billion (+37%)

 

Despite Trump’s talk of forging a better relationship with Russia, there is a ceiling to how close the two economies can get, say analysts. Instead, Russia will increasingly turn toward China and the European Union.

China is a neighbor and on its way to becoming the world’s biggest economy. The EU is the world’s biggest economic bloc, and it relies on Russian natural gas, and pipeline transportation which makes it much cheaper than shipping it to the US. The arrangement with the EU generates profits for Russia, and gives it enormous diplomatic leverage when it threatens to turn off the tap.

Those impressive increases in trade amounts by dollar value are partly a reflection of higher fuel prices this year. But they also point to more aggressive marketing by Russian oil and gas producers, led by Rosneft, Gazprom and Novatek, especially to China.

Russian exports of oil and gas to China, 2011-2016

2011 27 billion kg
2012 32.6 billion kg
2013 55.2 billion kg
2014 63 billion kg
2015 62.1 billion kg
2016 71.7 billion kg

 

Russian fuel exports to China in the first eight months of 2017 amounted to 55.1 billion kilos, putting it on pace to ship its neighbor 82.7 billion.

By comparison, over that same time period, Russia shipped only 6.1 billion kilos of fuel to the US.

What topic would you like the Trade Numerologist to cover? Email tradenumerologist@gmail.com with comments and questions. 

The Trade Numerologist is IHS Markit’s unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit’s Global Trade Atlas database, the world’s most complete and accurate set of trade numbers.

About The Author

John W. Miller is a global journalist with 18 years experience reporting from six continents and 45 countries, on print, digital, video and audio platforms. As a Brussels-based foreign correspondent, corporate and investigative reporter for the Wall Street Journal, Dow Jones Newswires and Time Magazine, and Pittsburgh-based global mining and metals correspondent for the Journal, he wrote over 60 stories for the Journal’s front page, and won awards from the National Press Foundation and the German Marshall Fund. 

Miller has covered elections around the world, the World Trade Organization, the ups and down of the European Union, economic and business trends, Fortune 500 corporations, mining and metal-making from Appalachia to Australia, the World Cup, and the Tour de France, and is an expert on global commodity trade, coal, copper and iron ore mining, the steel industry, US manufacturing, Chinese export policy, WTO and anti-dumping trade law, and EU politics. 

Miller is from Brussels, speaks fluent French, and holds US and Belgian passports.