Peterson Institute study casts doubt on Chinese aid to Russia

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Global exports to Russia fell sharply after the invasion of Ukraine, not only from Western countries that adopted sanctions, but also from non-sanctioned countries, including China, according to a new analysis.

The study suggests that Moscow is struggling to find suppliers for a range of products.

More than about two months after the invasion began on February 24, exports to Russia from sanctioning countries have fallen by around 60% while exports from non-sanctioned countries have fallen by around 40%, according to the study by the Peterson Institute for International Economics, which analyzed data from 54 countries.

The available data ends April 30, so the analysis doesn’t paint a picture until today, Martin Chorzempa, lead researcher and study author, said in an interview. But a separate analysis of China-only data through the end of May shows Chinese exports to Russia remained well below pre-war levels, suggesting Beijing is wary of helping Moscow, Chorzempa said. .

“After the European Union, China is the second largest contributor to Russia’s declining imports since the invasion, despite President Xi Jinping’s promise of ‘limitless’ cooperation,” Chorzempa wrote, referring to a partnership that Xi and Russian President Vladimir Putin announced shortly before. the war in Ukraine has begun.

China cuts tech exports to Russia after US sanctions

The study adds to a mixed picture of the Russian economy since sanctions first hit. After an initial plunge, the Russian ruble rebounded and even became stronger than it was before the war, which economists say helped ease some of the Russian public’s fears of economic collapse.

It now takes around 53 rubles to buy a dollar, down from around 80 just before the Russian invasion, according to Russia’s central bank. The country’s strong energy exports amid rising oil and gas prices partly explain the rise of the ruble, but also the collapse of Russian imports, which shows that the rise in the value of the currency n is not entirely good news for Moscow.

Because foreign suppliers have cut them off, Russian importers don’t need to exchange as many rubles for dollars these days to make purchases, a phenomenon that inflates the value of the ruble.

“Although Russia gets all this oil and gas money, it is not able to buy much, even from countries that do not impose sanctions,” Chorzempa said.

If it continues to struggle with imports, Russia’s economy will deteriorate over time, with manufacturers having to close and lay off workers, economists warn.

Russia “so far has not experienced any collapse. A significant economic downturn is nonetheless very likely as supply chain issues mount and fiscal issues emerge,” said Oleg Itskhoki, professor of economics at the University of California, Los Angeles.

Some signs of these problems have already appeared. Russian automakers AvtoVAZ and GAZ recorded an 84% and 57% drop in domestic vehicle sales in May, compared to the same month in 2021, a drop that Maxim Mironov, a Russian economist at IE Business School in Madrid, attributed to automakers’ inability to purchase imported parts.

Beijing chafing at Moscow’s demands for support, Chinese officials say

Western sanctions were designed to prevent Russia’s military and high-tech economy from accessing the components it needed to keep functioning. Initially, some US and European officials feared that China would step in to fill the void.

But economists said China likely feared losing access to American and European technology — and access to those markets to sell its products — if it angered the West by supplying Russia. For example, a provision in the US sanctions package prohibits other countries from selling Russian semiconductors if they want to continue using US technology to manufacture the semiconductors. Most countries, including China, rely on American tools and software for chip manufacturing.

Another factor that could explain part of China’s downfall is that foreign multinational corporations are responsible for half of China’s exports, Chorzempa said. “These companies need to be connected to the global economy and are presumably following orders not from Beijing but from their own headquarters,” he said.

Moreover, the war’s negative impact on the European economy is bad news for China, as it reduces Europe’s ability to buy Chinese goods, Mironov said.

China’s apparent reluctance to supply Russia will cause problems if it continues, economists have said. The country supplied a quarter of Russian imports in 2021, more than any other country.

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