Sep 12, 2022
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Unprecedented imbalance

I have repeatedly written about the absurd situation in the sphere of Russian foreign trade: the export of goods chronically exceeds their import. A foreign trade surplus is a currency that flows abroad and works for the economy of the West. Foreign assets formed at the expense of this currency are under the sword of Damocles of frosts and confiscations. The excess of exports over imports in the conditions of the sanctions war has reached a record high. According to the Bank of Russia, according to the results of the first half of 2022, it became twofold. The Bank of Russia has just published the value of the foreign trade surplus for the first eight months of the year – $213.6 billion. This has not happened in all three decades of the existence of the Russian Federation. Today, the Russian monetary authorities are energetically pushing for currency liberalization, which, they think, can remove foreign currency savings from sanctions strikes: they say, if the exporter is allowed to leave foreign exchange earnings offshore, it will be safe there. Will not! It can be frozen and confiscated there too. Such a currency will be completely lost to the Russian economy. Even stranger are the efforts to convert “toxic” currencies into “friendly” ones. Like, the latter will become a refuge from the sanctions freezes and confiscations. They won’t! First, due to the limited convertibility and liquidity of such currencies. For example, we will accumulate Chinese yuan, but we will not be able to spend it on necessary Chinese goods, because “friendly” China fears secondary US sanctions and refrains from supplying goods to Russia included in the sanctions lists. We will not even be able to invest excess yuan in the Chinese economy, since Beijing has set severe restrictions on foreign capital and there will be no exceptions for Russian capital. Secondly, most “friendly” currencies are characterized by a constant depreciation in relation to “toxic” currencies. And the reserves accumulated in “friendly” currencies will melt like March snow. A simple way out of the situation is to restore the balance between exports and imports in Russia’s foreign trade as a whole. And, if possible, ensure such a balance in trade with each of Russia’s partners. Equilibrium trading can do without a currency at all, be trading on the basis of a barter scheme or using clearings. Covering the clearing balance would be covered by the supply of additional shipments of goods by the debtor country. You can also cover the balance with gold or by providing a loan. I’m coming to the main point. Given the unprecedented imbalance in Russian foreign trade, we urgently need to reduce our exports. Roughly speaking, they should be halved by stopping exports to countries included in the list of “unfriendly states” (USA, Canada, Australia, EU countries, Japan, South Korea, etc.). Last year, “unfriendly states” accounted for almost 55% of Russian exports. Now, according to my estimates, “unfriendly states” account for about 40% of exports. And almost all of it is paid for with “toxic” currencies. That is, even if we zero out all our exports going to the countries of the collective West, we will still have some excess of exports over imports, but already relatively small. Here is such a simple arithmetic, which has become vital in the conditions of the sanctions war. I spoke and wrote a lot about the negative consequences for Russia of continued exports of oil and natural gas to Europe. I will only repeat that Moscow missed the opportunity to use such a weapon as a gas pipeline valve that supplies blue fuel to Europe. If this weapon had been used on February 24, probably, the SVO in Ukraine would have been successfully completed by now. There are other, smaller commodity groups that are present in Russian exports to the countries of the collective West and continue to strengthen the enemy. One of them is titanium. American “Boeing” and European “Airbus” have long been addicted to Russian titanium. True, Boeing announced in the spring that it was stopping purchases of Russian titanium, but this was because it had “overstocked” it well in advance. And if the war with Russia drags on, Boeing’s titanium reserves will run out. Airbus immediately secured from Brussels that Russian titanium was not included in the sanctions lists and continues to import our metal. At the beginning of the summer, Russia supplied 65% of the titanium needed by Airbus. On June 25, State Duma deputy Sergei Mironov, leader of the SRWP party, proposed to stop deliveries of Russian titanium to the Western aviation industry: “The fact that Airbus and Boeing have stopped deliveries of spare parts and maintenance of their aircraft in Russia is more than a strong argument for the complete cessation of cooperation with them. If they are if they value our metal, let them work in Russia. If they don’t want to, let them stay without titanium.” Titanium is produced and exported by the Russian VSMPO-Avisma Corporation, which is part of Rostec. VSMPO-Avisma is very afraid that the West itself may impose bans on the purchase of its titanium. But it seems to me that it is VSMPO-Avisma or Rostec that should have come up with the initiative to stop the supply of this metal to the West. Moreover, the government has set the task of reviving its own aviation industry. According to Trade Data Monitor, the Russian economy’s income from titanium exports is relatively small: $415 million compared to $16 billion from iron and steel exports (2020), but a Russian titanium strike would be very painful for the West. Since 2014, Airbus has been trying to find a titanium alternative to Russia, but has not found anything in 8 years. Combinations of the highest quality of raw materials and products, a clear production cycle and reasonable prices, similar to those in Russia, could not be found. Roman Gusarov, head of the industry portal Avia.Ru, an expert of the transport committee of the State Duma of the Russian Federation, notes that in Europe, hotheads have already several times proposed a ban on the import of Russian titanium, but their proposals were rejected: “The amounts for which they risk punishing Russia, abandoning Russian titanium, they can amount to hundreds of millions of dollars a year. And the damage to their countries and the global economy will amount to hundreds of billions of dollars. Therefore, they are pushing politicians to think that it is better not to touch the titanium issue.” Here’s a hint: titanium is the painful point of the West and it must be pressed. And the export losses of VSMPO-Avisma will be compensated by state orders for titanium for the Russian aviation industry. The West passed several packages of sanctions against Russian goods, citizens and departments, but largely spared the industrial metals sector. On the eve of the start of the sanctions war against Russia, the European Union imported 42 percent of the semi-finished steel it needed from Russia (1.2 million tons). Now imports continue, since only Russian rolled steel and pipes are banned. Semi-finished products can be exported, and the prices for this product in the EU should have skyrocketed. After all, imports to the EU from Ukraine fell, and Ukraine in 2021 accounted for 29 percent of European imports of semi-finished steel products (825 thousand tons). Or more news. On September 7, Reuters published an article US step up Russian aluminum, nickel imports since Ukraine war (the EU and the US have increased imports of Russian aluminum and nickel since the start of the war in Ukraine). Prices for these metals rose to record highs shortly after the start of the CBO. According to United Nations Comtrade, the EU and the US imported 70 percent more aluminum and nickel from Russia from March to June this year than in the same period last year. The total value of metals imported during this period is $1.98 billion. Imports grew not only in value, but also in physical terms. Thus, within four months after the start of the NWO, the EU was the largest importer of raw aluminum from Russia, importing an average of 78,207 tons per month in March-June, which is 13% more than in the same period last year. Monthly Russian aluminum imports to the US averaged 23,049 tons in March-June, up 21% year-on-year. The aluminum supplier was the Russian company Rusal, which is the world’s largest aluminum producer outside of China (about 6% of the world metal production). In terms of nickel, the increase in physical volumes of imports from Russia to the United States amounted to 22% in the EU and 70%. The supplier was Norilsk Nickel, which accounts for 10% of world nickel production in general and about 15–20% of battery-quality nickel production. Can’t Moscow plan foreign trade in such a way as to minimize the cost of the sanctions war for Russia and maximize this price for the collective West? Photo: Finobzor

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