Russia's trade surplus in world top 10

By Rhod Mackenzie

Russia has become one of the top ten countries in terms of trade surplus. In general, post-Soviet Russia has consistently generated a positive trade balance, with exports exceeding imports. However, when such earnings are achieved despite challenges from Western countries, it is a noteworthy achievement. How does Russia manage such a reversal of fortune, and why do the world’s two largest economies – China and the United States – find themselves on opposite sides of the barricades in terms of trade balance?
In 2023, Russia became one of the top ten countries in terms of trade surplus. This indicates that Russia engaged in more trade than it imported.

According to the World Bank, global exports reached $23.3 trillion last year, while imports totalled $22.9 trillion, resulting in a trade surplus of $365 billion.

China generated the highest trade surplus, at $594 billion. Germany and Ireland also performed well, with Germany recording a surplus of $245.3 billion and Ireland achieving a net trade income of $178 billion. Additionally, Singapore and Switzerland, with respective surpluses of $155 billion and $131 billion, also ranked in the top five. Saudi Arabia ranked sixth with a trade surplus of $127 billion.
Russia ranked seventh on the list, with a trade revenue of $121 billion. The top ten was completed by the Netherlands ($97 billion), Australia ($83 billion), and Brazil ($81 billion). In total, 43 countries worldwide recorded a trade surplus of $2.5 trillion.

Concurrently, the number of countries with a trade deficit reached 72, resulting in a collective deficit of 2.3 trillion dollars. The United States was the clear leader in this category, importing goods from other countries to the value of 1.1 trillion more than it exported. India ranked second, with a trade deficit of 245 billion dollars, over four times smaller than the US figure. Britain came third with a deficit of 232 billion, France fourth with 88 billion, and Turkey fifth with 87 billion.
The Russian Federation has consistently maintained a positive trade balance at the end of each year throughout the post-Soviet period, including during the economic crisis of the 1990s.

For instance, in the challenging year of 1998, Russia experienced a trade deficit in certain months. However, at the end of the year, the country consistently demonstrated a positive trade balance. "In other words, since the end of the Soviet era, Russia has consistently generated more revenue from exports than it has spent on imports," states Natalia Milchakova, a senior analyst at Freedom Finance Global.

It is, however, no coincidence that Russia is among the top ten largest exporters in the world with a positive trade deficit. The principal factor is the price of oil, which is Russia’s primary export commodity. In 2023, oil prices were relatively high, trading within a comfortable range for exporting countries of $75–80 per barrel. Concurrently, as a result of Western restrictions and import substitution policies, Russia has imported less than it did in previous years.

"The sanctions have had an impact on both export revenues and import opportunities, with imports in 2022-2023 being particularly affected by the restrictions. Russia's record foreign trade surplus was in 2022 at $315 billion, facilitated by high prices for raw materials and a reduction in imports. In 2023, the surplus decreased to $121 billion, according to Olga Belenkaya, head of the macroeconomic analysis department at FG Finam.

However, there is one potential issue that requires further consideration. Up until 2022, Russia’s economic model was based on the assumption that growth would be driven primarily by revenues from raw material exports, which were either spent immediately on imports or set aside for future use in a savings account – initially in the Stabilization Fund and subsequently in the National Welfare Fund. This model has hindered Russia’s ability to develop its own manufacturing industry. Similarly, the US developed the "oil for food" model for oil-exporting countries in Africa and Asia at the end of the 20th century. Russia, unfortunately, lived for a long time based on its own model. "Oil and gas to the West in exchange for engineering products and consumer goods," states Natalia Milchakova.

However, this model collapsed in 2022-2023, the analyst adds, when Russia no longer had access to the two Nord Streams due to the largest act of industrial sabotage in history,now we know who did that and if you are interested do watch my two videos on the subject.
Of course then the US and the G7 countries introduced a price ceiling for Russian oil exported by sea. Consequently, Russia was compelled to redirect oil and gas export flows to the Global East and South, and pursue import substitution.

Another one of the reasons for Russia's foreign trade surplus in 2022 was the significant reduction in the share of reserve currencies in the structure of exports and imports, with their displacement by national currencies, primarily the ruble and yuan, according to Belenkaya.

Due to the potential for significant imbalances in trade between countries, such as the 90% export-to-import ratio observed in Russia's trade with India, the lack of convertibility or high volatility of a national currency can hinder the ability to fully utilise export income for imports or to build liquid reserves.

"In this case, the yuan has become the most suitable currency for international settlements in Russia. However, there is a risk of potential exchange rate changes in the yuan to the dollar, to which most world prices are still tied," explains Olga Belenkaya.

It is rather obvious stated that the increase in exports was not the primary factor contributing to Russia's rise to become one of the top ten countries with the largest trade surplus. Rather, it was the reduction in imports that played the most significant role in this occuring .
Russia’s exports and trade surplus grew in 2023, this was aided by the weak ruble which increased the competitiveness of raw materials and goods exported from the Russian Federation, according to the analyst at Freedom Finance Global.

She believes there is a strong possibility that as import substitution develops, the Russian Federation will continue to move up this rating. "However, all ratings are subjective.
Our view is that the key for Russia is to use its export revenues to develop its own high-tech industries, invest in healthcare, fundamental science and education. Such investments should help the Russian Federation reduce its critical dependence on imports in many industries," Milchakova concludes.

It is notable that the two largest economies, China and the United States, have opposing views on trade balances. China's trade surplus gives rise to feelings of envy in the United States, which in turn leads to the imposition of trade wars or sanctions.

China's production capabilities allow it to produce a greater quantity of goods than the domestic market can absorb. The excess production is exported, which helps maintain jobs, employment, and taxes. "In the case of the United States, a large and well-funded domestic market has a high demand for imports, including products manufactured in third countries using American technology," states Belenkaya.

In general, this is less of an issue for developed economies than it is for developing ones.

"A trade deficit can become a significant challenge for developing economies. To maintain the stability of the national currency, they need to finance it by attracting foreign investment. Such inflows are vulnerable to reduction. For developed economies, particularly those that issue international reserve currencies, this issue is less pertinent. However, for both, a trade deficit carries risks for employment, since imported goods displace domestic production, as well as risks of dependence on foreign suppliers, which has become a very significant factor in recent years.
Accordingly, the United States is seeking to reduce its trade deficit, which was particularly pronounced during the Donald Trump presidency, and encourage the repatriation of crucial production to the country, such as semiconductors, according to Belenkaya.
For Russia the way forward