On Thursday, Russia announced that it would ban the export of over 200 products in retaliation for Western sanctions over its invasion of Ukraine, but Moscow held back on banning exports of energy and raw materials like metals, leaving open a vital lifeline to the Kremlin’s coffers.
Russia’s announcement comes after the U.S. banned Russian energy imports and the European Union announced plans to reduce its Russian gas imports by two-thirds this year.
Under Russia’s new export controls, several manufactured products—such as cars, telecoms, and electrical and agricultural equipment—cannot be sold outside Russia until the end of 2022. However, exports to members of the Eurasian Economic Union, an economic union of post-Soviet states, may be able to receive a waiver.
The export ban also includes some forestry products, such as timber, to “states that are undertaking hostile actions against Russia,” which would include the U.S. and members of the EU. In a separate measure, Russia also imposed an export ban on wheat and other agricultural products to the Eurasian Economic Union until Aug. 31.
Russia’s exports ban is unlikely to have much of an effect on Western economies, few of which rely on Russian-manufactured products. Instead, Russia’s export ban is likely an effort to shore up critical supplies in the country, as Moscow becomes increasingly isolated from the world economy. In passing its export bans, the Russian government said that the measures were “necessary to maintain stability on the Russian market.”
The export ban is “a desperate attempt to keep machinery and high-tech goods in the country,” tweeted Janis Kluge of the German Institute for International and Security Affairs, as “Russia’s technocrats know that many of these things will become quite rare in the future.”
On Tuesday, Putin ordered his cabinet to put together a blacklist of commodities and raw material exports that Russia could target. A broad export ban on critical raw materials like nickel or wheat would put additional pressure on already tight commodity markets as prices surge amid the Ukraine crisis. But the export ban Russia announced on Thursday doesn’t go as far as traders feared.
By excluding raw materials from its embargo, Russia has kept open a lifeline for its economy. Exports account for roughly 30% of Russia’s GDP. Oil and gas shipments contribute up to 60% of all Russia’s overseas sales, but Russia is also the world’s largest exporter of wheat, a major exporter of coal, and one of the top producers of metals like iron, steel, aluminum, nickel, and palladium.
As of now, timber is the only Russian commodity now under an export ban tied directly to Western sanctions. Russia is the world’s largest exporter of lumber and the seventh-largest exporter of forestry products, such as wood pellets and sawn wood. China is the largest recipient of Russian timber, but a sizable share of Western wood products comes from Russia. The country supplied about 10% of hardwood plywood to the U.S. in 2019, according to TimberCheck.
The export ban also presents a problem for Western companies that manufacture goods in Russia for foreign markets. French-Italian carmaker Stellantis, for example, produces vans for the Europe market at a factory in the Russian town of Kaluga. The company announced on Thursday that it would halt car shipments to and from the country, after Russia banned the export of automobiles.
Yet, rather than an act of retaliation, Moscow’s counter-sanctions may be motivated by the need to keep important commodities and products inside the country while Russia’s economy tanks under Western sanctions.
Putin also announced on Thursday that Russia may seize the assets of foreign companies pulling out of Russia, ostensibly to protect local suppliers and workers. Many Western businesses have decided to suspend or close their operations in Russia, including Shell, Goldman Sachs, Rio Tinto, and Ikea.
Russia’s government announced that it was considering letting domestic airlines take ownership of their leased planes—worth about $10 billion—which are supposed to be returned to their actual owners at the end of the month after the European Union ordered lessors to cancel their contracts with Russian airlines. These planes could be a source of spare parts for Russian airlines after Boeing and Airbus suspended their services in the country.
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