Report: Imports from Russia are decreasing, while exports are not

Since the start of the war and the implementation of sanctions, imports from Russia and Belarus have been falling rapidly – in the last quarter of 2021, the imports amounted to 393 million euros or 4.7% of Estonia’s GDP, while in the first quarter of this year the figures were 40.5 million euros and 0.4% respectively. Exports from Estonia to Russia and Belarus, however, have been on the rise – in the fourth quarter of 2021, exports accounted for 1.2% of Estonia’s GDP, but by the first quarter of this year, it had increased to 1.5% of GDP.

According to Uku Varblane, head of research at the Foresight Centre, foreign trade with Russia has historically been very unstable for political, regulatory, and economic reasons. “Before the full-scale war, Russia was a significant import partner for Estonia, but last year, Estonia imported goods from Russia and Belarus for 1.9 billion euros less than average in the period of 2019-2021,” said Varblane.

Imports of 769 product groups have decreased and imports of 170 product groups have increased.

The analysis of the commodity groups suggests that Estonian companies have replaced products and services previously imported from Russia and Belarus, sourcing them now from other markets, but this often means higher purchase prices. In product groups where imports from Russia and Belarus have decreased, imports from other countries have increased by a total of 4.5 billion euros per year compared to the 2019−2021 average. “The last two years have shown that, for example, in the wood industry and the production of metal products, favourably priced Russian raw materials provided a significant competitive advantage for Estonia,” said Varblane.

On the other hand, Estonia’s exports to both Russia and Belarus reveal the opposite trend compared to the immediate pre-war period.

In the fourth quarter of 2021, exports to Russia accounted for 0.8% and to Belarus for 0.4%, or a total of 1.2% of GDP (100.2 million euros), but in the first quarter of 2024, exports to these countries totalled 1.5% of GDP (140 million euros). “One of the reasons besides blockage of trade routes due to war can be opportunistic behaviour, using the new market opportunities that emerged in countries restricted by sanctions,” added Uku Varblane.

The Foresight Centre notes in its short report that if a longer period, i.e. the average of the years 2019-2021, is used as a benchmark, then compared to that, 148 million euros less of Estonian goods were exported to Russia and Belarus last year. However, there are big differences between product groups.

Exports of the following product groups subject to sanctions have declined the most: machinery and equipment (−73 million euros), chemical products (−47 million euros) and base metals and products made from them (−17.5 million euros). At the same time, the export of prefabricated food and beverages has increased by 12.4 million euros in 2023 compared to the pre-war period. The export of livestock and animal products has grown considerably (+6.1 million euros) as well.

The short report ‘Estonia’s foreign trade with Russia and Belarus: main changes since the start of the full-scale war’ is a continuation of the Foresight Centre’s 2022 special research stream ‘The long-term impact of the war between Russia and Ukraine on Estonia’.