Euro area linkages with Russia: latest insights from the balance of payments

This box provides an analysis of recent developments in trade and financial linkages between the euro area and Russia as recorded in the euro area balance of payments.

Metadata

Provider:

ECB

URL:

https://www.ecb.europa.eu//pub/economic-bulletin/focus/2022/html/ecb.ebbox202207_08~4f1967995f.en.html

Retrieved on:

Friday, November 11, 2022

Information

Tags:

Euroclear, ECB, Geography, Council, Coronavirus, GDP, Movement, Union, Comparable, FDI, COVID-19, Cryptocurrency, Bank, Renewable energy, Bookkeeping, Security (finance), EU

Geotags:

EUROPEAN UNION, UKRAINE, NETHERLANDS, CHINA, CYPRUS, RUSSIA, UNITED STATES

Summary

Key Points:

This box provides an analysis of recent developments in trade and financial linkages between the euro area and Russia as recorded in the euro area balance of payments.
This box documents how the record deficit in the trade balance between the euro area and Russia due to steep price increases for imported energy and lower exports amid EU sanctions contributed to a sizeable shift in the euro areas overall current account balance.
The euro area current account balance vis--vis Russia turned from a small surplus into a deficit of 0.5% of euro area GDP between the second quarter of 2021 and the second quarter of 2022, thus contributing significantly to the sharp reduction in the euro areas current account surplus over the same period (Chart A).
Due to Russias role as a major exporter of energy products and other commodities, the euro area has typically recorded a current account deficit vis--vis Russia.
The bilateral deficit was largest over the period 2010-14 when it averaged 0.3% of euro area GDP, as energy prices were at elevated levels.
However, in the first quarter of 2022 the bilateral current account balance recorded in annual terms a deficit in excess of 0.3% of euro area GDP for the first time since 2014.
FDI positions remained broadly unchanged as a result of the euro exchange rate changes vis--vis the rouble that offset euro area companies disinvestment.
generated by blocked coupon payments and redemptions of securities held in custody in the euro area) were prohibited from being transferred to Russia.
Following Russias invasion of Ukraine euro area residents broadly divested from Russian assets (see Chart D).
Amid the turbulences in Russian financial markets following Russias invasion of Ukraine, euro area residents divested more than 10 billion from Russian portfolio investment equity and debt instruments.
Several euro area companies also started to close down and sell their Russian subsidiaries, resulting in net divestments in FDI.