Difficulties with cross-border payments constrained Russian imports for most of this year; however, in recent months, these issues have been largely resolved. Data from the Central Bank, the Federal Customs Service, and Russia's trading partners indicate a recovery in the total volume of shipments in the third quarter to last year's levels. If this import recovery proves sustainable, it will help authorities combat inflation.
The pressure on payments for Russian imports, created by the threat of secondary sanctions, led to a 10% reduction in their volume in the first half of this year. However, by the second half, Russian exporters – apparently with government assistance – managed to develop offset schemes involving some of the non-repatriable revenue from Russian energy exporters. These schemes operate in Russia’s trade with both China and Turkey.
China’s role, however, is significantly larger. In recent months, Chinese imports reached record highs (over $11 billion per month), with China’s share of Russian imports surpassing 40%. Meanwhile, the share of European imports, though continually declining, remains substantial at 25%.
Another factor contributing to the recovery of imports in the third quarter was the early delivery of automobiles ahead of a sharp increase in Russia’s vehicle recycling tax on 1 October. This factor led to a particularly sharp increase in the import category of machinery, equipment, and vehicles.
As 2023 has shown, the Russian economy remains vulnerable to import dependencies, and amid its budgetary stimulus, import restrictions have become a significant inflationary factor. At the same time, new schemes for circumventing sanctions not only improve Russia’s economic situation but also make the supply of dual-use goods – supporting positive production dynamics in Russian arms manufacturing – more secure.
After a slump in the first half of the year, Russian goods imports recovered in value terms to last year’s levels in the third quarter, according to a review of the balance of payments published by the Central Bank. Preliminary data from the Central Bank indicates that imports totaled $76 billion, comparable to the third quarter of 2023 ($75.7 billion).
The Russian economy remains significantly vulnerable to imports. Budgetary stimulus has driven demand growth for both imported capital goods and consumer goods, especially as citizens' incomes have recovered and begun to rise. As a result, the substantial decline in imports since the end of 2023 became a serious issue and a factor contributing to rising inflation. Domestic production simply cannot adequately respond to this increase in demand.
In the first half of the year, Russian imports overall declined by approximately 10%, totaling $138 billion compared to almost $152 billion in the first half of 2023. The steepest decline was in imports from Europe, which fell by 17%, or $5.5 billion. Imports from China to Russia in January-June decreased by 3.5%, or by another $1.8 billion. Previously, Chinese imports had been growing rapidly (increasing by one and a half times in 2023 compared to 2022), largely replacing European imports. Their simultaneous decline at the beginning of this year indicated a significant issue.
According to Central Bank estimates, the total volume of Russian imports in the first nine months of the year lags by 6.5% behind last year, totaling $212.3 billion compared to $227.4 billion.
Overall, the dynamics of imports reflect the influence of several factors, primarily the ruble exchange rate. After an extreme strengthening to 60 rubles per dollar in the summer of 2022, the ruble depreciated by one and a half times by the end of summer 2023 (to 96.6 rubles per dollar), then gradually strengthened by mid-summer 2024 (by 10%, to 86 rubles), but subsequently began to weaken again (97 rubles per dollar in October). Import trends largely mirrored these currency movements: high levels throughout 2023 (imports reached the pre-war levels of 2021), a decline starting at the end of 2023, and a recovery trend from mid-2024.
However, in addition to the exchange rate factor, two other important circumstances affected import dynamics.
Another key reason for the reduction in imports has been payment difficulties, which began to emerge at the end of last year and became widespread early this year (→ Re:Russia: Battle for Imports). Due to the threat of secondary sanctions, major banks in China, Turkey, and other countries began to refuse transactions involving Russian companies, fearing these might be indirectly or potentially linked to Russia’s military-industrial complex.
However, the effect of secondary sanctions appears to have weakened in the second half of 2024, as indicated by the recovery in Chinese imports. Of the $76 billion in third-quarter imports, $31.5 billion came from China, according to data from the General Administration of Customs of the People's Republic of China. This is the highest figure in the history of Russian-Chinese trade, with China’s share of Russian imports reaching 41% (up from 38% in the second quarter). By comparison, the EU’s share in Russian imports in 2021, according to the Federal Customs Service, was 36%, while China’s share at the time was below 18%. Now, the share of European supplies has decreased to 25% (still a significant amount).
The recovery in Chinese imports has been facilitated by intermediaries. Sources in banking and law firms interviewed by Vedomosti claim that now only 20–30% of payments between Russian and Chinese banks are made directly, while 70–80% go through so-called payment agents. One such intermediary, advertising its services on vc.ru, offers the following scheme: the importer transfers to them in rubles the amount owed to the Chinese partner, plus a 4–5% commission. The intermediary then contacts the Chinese supplier, prepares contractual arrangements, and pays for the transaction from an overseas account (it is assumed this involves non-repatriated income from Russian exports). Thus, the importer’s rubles are neither converted into foreign currency nor leave Russia. These schemes could likely only have been developed with the involvement of the Russian government.
Previously, Vedomosti also reported that some Chinese suppliers have established separate legal entities to work with Russian partners so that, in the event of sanctions, these entities – and not their main businesses – would be affected. Market participants interviewed by the publication conclude that 'the bottom [in Russian-Chinese trade] has already been reached,' and the payment situation should only improve going forward. However, if importers using these schemes face transaction costs of around 4–5%, the physical volume of imports in the third quarter may still be somewhat lower than in the third quarter of last year.
In their review of the balance of payments, Central Bank analysts point out that Russia was able to increase imports not only from China but also from other regions. Indeed, some revival is recorded by Turkish customs data: total imports from Turkey for the quarter amounted to $2.3 billion, up from $2.1 billion in the second quarter and $2 billion in the first. In the third quarter of last year, this figure was $2.6 billion. Turkish banks were quicker than Chinese banks to respond to the threat of secondary sanctions at the beginning of the year. However, according to Bloomberg's forecast, a new arrangement aimed at reducing the risk of secondary sanctions is expected soon in Russian-Turkish trade. Under this arrangement, Bosphorus Gaz – formerly a subsidiary of Gazprom and the second-largest importer of Russian gas – will settle payments with Turkish companies on behalf of their Russian counterparts. Bosphorus Gaz, in turn, will receive rubles from Russian companies into its account in Russia and use these funds to pay for gas supplies. Thus, similar to the Chinese schemes already in place, international trade will effectively occur without cross-border money transfers by using non-repatriated foreign exchange revenue from energy exports.
Finally, in addition to the above, Central Bank analysts suggest that third-quarter import recovery may also be attributed to a one-time factor. In September, imports from China reached $11.2 billion, the highest figure on record. This spike is likely due to a significant increase in Russia’s vehicle recycling tax on 1 October, prompting suppliers to pre-fill inventories. While Chinese customs has not yet disclosed the structure of recent exports, Interfax estimates that Chinese companies shipped $1.8 billion worth of passenger cars to Russia in September. As a result, cars accounted for over 16% of China’s total exports to Russia, whereas the January-September average was slightly over 6%. Thus, the excess import of vehicles from China in September alone may have exceeded $1 billion.
In general, by the end of the second quarter, Chinese imports had reached 96% of their second-quarter 2023 level (or $1.15 billion less), while in August-September, they exceeded last year’s figures for the same months by 10% and 16%, respectively, amounting to an additional $2.5 billion in imports. Although the recycling tax factor ended in October, Chinese imports in October still exceeded last year’s level by $0.7 billion (7%).
The structural breakdown of Russian imports further confirms that the third-quarter surge was driven by the category of 'Machinery, Equipment, and Transport Vehicles.' This category accounts for half (51%) of Russia’s total goods imports for the first nine months of this year, with chemical products making up 19%, and all other goods comprising 31%. As shown in the chart, all three main groups lagged behind 2023 levels at the beginning of 2024, especially machinery and equipment. However, by the second half of the year, the lag in two of these groups nearly disappeared, while machinery, equipment, and transport vehicles showed a marked increase. Monthly imports in this category averaged $11 billion from January to July, rising to $13.5 billion in August-September.
It is likely that we are seeing a combined effect of compensating for previous shortfalls in technological imports – when the threat of secondary sanctions pressured import dynamics – along with the effect of early vehicle shipments. However, in this case, import dynamics may deteriorate again in the fourth quarter, as there may not only be a lack of additional shipments, but also a reduction in regular vehicle deliveries, which were excessively imported in previous months.
In any case, Russian importers appear to have largely mitigated the vulnerability created by the threat of secondary sanctions. This will aid Russian authorities in combating inflation next year. Meanwhile, reapplying pressure on the Russian economy through sanctions would require their upgrade and adjustment, a task that the new Trump administration is unlikely to pursue.