Bonn – In the first half of 2020, the EMU is almost exclusively in the red in its exports. Only food exports provided positive news.

By Verena Matschoß | Bonn

A sharp drop in oil prices and the low demand during the Corona crisis sent trade in the Eurasian Economic Union (EMU) into a tailspin from April 2020. In the whole of the first half of 2020, Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia exported one fifth fewer goods to third countries than in the first half of 2019. Exports to Germany even fell by 39 percent to US$ 9 billion (US$).

EMU imports fell only slightly in comparison – by 7 percent. Goods to the value of US$ 12 billion were imported from Germany, a drop of around 6 per cent compared with the same period last year.

Almost 60 percent of EMU exports to countries outside the Economic Union are mineral fuels. Therefore, if world market prices for oil and gas are low, this has a strong impact on export earnings. Excluding energy sources and raw materials, the picture was not quite so bleak: here, exports to third countries fell by only 9 percent to US$ 52 billion.

The only positive news in the first half of the year came from exports of food and agricultural raw materials, which rose by an impressive 17 percent. This was despite the fact that from the end of March to the end of June there was an export ban on certain types of food to countries outside the EMU. This ban included exports of millet, rye and buckwheat.

Russia dominates foreign trade

However, the dependence is very one-sided, not only in terms of the structure of goods: Russia accounts for over 80 percent of EMU exports to third countries. If the Russian economy suffers, the entire economic union suffers. And Russia’s economy is not doing well at all: the corona pandemic will have a strong impact on Russian trade in goods in 2020. Added to this are the dramatic drop in oil prices at the beginning of the year and the global drop in demand for raw materials and energy sources.

Structure of EMU exports (in million US dollars; change in percent)
1. Half Year 2020 Change 1. Half Year 2020/1. Half Year 2019
Total 177.676,5 -21,4
Mineral products 105.665,2 -31,3
Metals, metal products 17.869,0 -15,0
Food and agricultural raw products 12.580,5 16,6
Chemical products, rubber 11.271,6 -14,8
wood, paper products 6.002,8 -8,2
Machinery and equipment, vehicles 5.227,4 -20,9
Textiles, textile goods, shoes 482,5 -11,6
Raw leather, furs and articles thereof 63,3 -36,5

Source: Eurasian Economic Commission

Lower oil price also weighs on domestic trade

The development of domestic trade was less dramatic, falling by 14 percent in the first half of 2020. Kyrgyzstan experienced the sharpest drop in its exports to the other member states with a minus of 25 percent, followed by Kazakhstan (-19.7 percent), Armenia (-18 percent), Russia (-16 percent) and Belarus (-6.1 percent).

Similar to trade with third countries, the drop was mainly due to lower oil prices. Mineral products accounted for one fifth of domestic trade in the first half of 2020. Overall, trade in mineral products in the EMU fell by over a third.

Structure of EAWU internal trade in goods (in million US dollars; change in percent)
1. Half Year 2020 Change 1. Half Year 2020/1. Half Year 2019
Total 24.519,7 -14,1
Machinery and equipment, vehicles 4.921,2 -12,6
Mineral products 4.888,7 -34,5
Food and agricultural raw products 4.619,7 3,7
Chemical products 3.331,8 -5,8
Metals, metal products 3.118,0 -17,2
Textiles, textile goods, shoes 967,7 -7,7
wood, paper products 726,7 -7,1
Raw leather, furs and articles thereof 50,0 -8,9

Source: Eurasian Economic Commission

Ray of hope for agricultural products

But there were not only negative reports: Exports of food and agricultural raw materials within the EMU increased by almost 4 percent. As with exports to third countries, domestic trade also showed that the agricultural sector was not as badly affected by the corona crisis. In the first half of 2020, trade in food and agricultural raw products accounted for around one fifth of domestic trade.

Economic development in Russia decisive

Russia is also the driving force behind domestic trade, accounting for over 60 per cent of the economic union’s domestic trade. The further development of trade therefore depends to a large extent on how quickly Russia recovers from the corona crisis and the low oil prices.

Source: Germany Trade & Invest