The loss in exports to Russia, where trade has become increasingly difficult due to problems in money transfers, reached 37% in the first two months of the year.
Exports to the Commonwealth of Independent States contracted by 13.6 percent in the same period. Shipowners who invested in ships to Russia when business was brisk are experiencing a supply shock due to the decline in export cargoes.
In Turkey-Russia trade, which peaked after the Ukraine War, exports continued to decline in the second month of the year due to money transfer problems that started at the beginning of the year. According to foreign trade data from the Ministry of Trade, exports to Russia in February fell 34 percent compared to the same month last year and amounted to USD 670 million. Thus, while Russia was the 4th country to which Turkey exported the most in February last year, it fell to 8th place in February this year.
Looking at the two-month total export realization covering January-February, exports to Russia decreased by 37 percent compared to the first two months of last year to USD 1.3 billion. Exports to Russia decreased by 39 percent to USD 631 million in January.
Following the 20 percent contraction in January, imports from Russia fell by a negligible 1 percent in February. Two-month imports from this country decreased by 8 percent compared to the January-February period of the previous year and were calculated as USD 8.48 billion.
Decline in 22 out of 25 sectors
When the Turkish Exporters Assembly (TİM) data is analyzed to look at the performance of exports to Russia on a sectoral basis, only 3 out of 25 sectors saw an increase in two-month exports to Russia, and these sectors were olive and olive oil, hazelnut and its products, and aquaculture products and animal products. In the same period, the contraction in 7 sectors exceeded 50 percent. In the first two months, the sector with the highest proportional decrease was tobacco with 88.4 percent, followed by leather and leather products with 71.6 percent and cereals, pulses, oil seeds and products with 57 percent.
In terms of value, the loss in the chemical sector, which exports the most to this country, reached 33 percent in two months, while the decline in the second sector, fresh fruits and vegetables, was 10.2 percent, and the loss in the third sector, machinery and parts, reached 23 percent. While the decline in automotive, the 4th largest export sector to Russia, was 13 percent in two months, the decline in ready-to-wear clothing, which is exempted in money transfers, was limited to 5.6 percent. The total contraction in electrical and electronics, which has a significant share in exports to this country, exceeded 51 percent in two months.
In the aftermath of the war in Ukraine, Turkey’s exports increased not only to Russia but also to the Commonwealth of Independent States (CIS). As it will be remembered, Turkey’s exports to almost all country groups declined last year, while Turkey’s exports to the CIS country group increased by 16.6 percent to USD 24.5 billion. According to TIM data, in the first two months of this year, Turkey’s exports to the CIS declined by 13.6 percent to USD 3.29 billion.
Ship capacity oversupply
The problem in money transfers, which sparked the decline in exports, negatively affected not only exporters but also the logistics sector. Parallel to the embargoes imposed by the West, global shipowners had stopped their shipments to Russia, and local shipowners had expanded the fleet with new ships to fill the gap. However, the problem in money transfers left the shipowners in a difficult situation. Speaking to EKONOMİ, local shipping companies point out that there has been a significant decrease in the volume of shipments to Russia, and that the decline has accelerated in parallel with the weak freight rates. The CEO of a local shipping company, stating that there is an oversupply in the ship capacity working on this line due to the decline in cargo connections, said, “On the one hand, we are having problems in money transfers, and on the other hand, some ships are idle due to the supply-demand imbalance, which has made things very unpleasant. On the other hand, due to the increasing costs, we have become increasingly difficult to compete with companies that do not pay attention to the embargo, do not pay insurance and do not calculate.”
Turkish exporters want Russia to be included in the 33-country exception list, which also includes Iran. The economic bureaucracy is working on the issue, but the Western blockade of the banking system is reportedly too strict.
European exports to Kazakhstan are growing rapidly
The increasing exports of European countries to the region attract attention. Especially Kazakhstan is one of the prominent countries here… The UK’s exports to Kazakhstan amounted to 1.8 billion pounds in the period between October 1, 2022 and September 30, 2023, an increase of 89.2 percent compared to the previous 12-month period. Looking at the course of Germany’s exports to Kazakhstan over the years, it is seen that exports, which hovered in the range of USD 1.4-1.7 billion between 2014-2017, jumped to USD 3.05 billion in 2022 and USD 3.57 billion in 2023, when sanctions against Russia were imposed. Italy is also one of the countries that increased its exports to Kazakhstan after the war… Italy’s exports to this country increased by 48 percent from USD 588 million in 2021 to USD 871 million in 2022. France’s exports, which were USD 549 million in 2021, increased by 64 percent in 2022 and reached USD 1 billion.