Russia is losing importance for Baden-Württemberg's economy: An insight

Russia is losing importance for Baden-Württemberg's economy: An insight

Russia is on a remarkable decline as a supplier in the Baden-Württemberg economy. According to the South German newspaper Imports from the largest country in the world are declining sharply. In 2022, imports from Russia were only 100 million euros - a dramatic decline from 1.9 billion euros in 2021. Exports also suffered: they fell from 3.8 billion euros in 2021 to just 800 million euros last year. This clearly shows that Russian suppliers have lost their importance.

The decline in trade relations must be seen against the backdrop of the ongoing events in Ukraine. Since Russia's invasion of Ukraine at the end of February 2022, the EU and other countries have fundamentally reconsidered their political and economic relations with Russia. Several sanctions packages were adopted in this context, most recently the 17th sanctions package, which came into force in May 2023. This package, welcomed by the EU Commission and emphasized by High Representative for Foreign Affairs and Security Policy Kaja Kallas, aims to increase the costs for Russia in the ongoing war and further increase the pressure on the Russian economy.

The measures in detail

The new sanctions package includes extensive measures against the Russian shadow fleet, which is used to transport oil and oil products. Loud europa.representation.ec.europa.eu In this context, almost 200 ships are affected that are subject to a port access ban and whose services are prohibited. In addition, 31 new companies supporting Russia's military-industrial complex were added to the sanctions list, as well as 75 additional entries, including individuals and organizations that undermine Ukraine's territorial integrity.

Another crucial point is the high inflation rates in Russia, which are over 10%, as well as a growing budget deficit. Before the war, oil and gas revenues had fallen to 100 billion euros in 2022, and forecasts show that these revenues could fall to just 22 billion euros by 2024 - a fall of almost 80%.

The impact on the economy

The EU is coordinating its sanctions internationally with the G7 and other partners to further destabilize Russia's economy. Many German companies have reduced their business relationships with Russia or withdrawn from them completely. According to a study by the Yale School of Management, 24 of 130 German companies have left the Russian market, 39 companies have almost completely stopped their Russian business and 22 have reduced their involvement. The decline in trade is not just a phenomenon of recent years: since the annexation of Crimea in 2014, Russia has lost a lot of its importance as a sales market for German companies.

The figures from 2022 show that German exports to Russia in particular fell by 55% compared to the previous year. Automotive products are particularly hard hit, with a decline of 95% and data processing equipment by 77%. While some sectors have suffered, pharmaceutical and agricultural products saw prices increase by around 20%.

In summary, Russia's footprint on the German and European markets has shrunk significantly. The ongoing sanctions and pressure on the Russian economy appear to be having an impact and raise questions about how the trading landscape will develop in the future. More and more companies are showing a good knack for finding alternative business and reducing their dependence on Russia.