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EU trade with Russia dropped $12 billion in first year Ukraine invasion

The EU cites Russia's invasion of Ukraine for driving record inflation and economic uncertainty.

(CN) — As Russian tanks rolled through Ukraine, the European Union’s trade with Russia plummeted. Over the last year, the EU’s trade deficit with Russia fell by nearly two-thirds, as the value of Russian imports was cut in half, according to data published by Eurostat on Friday.

Prior to the war, the EU imported nearly 10% of goods from Russia. That number dropped to 4% over the last year.

“With Russia being gradually replaced by other trade partners, Russia’s share in extra-EU imports for six key products decreased, with strong declines visible for coal, natural gas, fertilizers, petroleum oil and iron & steel,” the report said.

The war in Ukraine has largely disrupted trade between Russia and the European Union (Eurostat).

In March 2022, the EU’s trade deficit with Russia hit 18.2 billion euros ($19.3 billion). The trade deficit decreased by nearly two-thirds to 6 billion euros ($6.4 billion) that December. Russian imports to the EU amounted to 22 billion euros in trade ($23 billion) in March 2022, and by December Russian imports to the EU were valued at just 10 billion euros ($11 billion).

Prior to Russia's invasion of Ukraine, the EU imported more than a quarter of its crude oil from Russia, along with 46% of solid fuel and 40% of natural gas. 

In anticipation of Russia potentially cutting off energy supplies, EU member states agreed to reduce their energy use in the months leading up to winter.

While the EU still sourced 22% of its coal from Russia over 2022, trade was completely cut off by the fourth quarter of the year with sanctions prohibiting any coal purchases from Russia. To make up the shortfall, EU members are buying more from Columbia and South Africa.

By the end of 2022, the EU imported just 21% of natural gas, 22% of fertilizer, 21% of petroleum oil and 10% of iron and steel from Russia.

To make up the difference, the EU increased its petroleum trade with Saudi Arabia and the United States. The United States also supplied the EU with more natural gas and fertilizer than in pervious years. EU increased imports of iron and steel from China.

With no policies directly addressing nickel trade, the EU sourced more than 40% of its supply from Russia last year.

While European exports of coffee, tea and spices to Russia remained largely unchanged over the last year, Russians are receiving far fewer products from the EU including toys, dye, and plants.

The war in Ukraine has largely disrupted trade between Russia and the European Union (Eurostat).

Follow a dramatic decrease at the start of the war, EU trade with Ukraine largely rebounded over the last year. And as the economy continues to bend in the winds of the war, the EU declared solidarity with Ukraine.

"Ukraine has become the center of our continent,” said Ursula von der Leyen, president of the European Commission, in a statement. “The place where our values are upheld, where our freedom is defended, where the future of Europe is written.”

As the EU pivots away from dependency on Russian fossil fuels, European energy costs fell by 7.9% between January 2023 and the previous month, according data published by Eurostat on Friday.

Energy prices remained 24% higher in January compared with the year prior, driving higher prices across the board. Energy aside, all other categories tracked an average 11.7% increase between January 2023 and January 2022.

Energy aside, prices in all other categories tracked an average 1.1% increase compared to the prior month.

The European Commission on Economy and Finance hopes the coalition of member states will see economic recovery without first dropping into a recession. In the Winter 2023 Economic Forecast published last month, government economists saw signs of record high inflation cooling off.

Since inflation peaked in the double-digits this past October, the EU is poised to watch inflation drop from 9.2% to 6.4% over the rest of the year. The optimistic forecast anticipates inflation settling below 3% by 2024.

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