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Giedrius RudisAnalyst Insight by Giedrius Rudis – Industrial Analyst

On 17 March, the EU and the US announced sanctions on certain Russian and Ukrainian individuals. Both sides of the Atlantic threatened to take further action if Russia proceeded with its plan to annex Crimea. Some analysts even fear that the dispute could evolve into an import/export ban. What impact would this dismal scenario have on Germany, Russia’s single largest trading partner?

Total Value of Commodities Traded

Source: UN Comtrade

In terms of Germany’s imports from Russia, oil and gas are the dominant commodities, followed by refined petroleum products, basic metals and coal.

Oil and Gas Dominate Germany’s Imports from Russia

Source: UN Comtrade

How serious would a loss in supply from Russia be? Some of the above-mentioned Russian commodities account for a substantial part of the German market. The country is particularly exposed to Russian oil and gas, which in 2012 accounted for over a third of Germany’s overall demand. Losing Russian oil and gas would be a serious challenge for Germany to say the least.

Market Structure of Main Import Commodities

Source: Euromonitor International

From an export perspective, commodity flows are far more diversified. In 2012, only motor vehicles accounted for more than 10% of Germany’s total exports to Russia. Pharmaceuticals followed with a 6% share.

Motor Vehicles Dominate Germany’s Exports to Russia

Source: UN Comtrade

However, Russia is not a crucial market for either Germany’s automotive industry or pharmaceutical manufacturers. In 2012, motor vehicle exports to Russia accounted for 3% of overall industry output, while pharmaceutical exports to Russia represented only 2% of output.

All in all, losing Russia as a market would not cause too much damage to Germany’s economy or one particular industry. On the other hand, however, the loss of Russian energy supplies would cause far more problems. Therefore, from an economic standpoint, Germany’s reluctance to take radical action can be well understood.

 

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