- Import from Russia more than doubled in value in 2022.
- The increase did not start after the invasion of Ukraine and it was most pronounced in the first months of the year.
- It was caused by the spike in oil and gas prices and the increase in demand as a result of post-pandemic recovery.
- The rise of import value does not mean that Bulgaria or other EU countries have been breaching sanctions or that their steps towards energy independence from Russia are not effective.
Over the last months of 2022 a number of publications appeared on Bulgarian media, claiming that trade between Russia and Bulgaria not only did not shrink as could be expected due to the Ukraine war and EU sanctions, but increased substantially.
Factcheck.bg examined the validity of those claims.
Interpreting economic data in the absence of official statistics
The publications are based on articles on Russian media. One of them quotes a Serbian publication which in turn points to Russia’s state agency RIA Novosti as its source. None of the articles are based on official statistics by the Kremlin.
Russia stopped publishing data on its foreign trade in April 2022, when economic sanctions over its invasion of Ukraine became effective. The official explanation was that the publication of trade statistic was being suspended “in order to avoid incorrect estimates, speculation and discrepancies“.
In the absence of official national data on foreign trade, Russian media frequently publish news on the country’s exports to EU member states based on the national statistics of the importing countries. Attention is paid mostly to countries and time intervals in which import from Russia grew. This helps to sustain the media narrative that EU member states can not or will not cut their access to Russia’s energy resources.
On its way from EU members’ national statistics via Russian media and into Bulgarian ones, sometimes the data is subject to speculation or wrong interpretations. For example, when a value is said to have increased 2.4 times that constitutes growth by 140% and not 240% as one of the Bulgarian publications says in its title.
What do Bulgaria’s official statistics say
When an article speaks about trade between countries or foreign trade turnover, this is measured in the monetary value of the exchanged goods. According to the National Statistical Institute (NSI), the value of goods imported from Russia into Bulgaria in the interval January-October 2022 was indeed more than double in comparison to the same interval of 2021 – it rose by 120%.
Monthly data shows that the most abrupt rise happened at the very beginning of last year, even before the war in Ukraine began, contrary to what some of the media publications say. For example, in January 2022 the value of imports from Russia was 274% higher than in January 2021, while in the following months its growth gradually slowed down.
Code for embedding the chart can be found under ‘Sources’ below this text.
Exports to Russia also grew by about 10%. Bulgaria has a markedly negative trade balance with Russia, with the value of imports exceeding that of exports more than ten times. That means that the slight growth in exports did not contribute significantly to the increase in the total trade value between the two countries.
Bulgaria’s imports from Russia consist mostly of energy resources – calculations by Capital show that before the war their share of total imports was around 70%. That percentage can be expected to be even higher now, after the introduction of sanctions, and to have a decisive impact on the total import value.
How did the rising prices of energy resources influence imports
Factcheck.bg contacted Kaloyan Staykov, chief economist at the Energy Management Institute, for comment on the issue. In his view there are two main factors behind the substantial rise of imports from Russia – the surge in the prices of energy resources during the first half of 2022 and the quantities of imported oil, which also increased by over 60% in the first 10 months of the year, compared to the same interval in 2021.
Oil prices started rising in 2021 after their sharp drop in 2020 as a result of the Covid pandemic. Our team compared the fluctuations in Russian oil prices over the last 10 years with the value of overall imports from Russia. There seems to be a clear correlation between the two indices, as can be seen in the chart below:
Russia cut off supplies of Russian gas to Bulgaria in April but according to Kaloyan Staykov the spike in gas prices, which started in the second half of 2021, also had an impact on the overall imports last year. “The pricing for the gas we used to buy from Gazprom included a 70% market component based of TTF prices, while the remaining 30% was indexed to oil,” the expert explained. And because the price at the Netherlands hub was rising, the market-indexed component on our contract with Gazprom also became more expensive.”
Bulgaria imported more crude oil than in 2021
NSI data shows that the quantities of imported oil also increased in 2022. In the interval January-October it was over 60% more than in the same months of 2021. That increase, however, came against a relatively low base – in 2021 Bulgaria imported less oil even compared to the pandemic year 2020.
According to Kaloyan Staykov last year the quantities increased because the economy was developing. In 2021 it was still recovering from the pandemic and demand wasn’t high enough, given that there were still restrictions in place over more than half of the year. Another factor was the scheduled maintenance at the Lukoil refinery in Burgas in October and November 2021, which meant that in those months the plant did not import any crude oil but relied only on reserves. In 2022 we already saw a growing demand in spite of the higher prices and this is the result, the analyst said.
Meanwhile, NSI data also shows a substantial increase in the overall export of fuels from Bulgaria. In the first 10 months of 2022 diesel export, for instance, grew more than twice not in terms of value, but of quantity – it rose by 129%.
An investigation by German daily Die Welt found that in 2022 Ukraine at times received up to 40% of its diesel supply from Bulgaria. Data from the national statistics indeed shows a sharp increase in diesel exports between April and May, after Bulgaria’s then prime minister Kiril Petkov visited Kyiv. At that point the quantity of exported diesel jumped by 229% in just a month.
EU trade with Russia is going down
After the attack on Ukraine in February 2022 the EU imposed unprecedented economic sanctions on Russia. They were added to already existing restrictions imposed after the annexation of Crimea on 2014 and the violation of Russia’s commitments under the Minsk agreements. The purpose of the measures is to inflict heavy consequences after Russia’s aggression and impair the country’s capability to sustain further military action.
EU sanctions include restrictions on the import and export of certain goods between Russia and the member states. Export bans include technology, machines and equipment used in the energy and transport industries, in oil processing, aviation and space research, marine navigation, luxury and dual use goods. Import bans cover steel, cement, timber, paper and plastics. In August 2022 a ban on the import of Russian coal entered into force, and in December – on the import of Russian crude by sea, from which restriction Bulgaria is temporarily exempt until the end of 2024. According to the EU Commission, the ban extends over 90% of the overall import of Russian oil into the Union before the measure was imposed.
Sanctions are not the only reason for the decrease in trade with Russia over the last year. Russian state company Gazprom unilaterally cut off gas supplies to several EU countries, when they refused to comply with the Russian president’s March 2022 decree demanding payment in roubles. In addition to Bulgaria, those countries include Poland, Denmark, Finland and the Netherlands, while Lithuania announced it was giving up the use of Russian gas by itself. In the second half of the year Russia lowered and then completely stopped its deliveries via the Nord Stream pipeline. The initial explanation was the need for maintenance but in September both pipes turned out to be seriously damaged by explosions and gas deliveries through them were never resumed. According to EU data, while in 2021 the Union imported 40-50% of its gas from Russia, in the first half of 2022 that share was just 31%.
Eurostat data shows also that oil and gas imports from Russia into the EU grew over the first quarter of 2022 but in the following two quarters it continuously diminished in terms of quantities as well as overall value. A further drastic drop is expected to be announced for December 2022, when the embargo on the import of Russian entered into effect.
According to the data by international consultancy Kpler, cited by the Wall Street Journal, in December Russia’s oil export by sea shrank by 22% compared to the average over the first 11 months of the year.
It is true that the overall value of trade between Bulgaria and Russia grew in 2022 and import more than doubled. The increase, however, did not begin after the invasion of Ukraine, as a number of publications on Bulgarian media suggest. It was most pronounced in the first months of 2022 and is due mainly to the rise in oil and gas prices, as well as the economic recovery from the Covid pandemic. The increased value of imports does not mean that Bulgaria or other EU countries are breaching sanctions or that their steps towards energy independence from Russia are not effective.
Expert consultant for this article: Kaloyan Staykov, chief economist at the Energy Management Institute