Plus $ 6 billion: how we managed to increase the export of non-resource products

Moreover, this happened against the background of a decrease in oil and gas revenues. NOVYE IZVESTIA tried to find out - is our country really getting off the oil needle and ready to surprise the world with its products labeled Made in Russia?

Yelena Ivanova, Natalia Seibil

Against the backdrop of falling oil prices in 2020, the growth of non-resource exports is good news for the budget and producers. The pandemic has affected all economies in the world with the exception of China. GDP was declining both in America and in Russia. Production was down, inflation was up. The chief economist of Gazprombank, Sergei Konygin, believes that the contribution of exports last year was a supporting factor, which is why the Russian economy showed a moderate rate of decline of 3.1%.

Gold

The growth of exports by $ 6 billion was due, first of all, to gold and agricultural products. According to customs data, 130 tons of gold were exported from Russia in 2020. In times of crisis, gold is in high demand as a safe asset that protects against inflation. Not surprisingly, in July and August last year, the price of gold reached all-time highs. The manufacturers responded instantly. Oksana Lukicheva, an analyst at the Otkritie Research center of expertise, says:

“Since gold was in high demand, and we had enough of it: both gold mining itself and the Central Bank still had reserves. Even the Central Bank in April last year, deliberately, in order to stimulate the export of gold abroad, stopped buying gold on the domestic market for its reserves, this also stimulated and gave impetus".

REC explains that gold cannot be regarded as a classic export commodity. They are usually traded by financial institutions, and the conjuncture strongly affects the volume of transactions. Obviously, the financial authorities gave Russian banks an opportunity to make money on the sale of gold. Of course, those institutions that are not subject to sanctions were able to take advantage of this. Nikita Maslennikov, chief analyst at the Institute of Contemporary Development, explains:

- The price of gold is a volatile thing, and in conditions of a lockdown, the demand for it grew as a safe asset. This year this will not happen. And besides, price fluctuations depend on many other things. But this is a highly volatile commodity, and it is extremely difficult to make predictions.

There are not so many gold exporting enterprises in our country. It is not surprising that, against the backdrop of a large-scale rise in prices, campaigns are increasing their exports, because they receive revenue in foreign currency, and their costs are in rubles. We have seen this more than once or twice, notes Sergey Konygin:

- Is it possible to continue this cycle, the question is difficult, since gold is an asset that protects against inflation. Now we see a surge in global inflation, perhaps the cycle will continue in the near future. How long will it last? The question is open, no one can say when prices will fall, global inflation will fall, supply chain recovery associated with production. I do not think there will be a 100-year growth cycle here, most likely we will expect some correction in the 2-3 year perspective.

In other words, the volume of gold exports may remain in the current year, and then everything will depend on the recovery of the world economy.

Grain and food

The National Union of Food Exporters clarifies that there are no official data on exports for 2020 yet. The State Customs Service will report only in May. In 2019, they also said that the export of agricultural products amounted to $ 25.5 billion, but it turned out that the volumes were lower - $ 24.8 billion, and then exports did not increase, but decreased, says the President of the Union Dmitry Bulatov.

In the structure of agro-food exports, 20% are caught fish, 40% are food products and 40% are agricultural products, primarily grain and, mainly, wheat.

Agriculture figures are considered not calendar years, but seasons, says Andrey Sizov, director of the SovEkon analytical center:

"In general, the season is far from record indicators, although they could be close to those, if not for the restrictions that were introduced. Our latest export estimate is 49 million tons of cereals, legumes and their processing. By comparison, the record was 55 million tonnes in 2017/18. This is our forecast for the current season".

Export duties have been repeatedly imposed on sunflower in Russia so that Russian producers do not export it abroad due to price differences, but transfer it to Russian oil mills. Now, for the first time since 2015, duties have also been introduced on grain. President of the National Union of Exporters Dmitry Bulatov says that our grain is in demand and the situation is good. So why limit it then? But there is another side to the coin:

"On the other hand, there is a situation when world prices exceed domestic prices, and the manufacturer has a question of what to do. Sell grain there for 5 rubles or sell it here for 3? As a result of the price scissors, all of our grain, even those needed for our industry, can go abroad. And then a situation may arise that we will import grain, maybe even our own, and will be forced to buy, but at a different price".

From the point of view of the state, there is a reason for this. But producers, if they are limited in supplies to some sales markets, always answer in the same way - they reduce production. Andrey Sizov does not hide the seriousness of the situation - the main problem of grain production is not quotas, which may not be chosen, but export duties:

"They were introduced and increased many times. Moreover, permanent export duties have been introduced, which means that in a few years no export from Russia will be possible".

From March 1 this year, wheat supplies will be subject to a duty of 50 euros per ton if it is sold within the allotted quotas. Outside the quota, producers will pay a prohibitive duty of 50% of the customs value, and at least € 100 per ton.

Since June 2, the government introduced a floating duty on grain exports. It will be calculated at a wheat cut-off price of $ 200 per ton. If the indicators are exceeded, the state takes 70% for itself.

According to the International Food Organization, food prices in the world have been rising for 11 consecutive months. This has not happened since 2014. The states, and not only Russia, had to react, says Sergey Konygin, otherwise we would have expected a surge in the price of sugar and bread. For 4 years, food prices have been falling, and over the last year they have risen to the level of 2016. The introduction of export duties is a temporary measure, says the economist, which is needed to stabilize inflation:

"The rise in world food prices through supply chains will increase, and grain producers have decided to take advantage of them to jump on the last wagon and boost exports, thereby reducing domestic sales. This was observed in 2018 in the oil products market. If you remember, there was also the introduction of damping agreements between several manufacturers in order to stabilize domestic prices. Then oil prices jumped, $ 80 per barrel - there was such a mark. We are seeing something similar now in agriculture".

The Union of Food Exporters doubts the effectiveness of duties and fears a reduction in acreage. This does not lead to anything good. The earth is not even an oil well; it cannot be drowned out so easily. The peasants should not be punished, they should be helped. Therefore, Dmitry Bulatov proposes not to introduce duties, but to give funds to food industry enterprises so that they can buy grain from producers:

"The Russian Export Center is allocated $ 2 billion annually to support the export of agri-food products. We need to allocate this money to our processing enterprises so that they can buy both grain and other products at close to world prices".

Then the manufacturer will not go to sell his products to distant lands, it will be easier for him to sell his products in his region. And this measure can be considered as a measure to stabilize our export potential.

Exporters have already made such an offer to the government, but did not meet with understanding. True, then the government was different, and the situation in the ministries too. Now the government is different, and the idea can be raised anew. If producers begin to reduce wheat production, the situation will worsen. We are driving the problem in depth with duties, exporters are sure.

What awaits non-resource exports

- Another non-commodity export item that appeared as a result of the pandemic is the vaccine. Already 50 countries have announced that they will use satellite V. India's second largest pharmaceutical plant will launch the vaccine. I am not sure that this will be a high-tech export, but nevertheless, there are positive stories, and this is the story of not one year, but the next two or three years, says economist Konygin. Whether Russia will be able to maintain its position as an export of goods depends on the recovery of the global economy. Russian foreign trade is influenced by countries such as China and other major economies in the world.

- We are now seeing an imbalance in the food market, for example, when in some countries there is a shortage of food supplies, for example, sugar, vegetable oil, meat, cereals. Some countries, mainly Asian, have increased demand.

If Russia follows global trends, low oil prices will automatically keep the share of mineral products low. Higher prices for grain and other food products, as well as for other non-primary goods, will lead to the fact that their share in exports will increase.

Based on the rates of vaccination and forecasts of both the IMF and the World Bank, the world economies should come out of the decline this year and go into plus. But then everything will again depend on the oil prices.