Bolsonaro in Moscow

Despite embargo, Russia nearly doubles exports to Brazil and eyes selling diesel

Aug, 09, 2022 Posted by Gabriel Malheiros

Week 202232

Subject to one of the largest sanctions packages imposed by Western powers, Russia recorded a 95% increase in exports to Brazil between January and July 2022. The Ministry of Economy data also points out that, with the trade boost between the two countries, the Russians outperformed some of Brazil’s traditional partners.

Since February, the Russian government has been under trade, financial and diplomatic embargoes by the US and Europe. The measures were taken on account of the invasion of Ukraine in hopes of suffocating the Russian economy.

However, President Vladimir Putin made it clear that he would redirect his sales. In fact, this was the message sent to other countries at the BRICS summit in June.

At the headquarters of the Brazilian Foreign Relations Ministry, sources told UOL that in the first months of the war in Ukraine, Americans and Europeans pressured the Jair Bolsonaro government to adhere to initiatives to isolate Russia.

There was also a reaction of distrust towards the Brazilian president after he, on the eve of the Russian invasion of Ukrainian territory, visited the Kremlin. More recently, Ukraine’s President Volodymyr Zelensky criticized Bolsonaro’s stance on the war.

In mid-July, the two presidents spoke on the phone. “I ask that all trading partners join the sanctions against the aggressor,” Zelensky said on his social media when explaining the conversation with Bolsonaro.

However, the Brazilian executive branch leader did not respond to requests to adhere to sanctions and maintained dialogue with the Kremlin, including opting for abstentions in UN resolutions against Putin. In certain stances, Brazilian diplomats criticized the sanctions against Russia, warning that the measures could cause a substantial increase in world hunger.

With no sanctions in place, government data confirmed the expansion of the flow of exports from Russia to Brazil. Between January and July 2021, the country imported the equivalent of 2.6 billion dollars from Russia. In the first seven months of 2022, the balance rose to 5.1 billion dollars.

According to an analysis carried out by Datamar’s business intelligence team, the two export items that experienced the most growth in terms of shipments to Russia were soybeans (NCM 1201) and sugar (1701). See below the track record of soybean and sugar shipments, measured in metric tonnes, from Brazil to Russia between January 2021 to June 2022.

Sugar and Soybean exports from Brazil to Russia | Jan 2021 – Jun 2022 | WTMT

Source: DataLiner (click here to request a demo)

In the same period, Brazil increased imports from around the world at an average rate of 32%. Thus, if  Russian products represented 2.2% of all Brazilian imports in 2021, they now represent  3.3% of national purchases.

From the 11th position in the ranking of countries with the highest share of the Brazilian market in 2021, Russia is currently ranked fifth.

With increased flow, Russia recorded more sales to Brazil than Mexico, South Korea, Japan, Canada, and the aggregate of all countries of the Andean Community. At the current rate, it is not impossible that the volume may exceed the purchases of Argentine products made by Brazil, valued today at 7.1 billion dollars in the first seven months of the year.

Two aspects weighed. The first was the increase in fuel prices, which resulted in an increase in imports to Brazil in terms of value. The same phenomenon occurred among the Europeans and other partners.

But diplomatic sources also indicated that another important aspect was Brazil’s decision to bring forward the import of fertilizers from Russia, precisely to guarantee supplies for Brazilian agriculture.

One of the fears was that the sanctions would affect the ability to transport and finance cargoes of fertilizers.

See below the track record of the volume of fertilizer imports carried out by Brazil from Russia between January 2021 to June 2022. The chart below was designed with data collected by Datamar’s business intelligence team on the DataLiner platform.

Brazilian imports of fertilizers from Russia | Jan 2021 – Jun 2022 | WTMT

Source: DataLiner (click here to request a demo)

Brazil negotiates the purchase of Russian diesel

Brazil anticipates that the trade flow will continue at a rapid pace. In reality, imports from Russia increased by 127% between July 2021 and July 2022, one of the most significant increases among Brazil’s key trade partners.

UOL found that Brazil still received a license from the Russian government to start importing diesel as well, in a maneuver that aims to help reduce fuel prices in the country.

According to diplomats, there is currently a negotiation to establish prices and conditions for this import operation.

In June, Jair Bolsonaro signaled that the topic had been part of a dialogue he had with Vladimir Putin.

During the war period, exports from Brazil to Russia increased, albeit at a much lower rate. According to official data from the Ministry of Economy, the value increased from 843 million dollars in 2021 to 1.1 billion in 2022.

Source: UOL

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