Research & Insights #52

Russian manufacturing industry grows fastest in almost 18 years

In March, Russian manufacturing activity grew at its fastest pace in almost 18 years, according to a business survey. The S&P Global Purchasing Managers’ Index (PMI) for Russian manufacturing rose from 54.7 in February to 55.7 in March, its highest level since August 2006. The 50 threshold separates expansion from contraction in the manufacturing sector. Moscow is helping to boost manufacturing, injecting funds into the defence sector to increase military production. The defence industry was behind stronger-than-expected growth in industrial output in February. “Driven by stronger demand, Russian goods producers recorded renewed business confidence regarding production prospects for the year ahead in March”, S&P Global said. Companies announced their plans to invest in new product lines and machinery.

Russia blocks renewal of North Korea sanctions monitors

Russia has vetoed the annual renewal of a group of experts charged with monitoring the application of United Nations sanctions against North Korea imposed since 2006 for its nuclear weapons and ballistic missile programs. This decision comes at a time when the United States is accusing North Korea of transferring weapons to Russia for use in Ukraine, a charge denied by both Moscow and Pyongyang. Recently, the FT revealed that Russia was supplying oil to North Korea, in defiance of UN sanctions. North Korean vessels were allegedly involved in illicit ship-to-ship oil transfers designed to circumvent the import ceiling, which limits North Korea to 500,000 barrels per year for oil and oil products. According to the British think-tank Royal United Services Institute, deliveries from the largest port in the Russian Far East (Vostochny) could amount to 125,000 barrels of petroleum products in just a few weeks.

Western pressure impacts Turkey’s trade boom with Russia

Turkey’s exports to Russia fell by 33.7% year-on-year in the first quarter, according to preliminary data from the Turkish Ministry of Trade. Washington and Brussels are exerting increasing pressure on Ankara to ensure that Turkish financial institutions and businesses do not facilitate or support trade with Russia, notably through secondary sanctions. According to Kutlu Karavelioglu, president of the Machinery Exporters Association, machinery exporters, the main beneficiaries of Turkey’s increased deliveries to Russia in 2023, could see their sales fall by a billion US dollars this year. A Russian presidential spokesman told reporters that Russia and Turkey were working to eliminate bank transfer problems resulting from anti-Russian sanctions. Six months ago, the Turkish president recalled that annual trade turnover with Russia was US$ 62 billion, and that the aim was to reach US$ 100 billion in the near future.

The Bank of Russia advocates crypto-currencies for international payments

The Bank of Russia wants to speed up the adoption of the draft law on international crypto-currency payments. The Governor of the Bank of Russia advocates that such payments be made under an experimental legal regime. At a national level, the Bank of Russia’s financial messaging system (SPFS) has become the main channel for exchanging financial information. Today, it is used to route some 98% of financial transactions in Russia. “Sanctions risks remain high when accounts in US dollars, euros, as well as SWIFT, are used in the chain of payments,” Elvira Nabiullina noted. The yuan’s share of the foreign exchange market structure reached a record high in March, rising from 46.6% in February to 53%. The share of “toxic” currencies (US dollars and euros) fell from 52.8% in February to 46.4% in March 2024.

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