Research & Insights #54

United States approves US$ 61 billion in aid for Ukraine

The U.S. House of Representatives has passed a US$ 95 billion aid package for the security of Ukraine, Israel and Taiwan. The bill is due to be signed into law, after passing the Senate. It provides US$ 60.84 billion for Ukraine, including: US$ 23 billion to replenish U.S. weapons, stockpiles and facilities; US$ 14 billion for the Ukraine Security Assistance Initiative, a funding program led by the U.S. State Department that helps train the Ukrainian military and provides equipment and advisory initiatives; US$ 11 billion to fund ongoing US military operations in the region, build the capacity of the Ukrainian army and boost intelligence collaboration between Kiev and Washington; and US$ 8 billion for non-military assistance, including helping the Ukrainian government pay salaries.

EU watchdog warns bloc still needs Russian LNG

The European energy regulator has cautioned Brussel that it still needs to import Russian liquefied natural gas (LNG) to prevent a potential energy crisis. While the EU has succeeded in replacing Russian pipeline gas imports with LNG since 2022, the global gas market remains tight. The EU has compensated for its withdrawal from Russian gas pipeline imports by increasing its LNG purchases from Moscow and other suppliers. Today, Russia is the Union’s second-largest supplier of LNG, after the United States, accounting for 16% of imports in 2023. According to data provider Kpler, EU countries bought 15.6 million tonnes of Russian LNG last year, almost 40% more than in 2021. By and large, European gas imports from Russia have fallen by around two-thirds compared with pre-war levels, even as supplies have shifted from pipelines to LNG.

Russia positions itself as a key player in global trade between Europe and Asia

Russia is developing two major trade routes linking Europe and Asia, and could, according to Bloomberg, place the country “at the heart of much of international trade”. Moscow is about to invest over US$ 25 billion in the International North-South Transport Corridor (INSTC) and the Northern Sea Route. These two transport routes could cut transit times by 30-50%, reducing the cost of sea transport compared with the Suez Canal route, located in an unstable region. Although Westerners have so far refrained from using these trade routes, “major Asian and Gulf economies” have already expressed interest, notes the media. The use of these trade routes also enables Russia to shift from trade with the West to trade with the Asian economies, further mitigating the effect of Western sanctions.

Russia’s surging budget revenues

Russian budget revenues rose by more than 50% in the first quarter of this year compared with 2023, thanks to energy and non-energy income. First-quarter oil and gas revenues rose by 79% year-on-year to 2.9 trillion rubles (US$ 32 billion), while non-oil and gas revenues totaled 3.3 trillion rubles (US$ 35 billion), an increase of 24%. The overall budget deficit for the three-month period was 607 billion rubles (US$ 6.5 billion), equivalent to 0.3% of Russia’s GDP, in line with government plans for an overall budget deficit of 0.9% of GDP for 2024. The increase in oil and gas revenues is linked to high oil prices, the introduction of new tax calculation methods and the impact of exceptional taxes. The rise in non-energy revenues is due to Russia’s overall economic growth. Higher domestic demand and spending translated into increased state revenues, mainly through VAT and sales taxes.

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