Research & Insights #56

EU agrees to use profits from Russian state assets to arm Ukraine

European Union countries have agreed to seize an estimated EUR 3 billion of frozen Russian state assets to purchase arms for Ukraine. On May 8, the European Union ambassadors reached an agreement that concerns the profits made by Euroclear, the Belgian central securities depository, holding roughly EUR 190 billion of Russian central bank assets. Euroclear is expected to provide around EUR 3 billion per year, which will be transferred to EU funds. EU member states, including Germany, Italy and France, have rejected Ukraine’s US-backed demands to confiscate around EUR 260 billion in assets held by the Russian state in G7 countries. Since the start of the war in Ukraine, Euroclear has made profits of around EUR 5 billion from Russian assets. Of this amount, the net profits generated up to mid-February 2024 will remain with Euroclear and serve as a reserve in the event of any legal action.

Putin signs decree setting Russia’s development goals

Vladimir Putin has signed a decree setting national development targets. The main demographic objective is to increase the total fertility rate (TFR) to 1.6 by 2030 and to 1.8 by 2036, compared with 1.4 at present. In addition, the country’s average life expectancy is set to rise to 78 years by 2030, compared with 73.4 last year. Currently ranked fifth, Russia aims to become the world’s fourth largest economy in terms of purchasing power parity (PPP) by 2030, overtaking Japan, which currently holds a 20-25% lead. To achieve this goal, the country’s economic growth will have to exceed the world average, which currently stands at 3%. The decree sets a target to reduce social inequalities to a Gini coefficient of 0.37 by 2030, compared with the current 0.403 (0 means perfect equality). The poverty level should be reduced to 7% by 2030, from 8.5% in 2023.

Russian technology imports are said to have reached pre-war levels

According to the Bruegel think-tank, Russian imports of Western technologies have reached pre-war levels. Moscow continues to buy essential foreign components used in military production and industry from China, Turkey and the United Arab Emirates, as well as Armenia, Georgia, Kazakhstan and Kyrgyzstan. The Kyiv School of Economics estimates that Russia acquired US$ 12.5 billion worth of technological goods in 2023, just 2% less in monetary terms than it imported in 2021. Forced to pay higher prices for technology, imports are likely to have fallen modestly in volume terms. Some 18% of these technological goods, representing US$ 2.3 billion, are Tier 1 products, i.e., critical technologies that are not produced in Russia, says the report. Tier 2 products, i.e. electronic items that Russia can produce but prefers to import, accounted for a further US$ 2.4 billion (or 19%).

Gazprom posts record loss in 2024

Russian energy giant Gazprom recorded its biggest loss since 1999, due to lower shipments to Europe and lower fuel prices. The company lost RUB 629 billion (US$ 6.9 billion) in 2023 due to lower sales in Europe, its main source of revenue. Analysts had expected net income of 447 billion roubles (US$ 4.8 billion), according to the Interfax news agency. Gazprom’s revenues have fallen by almost 30% year-on-year, with gas deliveries to Europe down 55.6% to 28.3 billion cubic meters in 2023, as calculated by Reuters. For the record, Russia’s share of Europe’s gas imports has fallen from 40% in 2021 to 8% in 2023, according to EU data. This year, Russia expects its pipeline gas shipments to foreign markets to rise by 18% compared with 2023, to 108 billion cubic meters, as the Power of Siberia link to China gradually reaches its nameplate capacity.

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