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Adapting Russian commodity markets amid international sanctions

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The geopolitical landscape has shifted dramatically for Russia following the invasion of Ukraine, leading to significant repercussions for its role as a major commodities supplier. While the EU, US, UK and G7 have imposed complex sanctions targeting Russia’s economy, some countries like India and China have emerged as crucial markets for Russia, counterbalancing the impact of Western sanctions. Despite attempts at economic isolation, Russia has shown resilience by pivoting towards these Asian markets, thereby influencing global commodity markets.

Here are some key takeaways from our recent webinar on how Western sanctions are impacting Russia’s markets:

  1. Metals and mining sanctions: Western sanctions have targeted the metal and mining sectors, introducing trade barriers and restrictive measures since February 2022. This has affected various commodities such as aluminium, copper, nickel, and steel.
  2. Battery raw materials: Russia’s role in supplying critical battery raw materials has been compromised by sanctions, leading to uneven impacts across different markets. While some commodities like copper, aluminium, and nickel have experienced price volatility, others such as cobalt and lithium remain stable.
  3. Aluminium trade shifts: Russian aluminium plays a crucial role in the global supply chain, with Europe being heavily dependent on it. However, recent sanctions have led to shifts in trade dynamics, with Russia exploring markets in Asia, particularly China.
  4. Gold: Despite sanctions aimed at limiting Russia’s income from gold, the country remains a significant player in global gold markets. Production levels have remained robust, although there have been disruptions in traditional export routes.
  5. Coal: Russian coal exports have expanded into Asian markets following bans on imports into the EU and UK. Despite infrastructure limitations, coal producers have increased exports to key markets like China, South Korea, and India.
  6. Steel sanctions: While the EU and US have imposed sanctions on Russian steel, their impact has been mitigated by lobbying efforts and selective bans. Changes in trade flows are expected to occur gradually over the coming years.
  7. Iron ore: Sanctions on Russian iron ore have been less severe compared to other commodities, reflecting the EU’s need to balance sanctions with its domestic steel industry. However, there has been a shift in export dependency towards China.

In conclusion, the webinar highlighted the resilience of Russian commodity markets in the face of international sanctions. While these sanctions have had complex effects on global trade and pricing, Russia has managed to navigate through them by leveraging alternative markets and strategic partnerships.

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