Romania and the Russia–Ukraine conflict

The Ukrainian revolution of February 2014 and the annexation of Crimea by Russia have resulted in increased international tension in the region and may have longer-term economic consequences for the trading partners of both countries. Romania is a next-door neighbour and may be more affected than other EU members especially if the conflict escalates.

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Limited trade and investment dependence

Economic cooperation between Romania and Ukraine is very limited. The Ukrainian market accounts for only 1.9% of total Romanian exports and 0.8% of imports (2013). Romania has had a growing trade surplus with slowly increasing exports and imports with a downward trend (Table 1). The composition of exports and imports is not very sophisticated, it contains mainly primary products.


The significance of Russia has been somewhat higher, 2.8% in the case of exports and 4.3% in the case of imports (2013). Romanian exports to Russia more than doubled between 2008 and 2013, growth being continuous following a minor setback in 2009 (Table 2). The main driving force has been the automotive sector. The exports of Dacia cars have been a real success story overall and also to Russia although some similar Renault models are assembled in Moscow. The exports of machinery and electrical equipment reached their peak in 2010 and dropped in 2012 when the other Romanian flagship exporter, Nokia, stopped production. Another important feature is that the composition of Romanian exports has become more diversified over the past five years. The two main categories mentioned above had a share of 72.6% in 2008 which fell to 59.5% in 2013. The upcoming export items were of lower value added such as chemicals, wood and metal products (12.9% combined share in 2008 and 21.2% in 2013). Imports are much more concentrated than exports; close to 90% is constituted by mineral products (see section on energy below). Imports fluctuate in line with Romania’s economic performance, covering the excess needs over the local production.


It is worth noting that, among the NMS, Romania has the smallest dependence on trade with Russia next to Slovenia. This may have two reasons; one is the country’s high rate of self-sufficiency in terms of oil and gas. The other dates back to the pre-transition period. Romania was more self-relying in its industrial capacities and did not participate in the CMEA division of production in the same way as other members did (the Soviet Union accounted for only 22% of exports and 32% of imports in 1988. Western technology and autarchic solutions dominated the development. For example, the nuclear power station was built with Canadian and not with Russian technology). 



Despite the modest trade dependence, Romanian exporters may be hurt by growing insecurity of trade and diminishing demand in the conflict-ridden economies. In case of a 10% fall in the value of exports to Ukraine and Russia, Romania’s GDP would decline by 0.16% according to the calculation of the National Bank of Romania (Romania: Recent Macroeconomic & Banking System Developments’, speech held by NBR Governor Mugur Isărescu, Bucharest, 16 April 2014).


Romania is a net receiver of FDI from the world. The inward stock amounted to EUR 58.9 billion in 2012, the latest year for which data are available. This is 22% higher than in 2008 as a result of continued FDI inflows during the crisis (Table 3). The outward FDI stock was less than EUR 1 billion in 2012, somewhat lower than before the crisis as a result of capital withdrawals. There was some modest Romanian investment activity in Ukraine in 2010 and 2012 while FDI outflow to Russia has been negative or insignificant since the outbreak of the financial crisis. Also inward investment from the two countries has been negligible. Russia holds only 0.1% of the FDI stock in Romania, which is one of the lowest among the new Member States, not much different from Poland or Hungary. Russian investment is more significant through holding companies or subsidiaries registered outside Russia. TMK owns the Resita steel tube producer, Vimetco (Vitaly Mashitsky) the ALRO Slatina aluminium works together with the alumina producer ALUM Tulcea. The oil refinery Petrotel Ploiesti belongs to Lukoil, which also owns two concession areas in the Black Sea. Gasprom through its subsidiary NIS Petrol has exploitation concessions in two fields in the West of Romania. In March 2013 it purchased Marine Bunker Balkan, an oil storage facility in the port of Constanta.



Romania has been a frequent destination for greenfield foreign direct investment projects as reported by the database. The significance of Russia and especially of Ukraine is rather small but higher than indicated by the balance of payments statistics. In 2003-2013 Romania received 23 greenfield projects from Russia, only 1.1% of the total, and this was also the share in terms of invested capital (Table 4). In 2011 and in 2013 four new projects were established in each of the years; there was no new project in 2012. None of the recent projects were established in manufacturing but mainly in trade and business services.


As an impact of the Russia–Ukraine conflict, growing insecurity of foreign property there may divert some investment from these countries to Romania. Although the number of projects that are not serving the local market in these countries is quite small, for such FDI Romania could be an alternative location.




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