Since the start of the full-scale war in February 2022 and implementation of sanctions, imports from Russia and Belarus to Estonia have been falling rapidly – from €393 million or 4.7 percent of Estonia's GDP in the fourth quarter of 2021 to €40.5 million and 0.4 percent GDP in the first quarter of 2024, according to a press release.

Exports to Russia and Belarus, however, have been on the rise – from accounting for 1.2 percent of Estonia's GDP in the fourth quarter of 2021 to 1.5 percent GDP by the first quarter of this year.

Foresight Center research director Uku Varblane noted that foreign trade with Russia has historically been very unstable for political, regulatory and economic reasons.

"Before the full-scale war, Russia was a significant import partner for Estonia, but last year, Estonia imported goods from Russia and Belarus for €1.9 billion less than the average of the 2019-2021 period," he explained.

According to the short report, imports of 769 product groups have decreased, while imports of 170 product groups have increased. Analysis of the commodity groups suggests that Estonian companies have replaced products and services previously imported from Russia and Belarus, now sourcing them from other markets, but this often means higher purchase prices.

In product groups where imports from Russia and Belarus have decreased, imports from other countries have increased by a total of €4.5 billion a year compared with the 2019-2021 average.

"The last two years have shown that, in the wood industry and the production of metal products, for example, favorably priced Russian raw materials provided a significant competitive edge for Estonia," Varblane acknowledged.

Changes in exports vary by product group

Meanwhile, Estonia's exports to both Russia and Belarus reveal the opposite trend.

In the fourth quarter of 2021, exports to Russia accounted for 0.8 percent and exports to Belarus for 0.4 percent GDP, totaling €100.2 million or 1.2 percent GDP. In the first quarter of 2024, however, exports to these two countries totaled €140 million, or 1.5 percent GDP.

"One of the reasons besides blockage of trade routes due to war can be opportunistic behavior, utilizing the new market opportunities that emerged in countries restricted by sanctions," the research director said.

In its short report, the Foresight Center notes that when using a longer period as a benchmark, i.e. the average of the years 2019-2021, then €148 million less of Estonian goods were exported to Russia and Belarus last year. However, there are major differences between product groups.

Exports of the following product groups subject to sanctions have declined the most: machinery and equipment (down €73 million), chemical products (down €47 million), and base metals and products made from them (down €17.5 million). At the same time, prefabricated food and beverages exports have increased by €12.4 million in 2023, and the export of livestock and animal products has grown considerably as well – by €6.1 million.

The Foresight Center is a think tank at the Chancellery of the Riigikogu that analyzes socioeconomic trends and generates future scenarios. It conducts research on a range of topics in order to anticipate emerging trends as well as potential disruptions.

The short report "Estonia's foreign trade with Russia and Belarus: Main changes since the start of the full-scale war" is a continuation of the center's 2022 special research stream "The long-term impact of the war between Russia and Ukraine on Estonia."

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