Euro area linkages with Russia: latest insights from the balance of payments

This box provides an analysis of recent developments in trade and financial linkages between the euro area and Russia as recorded in the euro area balance of payments. The euro area current account balance vis-à-vis Russia turned from a small surplus into a deficit of 0.5% of euro area GDP between the second quarter of 2021 and the second quarter of this year, thus contributing significantly to the reduction in the euro area’s current account surplus over the same period. The bilateral current account deficit vis-à-vis Russia increased on account of the rising value of nominal imports, largely of energy products, and lower exports driven by EU sanctions. Euro area financial exposures to Russia before Russia’s invasion of Ukraine were relatively limited, with foreign direct investment (FDI) being the most important component. Since the start of the war euro area holdings of Russian assets have declined, while liabilities vis-à-vis Russia have increased due to the impact of EU sanctions. JEL Classification: F32, F41