(Bloomberg) -- Russia had its smallest current-account surplus in more than a year as the flow of goods from abroad and new restrictions on oil exports endanger what’s become a critical source of hard currency for the Kremlin since the invasion of Ukraine.

As a recovery in imports took hold, the surplus in the current account decreased to $31.4 billion in the fourth quarter, down from $48 billion in the previous three months, according to preliminary central bank data published on Tuesday. Renaissance Capital estimates the total in December at less than $5 billion, the lowest monthly reading last year.

“The volume of goods imports has recovered after passing its peak decline in the spring and approached the pre-crisis level by the end of the year,” said Sofya Donets, an economist at Renaissance Capital. “There was a tangible adjustment to sanctions and other restrictions.”

For the full year, the surplus — roughly the difference between exports and imports — fell short of the central bank’s latest forecast. It reached a record $227.4 billion, as cash from exports of oil, gas and other commodities flooded in while imports remained depressed by sanctions.

In a statement on Tuesday, the Bank of Russia said a drop in imports during the first half of the year gave way to their “gradual rebound” and contributed to a lower surplus in the current account last quarter. 

What Bloomberg Economics Says...

“Declines in global energy prices, exacerbated by an increase in the discount for Russia’s Urals, has erased $20 billion of export revenue. The balance is set to weaken further this year, challenging efforts by authorities to stabilize the ruble and inflation.”

—Alexander Isakov, Russia economist. 

By imposing sanctions including import bans and a price cap on seaborne Russian oil shipments, Western countries are now aiming to reduce the flow of petrodollars to the Kremlin. Russia has also been cutting its gas supplies to Europe.

The price for Urals crude, Russia’s key export blend, more than halved from its peak of $100 per barrel in March.

Economy Adapts

The revival in imports is also increasingly a factor for Russia’s deteriorating external finances. 

Purchases of foreign goods, which plummeted in the months after the invasion in February, picked up strongly toward the end of 2022. Natalia Orlova, chief economist at Alfa-Bank, estimates their decline for the year at 9%, which she said was a “very good result.”

Imports plunged after the first rounds of sanctions disrupted supply chains and deprived businesses of many foreign components. Other measures by the US and its allies complicated commerce by cutting off many Russian banks from the global financial system.

The economy adjusted with time, however, by developing new trade routes and sourcing components from new markets.

“I am surprised how fast imports grew in December and the fourth quarter as a whole,” Orlova said.

(Updates with analyst comments starting in third paragraph.)

©2023 Bloomberg L.P.