The Economist: Russia and Texas

The recent invasion of Ukraine by Russia is generating questions regarding how important Russia is to the Texas economy, particularly as policies restricting trade and investment interactions are contemplated. The short answer: not very.

Texas trade with Russia (both imports and exports) was just over $6.0 billion in 2021, only 0.87% of overall Texas global trade. Of the $657.4 million in Texas exports to Russia, the largest categories were machinery (largely oilfield equipment), transportation equipment, computer and electronic products, and chemicals. Texas imported nearly $5.4 billion in commodities, with over 90% being crude and refined petroleum products.

The oil imports likely stem primarily from the fact that refineries are designed for specific types and combinations of crude, and Russian products are often included. However, this pattern will likely change as refineries adapt to higher US production levels and convert to cleaner crude options available from the Permian Basin and Gulf of Mexico. The refined products (over 76% of total Russian imports), could easily be supplied by producers within the state using Texas natural resources (in turn, generating economic benefits).

Any economic stimulus leads to dynamic responses across the economy. For trade, exports involve business activity in Texas to produce and transport the commodities. Imports create downstream effects as they are transported and sold or used in additional production. There are also indirect effects through the supply chain and consumer/induced impacts as earnings throughout the production process are spent.

When multiplier effects are considered, Texas-Russia trade generates no more than $6.9 billion in annual Texas gross product and 81,348 jobs (and probably much less), with imports comprising the bulk of benefits (primarily through the sale of finished goods). For perspective, total effects comprise only 0.38% of gross state product, 0.35% of earnings, and 0.63% of employment. Moreover, we have ready markets for these exports and sources for imports elsewhere. Thus, the true impact would be negligible.

Another issue is whether public entity investments in Russia should be divested and, if so, what consequences would occur. Data related to investments is limited. We do know, however, that US foreign direct investment in Russia is miniscule, comprising only 0.2% of the total. Available information indicates that for various large Texas public pension funds, well under 1% of investments are linked to Russia, and divesting (which may well happen in any case due to increased risk) should not have any material impact on returns.

It is generally preferable to allow markets to determine where goods are exchanged and money flows, but there are times when humanitarian and geopolitical considerations merit exceptions. Given the size and scope of the Texas economy, severing remaining ties with Russia would not have notable effects on long-term growth. Stay safe!!

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 2,500 clients over the past four decades.