Although the Russian economy is going down, and the rouble got into a free fall, president Putin was elected 'man of the year' in his country. The poll showed that 68% of Russians would grant him this title. The devaluation of the rouble and the weak economic position has consequences for fresh produce importers in Russia. Just like all other import products, prices of imported fruit and vegetables are going up. The Kremlin initiated a lobbying campaign to convince EU member states not to extend the sanctions. If the sanctions aren't extended, the sanctions will end in March. By the way, the economic situation in Russia is not just bad news for the Russians. The crisis could be headed to companies that have lent large sums to Russia. Belarusian customs reported having stopped 11 million euros worth of products at the border. Poland wants to export to Azerbaijan, and minister Dijksma is making 100 million euros available for a guarantee fund.
Belarusian customs stops vegetables
Belarusian customs report having checked 56,000 trucks and more than 10,000 shipments for illegal produce from the EU over the past two weeks. The trucks were headed for Russia. Customs stopped 70 trucks that did not meet requirements. For instance, customs stopped 18.4 tonnes of Chinese cabbage with phytosanitary certificates missing, and 20.6 tonnes of deep-frozen mushrooms which had forged information about the receiver on the documents. All in all, Belarus estimates to have stopped a billion roubles' worth (over 11 million euros) of fruit and vegetables.
Poland wants export to Azerbaijan
Poland is still looking for new export markets. After Polish apples were allowed to be shipped to Singapore and Canada, the country is working on gaining access to Vietnam, China and India. Poland also has its sights on Azerbaijan. The Eastern European country sees many opportunities for export to this country. A trade mission visited Baku to discuss trade.
Russian economy going down further
Russia's economic situation is rapidly deteriorating. The rouble is quickly losing value, and the oil price isn't cooperating. The attempt by the Russian Central Bank to hold onto roubles through a big increase of the interest rate, also seems to have no effect. Earlier this week, the bank increased interest from 10.5% to 17%. Yesterday, the rouble lost 20% of its value compared to hard currencies like the dollar and the euro. The lowest point was 75 roubles for a dollar, and 100 roubles for a euro. This morning, the rouble appeared to be recovering slightly. The interest Russia has to pay on government bonds, already rose above the interest rate calculated in Rwanda at the beginning of the week.
The situation is particularly risky for Russian companies with loans in dollars. They are confronted with the costs of the loans increasing quickly. Next year, Russian companies will have to repay or refinance 130 million dollars in total. The latter is difficult, because due to the sanctions, Russians are only allowed to get short-term credit (maximum 3 months).
Risks for exporters
The rouble's devaluation has changed the way Russian fresh produce importers operate. Due to the currency's instability, importers are forced to change their product range every day. Import for some vegetables has reportedly gone down by 20%. For fruit, the situation is slightly better. Citrus, bananas, apples and exotic fruits remain, with the upcoming holidays, big import products. Changes can be seen in the countries of origin of the products, however. Turkey, for instance, is the biggest citrus supplier, while a month ago Morocco was still in the lead.
Risks for exporters
The rouble's devaluation has changed the way Russian fresh produce importers operate. Due to the currency's instability, importers are forced to change their product range every day. Import for some vegetables has reportedly gone down by 20%. For fruit, the situation is slightly better. Citrus, bananas, apples and exotic fruits remain, with the upcoming holidays, big import products. Changes can be seen in the countries of origin of the products, however. Turkey, for instance, is the biggest citrus supplier, while a month ago Morocco was still in the lead.
Imported products are becoming significantly more expensive due to the rouble's free fall. That's why there's a risk that Russian won't be able to pay the bill for imported products. For this reason, Apple already halted all online sales in Russia. Although the general inflation has to be taken into account, in principle this means that Russian products will remain relatively cheaper compared to imported products. On the other hand, due to the higher interest rate, investing has also become a lot more expensive, which inhibits the growth of Russian companies.
Roubles crisis could head to Europe
The rouble's unstable position could have consequences for other countries and companies. There's a possibility of the crisis heading to Europe, with banks like the Austrian Raiffeisen Bank and the French Société Générale having significant outstanding sums in Russia. Raiffeisen Bank has 15 billion euros' worth of Russian securities, while Société Générale has 25 billion euros outstanding in Russia. Where the rouble lost 20% of its value, Raiffeisen lost 10.3% of its value, and Société Générale lost 7.3%.
Roubles crisis could head to Europe
The rouble's unstable position could have consequences for other countries and companies. There's a possibility of the crisis heading to Europe, with banks like the Austrian Raiffeisen Bank and the French Société Générale having significant outstanding sums in Russia. Raiffeisen Bank has 15 billion euros' worth of Russian securities, while Société Générale has 25 billion euros outstanding in Russia. Where the rouble lost 20% of its value, Raiffeisen lost 10.3% of its value, and Société Générale lost 7.3%.
This week, India and Russia also reached an agreement on trade in rough diamonds. Russia is a big producer of rough diamonds, India cuts the gems. Because the companies are now working together directly, eliminating intermediaries, both countries benefit. In addition, this fits within Russia's strategy, looking more and more to the East, away from the West.
Russia lobbies for lifting sanctions
Russia has begun lobbying in Europe, to get the European sanctions lifted. The past year, the EU imposed sanctions on Russia three times, which are coming to an end one by one, starting in March. The EU can extend the sanctions, but Russia is trying to prevent that by lobbying with EU member states. The Kremlin is focusing its efforts on Cyprus, Italy and Hungary. According to reports, Italy, Greece and Slovakia are already convinced. The Czech Republic is still hesitant. The sanctions are still supported by Great Britain, the Baltic states, Poland and Sweden. France and Germany are waiting and seeing. Incidentally, it's not unimaginable that Russia is also lobbying in Berlin not to extend the sanctions.
Russia lobbies for lifting sanctions
Russia has begun lobbying in Europe, to get the European sanctions lifted. The past year, the EU imposed sanctions on Russia three times, which are coming to an end one by one, starting in March. The EU can extend the sanctions, but Russia is trying to prevent that by lobbying with EU member states. The Kremlin is focusing its efforts on Cyprus, Italy and Hungary. According to reports, Italy, Greece and Slovakia are already convinced. The Czech Republic is still hesitant. The sanctions are still supported by Great Britain, the Baltic states, Poland and Sweden. France and Germany are waiting and seeing. Incidentally, it's not unimaginable that Russia is also lobbying in Berlin not to extend the sanctions.
According to the Russian minister of Agriculture, the search for new suppliers for banned products has generally been successful. The minister does admit that supplies might not be 100% replaceable. The main new suppliers are old Soviet republics, Latin America and Asia.
Read all articles from Dossier Russia here.
Read all articles from Dossier Russia here.