"With the current unrest in Ukraine, companies would be wise to be extra careful with the financial risks they take in the Russian market," said Sijbren de Jong, from the Centre for Strategic Studies in The Hague. Earlier this week, there was already news about U.S. banks withdrawing funds and investments from Russia.
As long as there is a threat of further escalation of the conflict between Russia and Ukraine, and as long as European governments are still able to enforce further sanctions on Russia, there is also a chance for investments or invoices in Russia not being paid back. Although Western governments will probably only enforce sector specific sanctions (if they are actually enforced), the fruit and vegetable sectors are the most obvious areas for such actions, said De Jong.
According to De Jong, what must be taken into account is that Russia may unilaterally restrict the import of certain fruits and vegetables, because it has already done so in the past. The question is whether this is a big risk, because such measures in the present situation would also affect the Russians, as they would have to import their products from elsewhere, which would entail higher costs.
Meanwhile, the Russian economy and the purchasing power of Russian consumers are already under pressure, which means that products such as fruits and vegetables are all relatively expensive because of rising inflation. With any additional measures, from any side, there would only be further losses of purchasing power. Although domestically Putin still enjoys great popularity, the position of the government on these matters could weaken him, as it happened with Milosevic in Serbia at the time the country had to face severe economic conditions. For this reason, the chance that Russia will introduce limits on imports is rather small.
For a complete ban on fruit and vegetable exports to Russia to happen, the government would have to enforce this through legislation. For example, if the tensions in Ukraine lead to a wider international or military conflict, there can no longer be a voluntary support from businesses to economic sanctions, but a legal obligation to refrain from exporting to the Russian market.
Incidentally, companies cannot rely on financial compensations from the government if they suffer losses on the Russian market. Companies would therefore do well to reduce their risks and reconsider any planned investments in Russia or Ukraine.
