Yesterday, the European Union (EU) and the Eurasian Economic Union (EEU) met in the Belarusian capital Minsk to address the crisis sparked by the situation in Ukraine; however, their views are so far apart that a solution appears not to be in sight. Meanwhile, European countries are seeking solutions to alleviate the effects of the sanctions, Poland is considering investments in Belarus, Romania is investing in storage and the Netherlands is also looking beyond the border. The Italian grape sector is "ruined" and Spain is also struggling. On the Russian side, there is concern about the fruit and vegetable supply in the coming winter months, as greenhouses are so unprofitable that they are actually not a solution. For its part, Georgia, after years of cold relations with Russia, appears to be getting another chance to significantly increase its export volumes.
China has announced that it will not to take part in the sanction war. The U.S. tried to persuade the Chinese to adopt the Western sanctions, but China has refused and made a call on both parties "to remain calm and start looking for a political solution to the current issues."
The EEU will be officially established in 2015 with Member States Russia, Belarus and Kazakhstan. The Union is a kind of counterpart to the EU. Putin's intention was for Ukraine to become also a EEU member, but Ukraine became strongly divided over joining the EEU or getting closer to the EU, which is the basis for the current conflict. Incidentally, Belarus has been flirting with the West by not adhering to all of Putin's sanctions and by congratulating the Ukrainian President on his election victory. The president/dictator Lukashenko, over twenty years in power in Belarus, is trying to get a better footing in Europe. Kazakhstan also decided not to follow Russia in the tightening of sanctions. Via Belarus, among other, a number of smuggling routes have been created for boycotted products to arrive to the Russian market.
The Netherlands focuses on new markets
Yesterday, State Secretary Sharon Dijksma sent a letter to the Lower House regarding the measures taken by the Government. In it she offered details on how the 125 million in EU aid will be distributed, but also described the Government's efforts to find alternative markets. To this end, embassies and consulates must provide information on the laws and regulations in place to be allowed access to certain countries and to assist in obtaining contacts.
The Minister believes that the Fresh Summit will provide opportunities in October and the Government wants to take advantage of recent trade missions in South Africa, Vietnam and Indonesia.
Lastly, Dutch tax authorities will be more flexible with the companies affected by the boycott.
Poland shows interest in Belarus
"We are looking for new markets, particularly in the United States and Canada, but we also want to strengthen ties with Belarus with a number of investments in infrastructure and technology, among other measures," said the Polish minister.
Poland is looking for investors to set up processing plants for fruit, vegetables, meat and fish in Belarus. The products can then be placed on the Belarusian market, allowing Belarus to increase its exports. According to the Belarusians this cooperation will be possible under the Polish and Belarusian legislations without the latter infringing its agreements with Russia.
Belarus expects greater exports to Russia
Belarusians are optimistic about the export volumes the country will be able to deliver this year to Russia. "We may ship about one million tonnes of potatoes and 204,000 tonnes of vegetables," said the ministry. According to the Belarusians, this will include 30,000 tonnes of cabbage, 20,000 tonnes of beets, 107,000 tonnes of carrots and 27,000 tonnes of apples. Belarusians emphasise that these exports will not put the domestic food supply at risk.
Georgia back to Russian market
For years now, Georgia and Russia have not had a friendly relationship. Several years ago, Russian tanks drove through Georgia and Russia and until last year the import of Georgian products was banned. In 2013, apples, pears, dried fruit and citrus, among other products, were re-admitted, and in 2014 Georgia will export tomatoes, cucumbers, cabbage, aubergine, cherries, apricots, peaches, plums, persimmons, kiwis and berries to Russia.
Recently, the former Soviet republic said it would increase exports to Russia. In the past six months, progress was made in negotiations between the two countries. According to the Georgian Minister of Agriculture, the export of citrus, peaches, apples, pears and quinces can "increase significantly."
Romania invests in storage
The country's stocks have grown due to the Russian boycott; Romanian growers have about 3,000 tonnes of vegetables in storage, especially tomatoes and cucumbers, and the domestic market can only absorb 60 tonnes of this volume per day. Due to the ban, cucumber exports to Poland and the Czech Republic have also declined; a large number of orders appear to have been cancelled. Romanian producers are hoping to get 10 million Euro from the European rescue fund of 125 million Euro.
The Romanian minister announced that the World Bank would grant them 4 million Euro, which together with the 6.2 million that the state is planning to invest will be used to purchase refrigeration and washing facilities and packing lines for all producer groups. That way, the sector will be able to store its products for longer. "It is not only about quality, but also quantity," said the Romanian Ministry, "thanks to these investments, growers will be consistently able to supply large volumes."
Bulgarian prices drop 15%
Growers are concerned about changes in the European market because of the boycott. Estimates show that 20% of the crop will be destroyed. The Eastern European country exported mainly cherries, peaches, strawberries, peppers and tomatoes to the Russian market. According to the producers, the domestic market is also now flooded by imports. Because of all this, prices have dropped by 15%. Growers fear that no compensations will arrive for them if the ban lasts for longer than a year and that they will lose their Russian partners, as there is no room in the domestic market for the country's entire production.
Italy "ruined" by the ban
"The situation is critical for Italian grapes. Putin's boycott has ruined us!" explains the owner of a Sicilian import-export company. "We can't sell anything in Italy due to the weather conditions and exports stagnate because they heavily depend on Russia." The biggest problem is that there is no demand. "The situation is even worse in Apulia, where the Victoria grape season is still in full swing."
Two growers from Apulia confirm this statement. "Prices are low; we must work on existing relationships and tap into new markets." Local clients who usually purchase the grapes before the harvest have suspended negotiations because most of the products are exported to Russia. "Some of the products are exported to Poland, but the situation is different due to the low demand."
In Metapontino, grape growers struggle with many other problems, namely the weather conditions, which are the biggest challenge. Consumption is stagnating and prices are on average 22.7% lower than last year. It is expected that prices will rise in September.
Spain struggles with losses
In Spain, many figures are being published to show the damage caused by the boycott, which the Ministry estimates at 337 million Euro; the EU at 338 million Euro and the Spanish organisation COAG claims losses of 1.2 billion Euro, taking also indirect damage into account.
The EU has ranked Spain sixth in the list of most affected countries, behind Lithuania, Poland, Germany, the Netherlands and Denmark. The Spanish government thinks that there are 16 countries that have been hit harder. Spanish exports account for 234 billion Euro per year and exports to Russia represent only 0.14%, according to the Spanish authorities. Despite the slight loss, according to these figures, the minister pleads for aid from Brussels.
Russia and China, economic lifeline for Mongolia
Mongolia is going through a difficult economic period, with internal and external deficits, but China and Russia offer new possibilities, as both countries are interested in the country's resources. China and Mongolia have recently already signed some contracts. In early September, President Putin is expected in the Mongolian capital Ulaanbaatar.
The World Bank does not have high prospects for the Mongolian economy; inflation remains at double digits.
Russian greenhouse sector inadequate
Many products are still fairly widely available on the Russian market, but there are fears that only potatoes, pumpkins, carrots and onions will remain in the winter months. Greenhouse horticulture is seen as the solution, but the sector is not sufficiently developed and is very expensive.
Viktor Semkin, director of the agricultural company Moscovsky, says that "more than 45% of the cost of tomatoes corresponds to gas and electricity, which are not subsidised. As a result, most greenhouses close during the winter months. During the coldest months, January and February, greenhouses are far from profitable due to high energy costs."
According to statistics, in 2013 Russia imported 800,000 tons of tomatoes and 200,000 tons of cucumbers. Russian greenhouses yielded 630,000 tons of vegetables and herbs last year, of which 65% corresponded to cucumbers and 30% to tomatoes. Russia can cover 34% of domestic demand with its own greenhouses, of which the country has 1,800 hectares. For comparison, the Netherlands has around 10,000 hectares and the Soviet Union had 5,000 hectares.
Incidentally, the Russian supermarket chain Bahetle, in the town of Barnoel, Siberia, claims that they can survive without European products. For fruit and vegetables, this seems a realistic goal, given that only 4% of the products have been affected by the embargo. The chain sells more Asian and Middle Eastern products, including Thailand, Vietnam, Turkey and Egypt, which have seen their position improve. Other regions also claim to be able to subsist without European products.
