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Sanctions begin to impact Baltics

  • 2014-09-03
  • From wire report

TALLINN - Estonia’s Minister of Agriculture Ivari Padar said that the Russian food import ban has hit producers of milk and pork and the fisheries industry the hardest, though the state has limited options at this time for supporting them, reports National Broadcasting. So far, only one agricultural firm has requested direct state aid - Rey Seakasvatus - the pig-husbandry farm.
“The dairy sector is the riskiest one, if we speak about import restrictions,” said Minister Padar. “As for pork, the problem is a much older one, starting with the period two years ago when Russia imposed its import restrictions on live pigs,” he said.

The minister said that the European Commission has recently made a decision to support dairy producers. Pig farmers will start getting extra subsidies at the end of the year, as the aid measure has already been set on the state level.
“In December, we will start paying special grants to pig farmers,” said Padar, noting that the amount involved will be approximately 2.6 million euros, to be specified in November. The ministry has calculated that the grants can be paid for approximately 320,000 pigs.
When speaking about state aid options for farmers, Padar said that the opportunities are rather limited, starting at aiding in searches for new markets.

EU to rescue
Latvia can hope for support for farmers from the European Union, the head of the European Commission Representation in Latvia, Inna Steinbuka said in an interview with LNT television on Aug. 28. Nevertheless, this will not cover the entire damage caused by Russia’s embargo, she added, reports LETA.
Steinbuka said that according to 2013 data, the embargo affects Latvia’s exports in the amount of 50 million euros, about half of which is comprised of milk and dairy products. The European Commission will not be able to cover all the losses; however, EU support could be equal to that provided by the Latvian government, Steinbuka said, adding that “Brussels is aware of the problems that currently affect the Baltic dairy producers.”
She said that at the moment there could be two types of support at hand: short-term support could provide funds for market intervention to buy and store milk powder and butter, thus de-saturating the market, while long-term support could involve subsidies.

Steinbuka also said that business owners must not rely only on state and EU support but seek new export markets. She praised the Latvian government for its efforts to promote exports to China.
Decisions on possible EU support for dairy farmers are expected to be taken on Sept. 5.
Another of Latvia’s major industries, the transit sector, is not endangered at the moment, and there is “no need to frighten ourselves with horror scenarios,” president of the Bank of Latvia, Ilmars Rimsevics, said in an interview on the LNT news show ‘900 sekundes’ on Aug. 26. He was commenting on the public concern about Latvia’s economy if Russia decides on additional sanctions.
Initial estimations after Russia introduced its sanctions indicated that their impact is not that severe; nevertheless, Latvia “ought to save up some reserve funds, as the budget deficit cannot be increased any further,” he said.

Farmers unite
Members of agriculture groups from the three Baltic States gathered in Riga in late August to discuss the present situation in the agricultural sector, which is affected by both Russia’s embargo and African swine fever.
As farmers incur heavy losses due to sanctions and African swine fever, it was proposed to declare Lithuania, Latvia and Estonia as an EU buffer zone and establish a specialized fund to compensate for losses.
The Chamber of Agriculture of Lithuania, together with other groups, is drafting the position of the Baltic States regarding buffer zone status. The position will be presented to the governments of the Baltic countries and sent as an open letter to the European commissioner for agriculture and rural development.

According to Eurostat, because of Russia’s embargo Lithuania’s losses are right now the highest of the Baltic States at an estimated 927 million euros, while Estonia’s and Latvia’s are 75 million euros and 70 million euros, respectively. Lithuanian trade is more heavily targeted to Russia than the other Baltic States.
Aggregate losses of EU member countries are estimated at 5.2 billion euros.
Baltic farmers will also ask the European Commission to nullify fines for exceeding European milk quotas, review dairy intervention prices, and increase export subsidies.

Andriejus Stancikas, chairman of the Chamber of Agriculture of Lithuania, puts losses for Lithuania’s agriculture industry at 1 billion euros due to sanctions, the majority of which hits dairy farming.
“Brussels must immediately make a decision on equal support. At the moment, we only hear talks about how the Italian tomato and peach producers will be compensated, while the Baltic States are forgotten. At the same time, we are like a buffer zone between Russia and Europe, and we are suffering the most in this war by taking the first blow. We have not exceeded our milk quotas yet; however, it will be inevitable. Brussels must nullify the potential million euros’ worth of fines,” Stancikas said.

Meanwhile, the head of the Lithuanian cooperative Kooperacijos kelias, Jonas Kuzminskas, said that Lithuania’s industry is currently forced to terminate contracts with Latvian and Estonian farmers due to overproduction.

Not Russia-dependent
Minister of Foreign Trade and Enterprise Anne Sulling, in Estonia, addressed the heads of Estonian embassies who convened in Tallinn, asking them to help out in relieving the situation.
“In terms of numbers, the sanctions are not affecting the Estonian economy as a whole to any significant degree, but some enterprises feel the impact quite strongly. Alongside short-term measures, it is important for us to look for new markets and Estonian ambassadors play a very important role in establishing contacts,” said the minister.
She asked that ambassadors study options in the countries where they work for selling Estonian dairy products and distribute information on what else Estonia has to offer.

According to Sulling, Estonian dairy products have been sold in Malaysia, Singapore, South Korea and Thailand, and that demonstrates that Estonian dairy products can find markets in countries that are far from Estonia.
She said that in the interests of economic stability, Estonia needs to minimize its dependence on the Russian market. “The current situation clearly confirms that if one were to direct a large share of exports to the Russian market, it might sooner or later become a rather painful lesson,” she added.

Buy local
Local producers are a priority to Latvian supermarkets and department stores, said the Latvian Food Retailers Association CEO Noris Kruzitis in an interview with the LNT show ‘900 sekundes.’ He explained that the large networks each cooperate with about 5-8 suppliers, who have turned to them looking for an opportunity to sell products that cannot be exported to Russia.

The size of shelves in supermarkets is limited, nevertheless, Kruzitis promised that solutions will be found and that products that cannot be exported to Russia will be sold through the local supermarkets eventually.
As for fresh products, their shelf life is short; therefore they will have to be sold in about a week’s time, Kruzitis said.
“We are calling on residents to pay attention to the products they buy,” added Kruzitis, indicating that it is important to support local producers by choosing their products.

Latvian Prime Minister Laimdota Straujuma on Aug. 18 in an interview with Latvian State Radio stressed that major agricultural companies will not go bankrupt because of the food embargo. She said that, likewise, hard-working farmers will find new export markets, and that they will receive help from the Investment and Development Agency of Latvia.
“The entire European Union has to focus on seeking new export markets. The sanctions may be lifted after a year; however, Russia’s market, as we all know, has never been a stable one. Farmers have experienced various kinds of sanctions many times,” Straujuma reiterated.

As Russia increases its military involvement in Ukraine, threats of additional Western sanctions against it will increase. This risks a further backlash of Russian sanctions against the Baltics. Businesses in the Baltics have learned to diversify trade away from its eastern neighbor. Current events are a reminder for companies to continue to develop their product lines with ties to strong and reliable long term partners.