Exports to Russia inch up

  • 1998-12-10
  • Rebecca Santana
TALLINN - Some exports to Russia have been increasing, but many in the Estonian business community are reluctant to describe the trend as a "recovery" for the Russian economy.

In an article in the Dec. 2 issue of the Estonian business daily Aripaev, a number of Estonian dairy and fish producers said their exports to Russia are picking up and some non-agrarian related industries are also reporting a slight increase in sales.

Exports to Russia plummeted after the Russian government devalued the ruble back in August. Russia is Estonia's third largest trading partner, accounting for 12.6 percent of exports, according to Central Bank statistics. A number of companies were forced to lay off workers and cut production as a result of the Russian financial crisis which hit the dairy and fishing industries the hardest.

"The situation in Russia has changed. We aren't able to meet the demand," said Ahti Viilup, director of Saarema Meatpacking and Dairy Factory in an interview with Aripaev. According to the report, the Saarema factory is exporting as much to Russia as it did before the crisis.

Companies in non-agrarian related industries have also noticed a slight increase in exports to Russia.

"We started to see some increase in our sales in October," said Rein Reile, the general director of Sadolin, which exports wood protection products to Russia. In 1997, Russian exports accounted for 40 percent of their business and Reile said that amount dropped down to "practically nothing."

The first part of 1998, before the August crisis, was also extremely profitable for the company. Despite the dismal fall sales, Reile estimated that Russian exports would still account for 35 percent of the company's cumulative, year-end total export percentage.

Some people chalked up the increase to small infusions of cash into the Russian economy from places like the Red Cross or other humanitarian organizations.

Whether this trend is seasonal or reflects a long-term recovery for the Russian economy still remains to be seen. According to one exporter, the increase in dairy exports is related more to seasonal factors than any improvement in the Russian financial situation.

"October was very, very bad," said Peeter Reid, director of Epexim, a subsidiary of Tallinn Dairy.

According to Reid, food exports usually increase at this time of year due to the onslaught of the Russian winter.

The early cold weather that most of Russia is experiencing also helped boost sales. Exports usually drop back around February when butter exports from New Zealand arrive.

"After that, selling is going down," Reid said. All of these factors make him reluctant to hail the return of the Russian market.

"I'm not thinking that the good times are coming back," said Reid. Before the crisis 90 percent of Epexim's exports went to Russia and 10 percent went to the Ukraine.

Reid sells butter and sour cream and he said that butter prices are high enough for him to make a slight profit. But he hasn't been making any money on sour cream sales.

"We haven't a profit but we sell it today because we don't want to lose our market," said Reid.

While some individual banks have decided to plunge back into the Russian market, the International Monetary Fund has refused to extend a bailout package to Russia until the country makes substantial changes in it's economic structure. Until that happens, many observers conclude that the changes in the Russian economy will be short-term at best.

"Everything is stopped right now," said Christer Lamil, the director of Eesti Lindsaw, which manufactures timer-cutting machines in Haapsalu and employs 30 people. Almost 50 percent of the company's exports usually go to the Russian market. "We've been very connected to Russia." Lamll said that the company is now trying to develop other markets.

"In spring it will start to steadily recover, but it will take time," said Reile, who also emphasized that his company's business is seasonal and that November is usually a downtime for sales. "We don't foresee for the near future that sales will be up to the same level. It will take some time for a change in the total Russian economy."

The company had orders in August and September but waited to see whether they would be able to get paid. Like many companies that do business with Russia, they only conduct deals in dollars.

The statistical office that gathers customs information about exports to Russia and other countries did not yet have November figures.