That was the conclusion to which representatives of the three Baltic countries came after a discussion at the Stockholm School of Economics Dec. 4, in Riga. They gathered there to evaluate the effect of the Russian turmoil on the Baltic economies.
"This is the first real crisis the Baltic states are going through, and these countries will have to learn some hard lessons," said Uldis Cerps, president of the Riga Stock Exchange, who took part in the discussion.
The first lesson Baltic exporters will have to learn is to never depend on a single market. For most dairies and fisheries Russia was the major sales market, so they are the ones that have been hit the hardest when that market collapsed.
Toomas Tamsar, chief executive officer at Norma Group, said in July, that 11 percent of total exports were food exports, 7.5 percent of which went to Russia. According to the Estonian Chamber of Commerce Survey, 60 percent of companies reduced or stopped exports to Russia, more than half of companies had problems with payments, and 20 percent had to lay off workers.
The areas most affected within the food industry are dairies and fisheries with their sales down seven times compared to the pre-crisis period when these branches earned $5.5 million monthly.
The Latvian and Lithuanian representatives related to Estonia's experience, as these countries' dairy and fishing industries were also oriented to the Russian market.
As reorientation to the West is "more than troublesome," Tamsar said, the Baltics turned to each other's markets to trade, but that brought new problems.
"The free trade agreement between the Baltic states was effective only on paper while in reality there were many obstacles preventing its implementation," Tamsar said.
Cerps pointed out the importance attached to the development of an integrated Baltic market and common strategy within the Baltics and voiced his concerns about Lithuania unilaterally practicing internal market protection.
Nevertheless, participants in the discussion admitted that the Russian crisis also had some positive influence because it should encourage businesses to restructure themselves and look for new markets.
"The corporate sector should use the Russian crisis as a pretext to restructure," said Cerps.
Helmuts Ancans, the head of Monetary Policy Administration in the Bank of Latvia, said the crisis had already induced a number of Latvian companies to find new and sometimes quite unconventional markets, for example, Egypt.
Bo Kragh, vice president of Svenska Handelsbanken, said the crisis will also affect the banking sector and interest rates, which should surge.
Julius Grigaliunas said the crisis would scar the Lithuanian banking sector the least because Lithuanian investment in Russian securities amounts only to 1 percent of total assets.
Although some banks will be affected more and some less, Ancans predicted this year will be a bad year for banks which will finish it without profits and their shareholders might look at the possibility of recapitalizing.