Italy loses billions in economic standoff with Russia, opposition leader says

Reuters/Tobias Schwarz

Reuters/Tobias Schwarz

 

RT News

Published time: October 13, 2014 19:53

The EU sanctions imposed on Russia have already cost Italy alone two billion euro due to Moscow’s retaliatory food embargo, the leader of Italian opposition party Matteo Salvini says.

Western sanctions on Russia are a “great foolishness” and the EU agricultural sector has already lost five billion euro, said European Parliament deputy and the leader of the Northern League opposition party Matteo Salvini.

He added that Brussels is only ready to provide 200 million in compensation.

Farmers from many EU states have complained they are bearing the brunt of Russia’s food embargo, having lost access to Russia’s $16 billion food market – about 10 percent of total exports, according to Eurostat.

Italy has been the most outspoken about the consequences of Russia’s ban on certain European food imports, with the country’s Veneto region claiming last week they would take all the necessary steps to protest EU sanctions against Russia. Veneto ranks the second among Italy’s regions in agricultural production, accounting for 160,000 agricultural firms with a total turnover of six billion euro per year.

Matteo Salvini has previously opposed the sanctions against Russia, saying that if Italy dropped the sanctions, the country could return to its previously privileged relationship with Russia.

“I want to be optimistic. I believe some European governments will take the right side and prevent new sanctions,” the politician said.

The opposition leader is now visiting Crimea to discuss the prospect of Russian-Italian economic, cultural and tourism co-operation.

“If an Italian television viewer arrived here, he would be surprised to see no tanks and no armed soldiers,” he told the reporters before meeting Crimea’s leaders.

Who is hit hardest by Russia’s trade ban?

Germany and Poland will lose the most trade with Russia, and neighboring Finland and Baltic states Lithuania and Latvia will lose a bigger proportion of their GDP. Norway will see fish sales to Russia disappear, and US damages would be very limited.

Russia has banned imports of fruit, vegetables, meat, fish and dairy products from the 28 countries of the EU, the US, Canada, Norway, and Australia for one year.

EU trade is heavily dependent on Russian food imports. Last year Russia bought $16 billion worth of food from the bloc, or about 10 percent of total exports, according to Eurostat.

In terms of losses, Germany, Poland and the Netherlands- the top three EU food suppliers to Russia in 2013 – will be hit hardest. Food for Russia makes up around 3.3 percent of total German exports.

French Agriculture Minister Stephane Le Foll said his government is already working together with Germany and Poland to reach a coordinated policy on the new Russian sanction regime.

Last year, Ireland exported €4.5 million worth of cheese to Russia, and not being able to do so this year is a big worry, Simon Coveney, the country’s agriculture minister, said.

Farmers across Europe could face big losses if they aren’t able to find alternative markets for their goods, especially fruit and vegetables.

Some are already demanding their governments provide compensation for lost revenue.

“If there isn’t a sufficient market, prices will go down, and we don’t know if we can cover the costs of production, because it is so expensive,” Jose Emilio Bofi, an orange farmer in Spain, told RT.

EU farmers complain €125mn compensation is just drop in the ocean.

The €125 million in emergency EU support to its food producers may not be enough to cover the damage, as some estimates have it more than a hundred times higher.

On Monday, the European Commission announced €125 million in emergency funding for European farmers hit by the Russian trade ban

Economists at ING estimate the embargo could cost the European Union €6.7 billion ($9 billion) during a year of lost production. The report also sees 130,000 jobs at risk in the trade row between Russia and the West over Ukraine.

The European statistics office, Eurostat, said the ban – which bars meat, dairy, cheese, fruit and vegetables from all 28 EU member states, affects €12 billion ($16 billion) worth of EU exports, or 10 percent of the total.

Hit hardest will be Poland and Norway, both of which export over $1 billion in sanctioned foods to Russia, followed by the Netherlands and Spain, both which have strong trade ties with Russia.

Spain already estimates it will miss out on €337 million in food and agriculture sales due to blocked access to the Russian market. The value of sanctioned food exports to Russia is $792 million, according to Russian Federal Customs data.

In Zaragoza, Spain, fruit growers took to the streets dumping out excess produce and torched an EU flag.

“This price compensation is not enough. Let’s say 20 jobs in our company will be lost. Our salaries will also be affected- then, we will just disappear,” a Spanish fruit farmer told RT.

Exporters may have to further slash prices, which have already fallen 80 percent in the fruit industry, or even throw away perfectly fresh produce that can’t be sent to Russia.

In Greece, farmers feel sanctions are putting their livelihood at stake- being shut out of the Russian market is bad for business. Producers estimate losses over fruit alone will exceed €178 million in the next 12 months.

READ MORE: Russian food ban takes huge bite out of Greek fruit growing industry

“Right now we have no other market to send out produce to, other than the Russian one,” Fotis Kyriazis, President of the Irmini Agricultural Cooperative, told RT.

“I don’t think anyone will compensate us for our losses. Neither Greece nor the EU has the money to compensate us,” Kyriazis said.

The worst-hit countries have already tried to bypass the restrictions by sending goods via Belarus, but were stopped by Russia’s consumer watchdog.

Poland, which before the ban exported 50 percent of its apples to Russia, is feeling the sanctions biting back and is hoping to launch a complaint with the European Commission and World Trade Organization.

“The ban has caused horror among Polish producers of fruits and vegetables. We have to tighten our belts and get production costs back at the very least,” Jacek Izyucki, Trade Branch President of the Agrostar Company in Poland, told RT.

“Obviously some unintelligent political decisions were made and brought harm for all,” Izyucki said.

1farmers

Key food suppliers to Russia

Country Exports to Russia, 2013
(in billion $)
Belarus 2.74
Brazil 2.41
Ukraine 1.99
Germany 1.83
Turkey 1.68
China 1.61
Poland 1.55
USA 1.54
Netherlands 1.42
France 1.42
Italy 1.34
Spain 1.26
Other EU countries 4.88

Source: Data from the International Trade Centre analysed by Reuters

The largest opposition party in Greece is urging its government drop sanctions against Russia, even if the move isn’t supported by other EU states.

In 2013, Denmark supplied Russia with $628 million worth of products which are now banned.

European Agriculture commissioners will set up a task force to address Russia’s sanctions, on Monday.

Border States

Lithuania and Finland, which both share a border with Russia, could be hit hard by the new restrictions.

Now a member of the EU and NATO, Lithuania is still closely linked economically with Russia. Banned exports account for 2.5 percent of the country’s GDP, according to an estimate by Capital Economics.

Vegetable and foodstuffs are among Lithuania’s top five exports.

Finland’s dairy industry stands to lose up to $535 million (€400 million) in the trade spat. The country depends on Russia for 14 percent of its trade.

Both Finland and Lithuania have already contacted Brussels with complaints.

Scandinavian neighbor Norway, a large exporter of fish and seafood to Russia, will lose out to domestic fish companies, which have seen their share prices soar after the introduction of the trade restrictions.

America not bothered

For the US the effect will be very limited, as agricultural exports to Russia are about one tenth of one percent of total US gross domestic product of about $144 billion, according to the US Department of Agriculture.

US food exports to Russia in 2013 amounted to less than 1 percent of the country’s total agricultural exports, the US Department of Agriculture said to RIA Novosti. Conversely, Russian exports to the US and European markets are 13 percent of its GDP. In 2013, the US exported $1.3 billion of food goods to Russia, about a quarter of which were poultry products.

So far the US, EU, Canada, Australia, and Norway haven’t responded to Russia’s retaliatory measures.

What’s in the ban for Russia?

The immediate trade restrictions will create a $9.5 billion gap in Russia’s food market that needs to be filled. Russia is in talks with Latin American countries on how to fill this hole with meat from Brazil and cheese from New Zealand.

Russia is also holding talks with Custom Union members Kazakhstan and Belarus, which it will ask to prevent any transit of Western goods into Russia.

Promising to develop its own industries and protect the economy, Russia will support the new measures at home, and has already allotted $50 billion to farmers.

However, some analysts fear it won’t be enough, and that food prices will rise, further worsening Russia’s inflation problem. Higher inflation will not only hurt those buying groceries, but also Russia’s export sectors- oil, gas, metals, and mining.

Restaurants will have to adapt, as they source nearly 50 percent of their produce from abroad, according to OAO Rosinter Restaurants Holding, which operates 370 restaurants in Moscow, Bloomberg News reported.

 

 

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