Latvia’s total volume of export to Russia reached EUR 1,470,000,000 last year. Import figures are said to have been EUR 1,200,000,000. One year ago, Russian businessmen invested half a billion euro in Latvia. This includes approximately 100 million in electricity and gas sectors and 50 million in real estate sector.
Latvia mostly traded with Russia with food products, the lion’s share of which was alcohol. According to Investment and Development Agency of Latvia (LIAA) – TOP 7 export goods to Russia include whiskey, medicine, cognac, particle boards, sprats, rum and vodka. Import from Russia to Latvia is dominated by oil and gas products, as reported by Nekā personīga (Nothing personal) programme of TV3.
According to the agency, the crisis has already begun.
‘Our agency is certain – Latvian entrepreneurs are suffering losses already. This applies to transit and logistical sectors and trading. Businessmen are concerned about the future. If sanctions are introduced, the losses businessmen suffer right now will be next to nothing compared to what will come after,’ – says LIAA Director Andris Ozols.
Compared to that of Russia, the volume of trade Latvia has with Ukraine is 13 times smaller. Ukrainians mostly invest in Latvia’s financial and banking sectors. The volume of real estate deals does not exceed EUR 5 million. Latvia’s exports to Ukraine include medicine, mobile phones, television sets and vodka. Ukraine provides Latvia with – metal alloys, train coaches and tugs. Trade volumes with Ukraine had reduced by half one year ago. What might happen this year – none can say. Nevertheless, Latvia may also benefit from a conflict in Ukraine.
‘The centre of Kyiv now has plenty of potential trading space available for attractive prices. Latvian businesses that have the resources should take advantage of this situation. Even though such steps may be emotionally heavy – business is business,’ – says Ozols.
Latvijas Balzams is the largest Latvian exporter of alcoholic drinks to Russia. It belongs to SPI Grupa. Its owner, Jurijs Šeflers, has invested money in the construction of a Z-tower in Riga. Latvijas Balzams is worried that sanctions against Russia could close the Russian market for Latvian businesses for a long time.
‘If Russia ends up being economically isolated, it will likely switch to other countries. And after the end of the sanctions, it may be difficult for the EU to re-establish good trade relations,’ – believes Latvijas Balzams Commercial Director Valters Kaže.
Rīgas piena kombināts is now owned by a Russian businessman – Andrei Bezhmelkitsky bought it along with Valmieras piens in 2011. The growing crisis has yet to impact the company. The fluctuations of the Russian ruble raise some serious concerns. Contracts with Russian companies allow them to pay for supplies within one month’s time. If the value of the Russian ruble falls within this period of time, Russian companies may end up paying less. Banks have become cautious in providing loans to companies related to Russia.
Possible sanctions may freeze multiple important national contracts, including: the sale of airBaltic, Citadele Bank and Liepājas Metalurgs.
Finance Ministry does not plan to narrow the range of possible investors; Russian investors are still welcome.
Sanctions against Russia will likely impact Latvia’s transit sector the most. This especially applies to railway cargo transport. In 2013, 77% of all railway cargo handled in Latvia came from Russia.
Soon the EU will gather to discuss sanctions that will limit Russian businesses in Europe. In order to prevent such a turn of events, Russia is expected to start constructive discussions with Ukraine. Nevertheless, Latvian entrepreneurs should keep in mind that there will be losses regardless of the two possible outcomes.
‘Of course, we do not want to become another railway station. We want our planes to fly to Russia. We want our businessmen to cooperate on equal terms and clear contracts that are recognized and respected by both sides. As for the current situation – what we see now is an unprecedented situation. And actions that have breached all possible and impossible agreements and actions that contradict all international conventions, traditions etc. It is possible that the situation will become more complicated. I also understand that there will be losses if the situation develops following this scenario. But this is the kind of situation when we speak of things that are more important than losses in economic cooperation,’ – explains State Secretary to Foreign Ministry Andrejs Pildegovičs.