Latviski English По-русски
Monday 22.01.2018 | Name days: Austris

Sanctions against Russia could impact Latvia’s economy

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RURussian businessmen are interested in Latvia’s energy, banking, manufacturing and real estate sectors. Russia’s direct investments in Latvia reach EUR 580 million. Russian money does, however, end up in Latvia via other routes as well.

There is also the money of a number of Russian oligarchs present in Latvia. These individuals either have been added or have been close to Western countries’ sanction lists, as reported by De facto programme of LTV.

Many foreign politicians and analysts have said that putting oligarchs’ money at risk is the most effective way of forcing Russia to listen to the West. Aside from those who have already experienced sanctions, the British The Guardian mentions one of the wealthiest people in Russia – Viktor Vekselberg – as one of the possible targets for USA. In Latvia, Vekselberg’s owned company is busy with a EUR 50 million construction project to provide the Latvian State Revenue Service a new building in Mežaparks.

The name of billionaire Vladimir Yevtushenko has been mentioned as well. Sistema financial corporation – owned by Mr Yevtushenko – has expressed interest for the procurement of state owned shares in Lattelecom.

The owner of Severstal – Aleksey Mordashev – is also mentioned among the Kremlin-loyal businessmen. Power Machines has acquired orders from Latvenergo worth nearly 80 million over the past half-year. Power Machines is also responsible for performing the reconstruction of Kegums HES and Plavini HES. Latvenergo Production Manager Māris Kuņickis explains that the offer of Power Machines was the most economically beneficial: ‘Worst case scenario – we will never receive the turbines we need. This could force us to look for other ways of modernizing our power stations.’

Sanctions have not impacted Mordashev, who had received a Cross of Recognition personally from President Andris Berziņš for his contribution to Latvia’s economy.

Latvia’s economic ties with Russia are not as strong as they were in the ‘90s. This will allow Latvia to overcome economic sanctions with relatively low losses if the EU decides to introduce sanctions against Russia, believes former Economy Minister of Latvia Daniels Pavļuts.

In the event of sanctions against Russia, Latvia’s sea ports and transit sector as a whole would suffer the most – the country would lose nearly 70% of all handled cargo. This kind of situation is real even without sanctions, because Russia’s policy clearly provides for the reduction of cargo flow through the Baltics by 2020.

‘The situation in Crimea may only speed up this process,’ – says the head of Latvian Logistics Association Normunds Krūmiņš. He adds that Estonia experienced a similar thing after the ‘Bronze Soldier’ riots. ‘Russian transit stopped, and they decided to switch to container cargo shipments and higher added value cargo. Now they live quite well,’ – says Krūmiņš.

Transit sector experts say alternatives to Russia are neither safer nor more democratic – Belarus and Kazakhstan. On top of that, both countries have strong border ties with Russia. This leaves the possibility of the two working in the interest of Russia.

Energy sector is the other one that requires alternative sources. The situation does not benefit from the fact that Baltic States and Finland have both played a part in delaying the construction of a LNG terminal in the region. It would have allowed the countries to accept gas supplies from all over the world.

Russia receives at least one-tenth of Latvia’s export. The bulk of Latvia’s export to Russia is alcohol, canned fish and medicine. Latvia mostly imports gas, metals and meslin from Russia.

The Latvian Economy Ministry keeps in secret the three possible development scenarios. The worst one, according to unofficial information, includes the reduction of Latvia’s GDP by 10%. This figure was confirmed by PM Laimdota Straujuma this week: ‘It is the most pessimistic scenario and this kind of turn of events is not realistic,’ – she said.

The Bank of Latvia believes cutting economic ties with Russia will not leave any deep wounds for the country’s economy. ‘We do not have any precise estimates to confirm the possibility of such a dramatic effect even in case of the worst possible scenario,’ – says Bank of Latvia economist Andris Strazds. He believes the current uncertainty in regard to possible sanctions may change residents’ behaviour; particularly in the form of a reduction in investments.


Leave a reply

Tax reform challenge in January: labour tax recalculation

2018 commenced for Latvia with a historical tax reform and conceptual changes, significantly affecting everyday work performed by businessmen, employers and accountants. One of the changes financial specialists have to remember when calculating wages for January is the one for personal income tax, which also includes changes for state social insurance fees and solidarity tax, BNN was told by accounting experts.

Total tax debts in Latvia reach 1.217 billion euros at beginning of 2018

At the beginning of the year, total tax debts in Latvia, including existing debts, halted debts and debts with extended repayment debts, reached EUR 1.217 billion, which is 3% less when compared with the previous month, as reported by the State Revenue Service.

Estonia emphasises animal welfare as demand for animal food products grows

Although the demand for food products from animals is increasing, attention should be paid both animal welfare and sustainability in agriculture, Estonia's Minister for Rural Affairs Tarmo Tamm has stated.

Latvia hopes to recover its status as a country free of swine fever

There is hope that Latvia may yet recover its status of a country free of swine fever, says Food and Veterinary Service’s (FVS) Animal Infections Monitoring Department lead expert Mārtiņš Seržants.

Estonia prepares to inform population of actions in case of emergency or war

Estonia is preparing a brochure on how its population should act in case of major crisis or war.

De Facto: international lawsuit against Latvia is associated with infamous Winergy case

Norvik Bank’s lawsuit against Latvian state in the international court of arbitration in Washington is associated with Winergy wind park business, as reported by De Facto programme of LTV. The bank has yet to announce the amount of money it wishes to enforce from the state

German Social Democrats vote to U-turn on coalition talks with Merkel's conservatives

In Germany, where four months after its federal parliamentary elections there is still no government, the Social Democrats have voted to enter coalition talks with the conservatives led by German Chancellor Angela Merkel.

Weather in Latvia to become warmer this week; thaw to settle in

Weather in Latvia will be dictated by an anticyclone at the beginning of the week. Precipitation is only expected in some areas, mostly in the north. The sky will be cloudy for the most part. Still some sun is expected every now and then, as reported by State Environment, Geology and Meteorology Centre.

Turkey crosses into Syria to attack Kurdish militia

Turkey's ground forces have entered the territory of neighbouring Syria strengthening Ankara's offensive to push Kurdish militia, considered to be terrorists by Turkey, away from the border.

Week in Lithuania. Fake news on Lithuanian Defence Minister planted on news portal

The Tv3. lt news website was hacked on Thursday, January 18 - a fake news story about Lithuanian Defence Minister Raimundas Karoblis was posted claiming that Karoblis allegedly harassed Ridas Jasiulionis, a journalist at the Žinių Radijas radio station, and admitted being gay.

BNN summary of the week: final report on Oligarchs case and ordered attacks on e-health

BNN offers a summary of this week’s topical news in a variety of categories: Change; Fight; Attack; Growth; Decline; Opinion; and Study.

Economist: the most important reform has to happen in people’s heads

«Of all the clever things taught to us in school about psychology, one thing that has stuck with me over the years is the idea of internal/external control point. There are people who believe they make their own fate. There are also people who believe our fate depends on external powers. I suspect people in Latvia explain successes and failures with external factors much more than people in Switzerland or any other country that has enjoyed its freedom longer than Latvia,» comments Luminor Bank’s economist Pēteris Strautiņš.

Minister promises bigger wages for working people and support for country’s industry

«Latvian Economy Ministry’s priorities for 2018 include increasing wages for working people and providing support to the country’s industry. For Latvia’s centenary year, every resident should have the right to experience the increase of the personal and state welfare,» promises Economy Minister Arvils Ašeradens.

Latvenergo: electricity price has declined 30% in the past three years

Average electricity price in Latvia has declined in recent years. The average price of electricity has declined by 30% at Nord Pool exchange between 2014 and 2017, allowing end user costs to decline, says Latvenergo.

Alcohol sellers in Estonia to be checked by little «police»

To find shop assistants illegally selling alcohol or tobacco to minors, Estonian police introduces the method of sending minors as police aides to retail shops to try to purchase the products banned to them.

EY study: cyber security has become a priority to banks this year

Over the course of the year, priorities of banks around the world have switched from reputation and risk management to data security matters, as concluded in the latest EY Global Banking Outlook 2018.

Political association: UGF and Harmony are covering up state capture

«Parliamentary investigation of Oligarchs case has shown what is what in the Saeima of the Republic of Latvia. Green farmers are in full harmony, covering up Aivars Lembergs and the fact of state capture. They and Inguna Sudraba have made the parliamentary investigation into a farce. Unfortunately, the power in those people’s hands is no farce – rather misfortune for all of Latvia. I hope citizens will take all that into account when they go voting,» says leader of Kustība Par! Daniels Pavļuts.

Tallinn-Helsinki tunnel plan lacks ambition, says «Angry Birds» game maker

While Finland and Estonia work on plans of an under-sea tunnel from Tallinn to Helsinki, the construction of which could start in the 2030s, a Finnish businessman, previously involved in development of Angy Birds video game, has presented plans to finish the massive construction project in 2024 already.

Experts: healthcare financing law will deny healthcare to the least protected

In a discussion regarding healthcare, experts said that Latvian President Raimonds Vējoņis’ proposed Healthcare Financing Law is economically unjustified and ineffective. The document lacks principles of a socially responsible state, because healthcare is becoming less accessible, which will likely worsen public health indexes, says Kustība Par! political party.

Branded «aggressor state», Russia says Ukraine buries Minsk peace agreements

As the Donbas War continues, the parliament of Ukraine has passed the so-called Donbas reintegration bill after three days of debates defining territories controlled by pro-Russian separatists in the east of the country as temporarily occupied by Russia.

Weather to remain winter-like in Latvia during the weekend and next week

On Friday and Saturday, no major increase of snow is expected. Air temperature will increase slightly, but colder masses of air will slow into the country on Sunday, as reported by Latvian State Environment, Geology and Meteorology Centre.

Winter storm in Netherlands and Germany turns tragic

A powerful winter storm in western and central Europe has claimed the lives of eight people.

Lithuanian bishops: skipping fasting on February 16 this year is not a sin

In an unprecedented move, the Conference of Lithuanian Bishops, the governing body of the Lithuanian Catholic Church, said that meat dishes okay for the people of faith on February 16, which marks the 100-year anniversary of Lithuania's statehood and the Lent Friday, which is traditionally a day of fasting for religious Catholic people.

Coincidence? Votes from Harmony and UGF ensure Sudraba remains the head of Oligarchs case committee

On Thursday, 18 January, the majority of Saeima members voted against the proposal to dismiss Inguna Sudraba from the post of the head of parliamentary investigative committee in charge of the review of the infamous Oligarchs case.

Kaljulaid criticised over involvement of acclaimed, but unrestrained director in centennial reception

As Estonia readies for the presidential reception to honour the 100th anniversary of Estonia, its President Kersti Kaljulaid is being criticised in an open letter for trusting Tallinn’s NO99 theatre, whose director physically assaulted a female colleague.

Would you be ready to boycott something in your life?

View Results

Loading ... Loading ...

Polls Archive

Category feed: Feed: