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Exporters, concerned about the possibility of trade restrictions like the ones in 2014 that ended pork and fruit sales to Moscow
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Wine, oil and olives are among the products most threatened by the tense pre-war situation in the current crisis
The increase in tension between Russia and Ukraine may have unforeseeable consequences for the lives of thousands of people, for international politics and for world trade, but there are other effects that are more to be expected: the West has already warned that it has ready “Swift and severe” sanctions against Moscow in the event of military intervention, and in the face of such measures, a reciprocal response usually does not take long to arrive. The precedent is very fresh: in 2014, the Russian embargo against European agri-food products in retaliation for the EU sanctions against the invasion of Crimea ended practically overnight with lSpanish meat, fruit and vegetable exports to a market of 140 million consumers. The restrictions -which last until today- have caused a 67% collapse of Spanish food imports by Russia, according to data from the Foreign Trade Institute (ICEX): they totaled 1,111 million euros in 2012, and 362 million in 2020. Now the fear in the Spanish countryside is that a new round of restrictions hits products that were freed from the blockade eight years ago and that are also doing well in the Russian market.
Crisis Although Russia is not one of Spain’s main trading partners -it is the twenty-sixth market and the twenty-fourth supplier- some agri-food products have managed to maintain or gain market share in the Eurasian country in recent years. This is the case of table olives (thanks to sales of 74.5 million euros in 2020, Spain is the second largest exporter of canned vegetables to Russia, only behind China), olive oil (in which Spain maintains the leadership, followed by Italy) and bottled wine (sales to Russia, for more than 100 million euros in 2020, place Spain as third supplier of Moscow, behind Italy and Georgia and ahead of France). All sectors emphasize that, beyond the present, Russia’s trade prospects are interesting going forwardgiven the expectation that the middle class will settle down and demand more of the type of products in which Spain stands out.
Wine and oil, in danger
Vidal del Saz is manager and owner of the winery of the same name in Campo de Criptana (Ciudad Real). He has been exporting wine to Russia for 12 years, up to 2 million bottles per year at peak times -now it sends between 700,000 and 800,000- and he has no doubt that if the conflict escalates, all the leading Spanish products will be affected: “we are obviously afraid; we are not essential; whether it is because of border closures, or because of fluctuations in the ruble, or by obstacles to transactions between banks in some way [la situación de tensión] it will have an impact”. José Luis Benítez, Director General of the Spanish Wine Federation (FEV), shares these fears: “wine, unfortunately, is used a lot in trade wars. Russia knows that it is doing a lot of damage to Europe with this product; although it is not the main client, it is symbolically very important”. “Any uncertainty that affects the good commercial climate is a handicap that can be very important for our sector; it will depend on whether it’s a downpour, a storm or a typhoon,” he concludes.
The olive oil sector does not hide its concern either, in this case accentuated by competition. “If they only imposed sanctions on Spain, because it is taking a stand in this conflict, and not on Italy, which is not taking a stand, there could be differentiated sanctions, which would make us lose market share,” warns Rafael Pico Lapuente, director of the association. of Asoliva exporters. “We must tell those who govern to be very careful with what they say out there and the ships that rule, which can have consequences”, he adds in reference to the shipment of the Blas de Lezo frigate to the Black Sea; as an example, he points to the conflict between the EU and the United States over aid to their respective aircraft manufacturers, Airbus and Boeing, which imposed sanctions on Spanish olive oil, but not on its European competitors.
Like their colleagues in wine and oil, among table olive exporters there is widespread concern about possible entry barriers to a “quite mature market with a lot of growth potential in which the Spanish product leads with 93% of the market share”, according to the General Secretary of Asemesa, Antonio de Mora. “I have made a recent consultation among the exporting companies and for now none have perceived consequences of the conflict, but We are alarmed because if there are, they will affect us a lot,” he adds.
Persimmon and pork, victims of the embargo
The experience of the sectors that did suffer the 2014 embargo is instructive. Among the fruits, the case of the persimmon is especially noteworthy, highly appreciated in Russia. Vicente Carmelo Burches, producer on the banks of the Júcar and responsible for the sector of this fruit in the AVA-Asaja agrarian association, says that “the export of persimmons to Russia was very good, almost doubling every year”; a market -according to him- not only growing but less demanding than others, so that fruits of a smaller caliber or a little scratched were also sold there, contributing to increase world prices. Then came the embargo: “it was a debacle; there is no profit anymore and that is why many of those who had planted are uprooting [los árboles]because we went from selling at 50-55 cents per kilo to 20 or even close to 10”, he laments.
In the case of pork, the impact was also considerable: of the 800,000 tons that Russia imported annually from the European Union before the veto, Spain contributed some 150,000, according to the employers’ association Anprogapor; now, the quantities are testimonial, explains the director of this association of producers, Miguel Ángel Higuera: “it was a tremendous scare, given the difficulties of the sector, even the EU itself paid to freeze meat, to remove it from the market until supply and demand,” he recalls. Higuera appreciates, however, a positive effect of the embargo: forced the sector to open new markets. “We had to put on our ‘running shoes’, so to speak, we looked for new opportunities in other countries and in the medium term that put us in the world market, fighting for competitiveness and being the best”. Shortly after the embargo, he assures, the export was reoriented towards Asia, and especially towards China.
lose market share
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One of the dangers of an embargo being put in place, warns from all sectors, are the difficulties of recovering lost market share. “There are already countries closer to Russia that have planted persimmons to supply them, I find it difficult to return to the levels of before,” says Burches; “When we can return, it will be as one more actor in the chain, not at the levels of before; the Russians have increased self-sufficiency [de porcino] and with the EU out of the game, countries like Brazil or Chile partly took its place,” says Higuera. “Georgia, Moldova, Argentina or Chile would be well placed to take advantage of the gap that European wines could leave,” adds the head of the FEV, while in oil and olives Italy and Greece are concerned and, above all, the countries from North Africa and the Eastern Mediterranean, which would certainly be left out of possible sanctions.
In addition to embargoes and vetoes, an escalation of the conflict could also have other serious consequences for the Spanish agri-food sector: “In addition to the general increase in prices of energy sources, such as oil and gas, products referenced or linked with them such as fertilizers and fertilizers, of which Russia and Ukraine are major exporters“, lists Ignacio López García-Asenjo, director of international relations for the Asaja agrarian association. “We must also take into account that we are deficient in animal feed from vegetable products (sunflower seeds, or corn) in which Ukraine stands out; if there are supply problems, there can be higher production costs in both intensive and extensive farming, if the drought becomes more critical,” he adds.