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Artur Eresko □ A Lost Billion

Artur Eresko □ A Lost Billion

The results of the two-year sanction opposition reflected on the Latvian economics rather sadly. Some estimates suggest that the country has already lost 1 billion euro, the losses continue increasing.

 

Sanctions against Russia were imposed by the western community two years ago. In March the EU took a decision on their extension until 15th September of the current year and, most likely, the sanction war may continue for another year. In its turn Russia on 6th August 2014, in response to anti-Russian embargo, prohibited import of a wide range of western food and agricultural products. So, milk and meat products from Latvia disappeared in Russia.

According to estimates of the Russian Ministry of Economic Development the damage to the European partners caused by embargo makes up about 100 billion euro. The total losses of Russia make up one quarter, about 25 billion dollars.

The winners from the sanction war are the countries – neighbors of RF: republics of Central Asia, China, republics of Caucasus, Belarus.

Unfortunately, Latvia (alongside with Estonia and Lithuania) appeared to be one of the most unprepared countries in Europe for imposition of Russian veto. In particular, a colourful project of marketing of Riga and Latvia – ‘Rizhsky Dvorik’in Moscow retail chains Perekrestok and Ashan ended in a fiasco substantially immediately. And from summer 2015 Rospotrebnadzor took Latvian fish cans away from the shelves of these and other supermarkets.

Despite mutual sanctions Russia for Latvia outside the eurozone remains the most important commercial and economic partner, which share in export in 2015 made up 9.7%, in import — 10.6%. On results of the year 2015the bilateral trade turnover reduced by 45% — from 13.5 billion euro to 7.417 billion euro.

Forecasts for the current year are also pessimistic: but here the largest portion of direct losses and potentially lost profit of the Latvian exporters is caused not by Russian embargo, but by negative monetary and economic factors of development of both EU and Russia.

According to estimates of the Ministry of Agriculture of Latvia, direct losses of the Latvian export in 2014 made up almost 80 million euro, while in 2015 – more than 120 million euro. In aggregate – about 200 million euro.

But there are indirect losses as well, connected, first of all, with the impact of the Russian rouble devaluation. And they are significantly higher than those of sanctions. It is estimated that in four out of five cases the decline in the Latvian export to Russia is attributable to the sharp weakening of the rouble and decline in solvency of Russian ordinary people and undertakings. And only one of these cases – is the direct effect of the RF product embargo.

So, if to sum up direct and indirect losses of Latvia from the trade war with Russia, one can state that the Latvian economics has lost about 1 billion euro. Or approximately per 2% of GDP per year.

In other words, the Latvian economics may have shown on the average the growth of 5 percent, instead of 3 percent per year as it happens now.

 

Artur Eresko (Артур Ересько) - Candidate of Economic and Legal Sciences.

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