OREANDA-NEWS. August 19, 2014. Citadele Group economist Simona Strizevska on Russian sanctions:

“Russia’s decision may affect Latvia’s dairy industry to the greatest degree, but at the level of the overall Latvian economy, it has to be said that the negative influence of the sanctions must be seen as limited.”

Citadele Group economist Simona Strizevska on Russian sanctions. Russia’s counter-sanctions, which are aimed at banning the import of farm products from Europe and other Western countries, could be particularly harmful for some Latvian food companies and agricultural enterprises, but at the level of the overall Latvian economy, it has to be said that the negative influence of the sanctions must be seen as limited. According to 2013 data, the value of Latvian products to which the import ban applies is around EUR 50 million a year, which represents 0.5% of Latvia’s total exports or 0.2% of Latvia’s gross domestic product.

Russia’s decision might affect Latvia’s dairy companies to the greatest degree. The export of dairy products to Russia increased rapidly in recent years, and this represented a bit less than EUR 40 million, or 15% of Latvia’s total dairy product exports in 2013 if dairy products based on plant fats were included. At the same time, however, the dairy industry in Latvia is largely focused on domestic demand, with 65 to 70% of output consumed locally, on average. What is more, dairy products represent one of the largest import segments in Latvia, exceeding a value of EUR 150 million in 2013. This means that dairy companies in Latvia may be encouraged to compete harder against foreign products on our shop shelves.

Overall, Russia’s import ban will limit demand for EU farm and food products with a value of EUR 5-5.5 billion a year. This means that lower demand and the search for new distribution markets may, in the short term, lead to lower meat, vegetable, fruit and dairy product prices in Latvia and the rest of the European Union.