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New opportunities on the Russian market as a result of the EU-Russian sanctions

Thursday 13 November 2014

On July 31, 2014 the European Union introduced sectorial sanctions against Russia, which were further expanded on September 12, 2014.

The sanctions imply:

  1. Prohibition of any economic interaction with listed legal entities and individuals.
  2. Prohibition of export of arms, double-purpose goods, equipment for deep water and Arctic oil projects and provision of services for the latter.
  3. Prohibition of access to capital markets: instruments with maturity over 30 days.

As a result Russia introduced counter sanctions. On 06 August, the Russian President Vladimir Putin signed a decree forbidding agricultural and food imports from all countries that have previously introduced sanctions against Russian companies and/or citizens. Now the import of any meat, fish, poultry, seafood, milk and dairy products (including cheese), vegetables, fruits, sausages and nuts is prohibited.

Both the EU sanctions and the Russian counter sanctions create opportunities for companies from Latin America, Asia and other countries who have not joined the sanctions against Russia.

The Russian market potential remains strong: it is the largest consumer market in Europe and the government expenditures and funding of large infrastructural projects will remain high. At the same time the EU and US sanctions and the Russian counter sanctions created a vacuum on the market, as many European and US companies where forced to close their operations in Russia. Latin American, Asian, South African countries can capitalize on these opportunities on the Russian market.  

Food sector

Russian counter sanctions mean a massive decrease in imports. As a matter of fact, 37% of Russian meat imports and 25% of beverages imports come from the EU, another 12% of meat imports come from USA, and 32% of fish imports come from Norway. Many importers will surely suffer losses.

Meanwhile, Russian retailers are actively searching for partners from other countries to substitute import from EU, USA, Canada, Australia and Norway. In order to diversify trade flows, partnerships with Asian, Latin American and BRICS countries are being intensified.

Russian retailers are not looking for short-term solutions to fill the empty shelves, but for a long term partnership. They are willing to invest into marketing and promotion of new products and are eager to find suppliers fully matching their requirements.

Other sectors

Export opportunities also exist in the following sectors, which are traditional for Latin America:

  1. Minerals and metals.
  2. Chemical products.
  3. Pharmaceuticals.
  4. Biotechnologies.

The Western influence is reducing across all sectors, even in those which are not affected by the EU and US sanctions. Russian customers are looking for suppliers of technologies, goods and services, which can substitute Western technologies and would like to work on long-term partnership basis (e.g. localization in Russia).

Many foreign companies now also consider restructuring their businesses, so as to continue cooperation with Russian companies and lessen the harsh effects of mutual sanctions by taking the following steps:

  • Work through intermediaries
  • Subsidiary in third countries
  • Sub-contracts with companies in third countries
  • Localization in Belarus, Kazakhstan, Armenia

To find out more about the impacts of the sanctions’ and arising possibilities to start business with Russia, please contact Lighthouse Russia (info@thelighthousegroup.ru).

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