Wiki Spanish Food editorial team
It’s been more than a year since Russia decided to close its borders to certain European food products in response to economic sanctions imposed by the European Union as a result of its intervention in the Ukrainian conflict. Spanish producers decline to estimate the economic impact of the embargo; however, they have said that, in an effort to offset the effects of being blocked by Russia, they have reinforced sales in their traditional market, the European Union, and opened new business opportunities in non-EU countries.
The farming organization Copa-Cogeca calculates the Europe-wide impact to be around 5.5 billion euros, in line with the European Commission's initial estimate, based on the value of exports to Russia in 2013 of those products banned by the country (fruits and vegetables, meat, fish and dairy products, among others). Spain is the sixth country most affected by the sanctions, with an impact of 338 million euros.
Sources in Spain's producer sector say that the impact "has been much greater" because, in addition to direct exports, it's also important to have consideration for "re-exports" of Spanish products to other countries (i.e. a portion of the tomatoes exported to the Netherlands and Poland is then sent to Russia), and the slide in prices resulting from the ban on many products.
Fermín Sánchez Navarro, managing director of the company Gruventa, which sells fruit and vegetables in over 50 countries, told Wiki Spanish Food that the effects of the embargo have been "extremely negative for Spain's fruit and vegetable sector, with million euro losses".
An alternative: Canada and the UAE
"Russian customers have been inevitably lost, but major efforts have also been made to enter new markets to offset the ban", says Sánchez Navarro, who adds that "the enormous export capacity of sector players has allowed for the diversification of exports to countries such as Canada, the UAE and Asia".
However, the volume of sales to those markets is still small. "Transport costs are high and raise the final price of the product; goods are sent to China and Japan by airplane, but not very often because it's not profitable", say sector sources.
For Andrés Góngora, who's responsible for the fruit and vegetable sector at the Coordinator of Organizations of Farmers and Stockbreeders (COAG), what's more important is that sales within the EU, where more than 90% of Spanish fruit and vegetable exports head, have been strengthened.
According to Góngora, the crops that suffered directly from the embargo were stone and citrus fruits, which saw prices tumble by around 50% last summer.
Once the planned initial impact on those crops passed, they were able to spend the rest of the year refocusing exports to Europe. "Our rivals—Turkey, Morocco, Israel, and some Latin American countries—zoned in on Russia, and we strengthened our traditional market", says Góngora.
Sales to EU countries rockets
Data from the Ministry of Economy reflects the improvement in sales to Europe: food exports expanded by 9.6% between January and July, among other reasons due to the increase in fruit and vegetable exports to Germany, France, the UK and Italy.
More specifically, and according to a foreign trade analysis by the Ministry of Agriculture, Food and the Environment (Magrama), fruit exports increased notably to Italy (38.9%), the UK (20.6%) and Germany (19.6%). In the case of vegetables and legumes, sales increased to France (17%), Belgium (15%) and Italy (13%).
One year after Russia announced the embargo, which has been extended for an additional year until summer 2016, the various players in this sector agree that it will be difficult to recover that market, especially since competitor countries have positioned themselves to take advantage of the political crisis.
Góngora believes that companies "will have to start over” and that there’s a possibility that "things will return to normal, but it won’t happen overnight”.
The meat sector ban
According to Miguel Huerta, secretary of the National Meat Processing Industries Association of Spain (ANICE), Russia was one of the main export markets for Spanish meat, and its closure “had a notable effect, and also impacted the balance of supply and demand within the European Union”.
However, in Spain, ”other circumstances allowed producers to better manage the Russian ban than other countries and to conclude 2014 with an improvement in the export volume, but not export value, compared with 2013”.
Huerta, co-secretary of the Confederation of Spanish Meat Managerial Associations (CONFECARNE), says that when Russia imposed the ban, that market had already been closed to Spanish meat and pork products "for protectionist reasons” for more than a year, with the result that sales of meat to Russia declined by almost half in 2013.
“As a result, our sector concentrated on exports to non-EU countries one year in advance, refocusing sales towards Asian markets and other countries, which improved our position with respect to almost all of our European competitors, who continued to focus broadly on the EU,” he says.
“It’s going to be very difficult to return to that market, since Argentina, Chile, Turkey, and Egypt have positioned themselves in Russia, taking our place and supplying products all year round”, says Sánchez Navarro, who expects ”this embargo—which has been unfair, disproportionate, and terrible for sector interests—to come to an end in July of next year”.
As a result, sector exporters have leveraged opportunities in countries such as South Korea and Japan, which has helped palliate the effects of the situation in Russia. As a result, Huerta says that exports to non-EU countries expanded by 30% in terms of volume and 33% in terms of value, despite the Russian market being closed, in 2014.
According to data from Magrama, the increase in sales to non-EU countries continued to grow in the first half of this year. Exports of meats and offal increased by 8.5%, driven by countries such as China (54%) and South Korea (80%).