Sanctions on Russia may hit exports

By Lalin Fernandopulle

The US and Western sanctions on Russia will have a trickle down effect on Russia's relations with other countries and its trading partners according to international relations experts.

Russia, an oil and gas rich country, is a major trading partner between the East and the West. Russia provides around one third of the EU's oil and gas and around 40 percent of the gas is exported through Ukraine.

Sri Lanka has a substantial trade exposure with Russia which imports a large quantity of Ceylon Tea.

National Chamber of Exporters, President and Heladiv Group Chairman Rohan Fernando said that the situation in Russia after the annexation of Crimea will lead to a lot of issues pertaining to trade. As it is, the Russian economy is not on a strong footing and the Rouble is being devalued against major currencies, primarily the US Dollar.

“We are already experiencing problems by not receiving payments on time and some of the transactions take a long time for clearance.

"If the US and Western Europe enforces trade sanctions, trade between Russia and other countries will definitely be hampered, similar to what Iran is experiencing,” Fernando said. Putin being adamant to go through with his decision to annex Crimea, is rather vulnerable in today's context of being isolated by the US and the West which the average Russian does not like. “We see a bad picture for tea exports to Russia in the coming months due to these reasons,” he said.

The United States and the European Union have imposed tough sanctions on Russia for annexing Crimea which the West and the US believe is a violation of international law. US President Barack Obama has threatened further sanctions if Russia takes steps to destabilise Ukraine.

US and Western sanctions are aimed at Russia's energy sector and making Europe less dependent on Russian gas. Experts believe sanctions will push Russia to deepen ties with BRICS states, in particular, and strengthen ties with China, which will possibly turn out to be a big catastrophe for the US and the EU.

The World Bank has warned that further sanctions could send Russia into deeper recession. With suspension of Russian participation in G8 and possible strengthening of economic sanctions, the experts expect some industries to be targeted, including limits on imported products. Apparel exporters said that though Russia is not a major market for Sri Lankan apparel the situation in the region could have an adverse impact on exports to the EU in the long term.

Apparels Exporters Association President Yohan Lawrence said there has been no impact as yet on apparel exports due to the crisis in Russia. In 2013, exports to the Russian Federation was US $20 million.

The Russian market has been identified as a market for growth for Sri Lankan apparel. Experts believe that sanctions on Russia will have a negative impact on Europe as many countries depend on Russia for oil and gas. Italy imports around 30 percent of its natural gas from Russia.