Reduction in imports led to a favorable investment environment

26 june 2014

The Analytical Center hosted the roundtable titled “Introduction of economic sanctions and restrictions on Russia: impact assessment for domestic agro-industrial sector”.

Participants of the event examined the impact of economic constraints and other actions of foreign countries against Russia, on the production and profitability indicators of the companies from agro-industrial sector. They also discussed the potential risks and opportunities for domestic agricultural producers.

Opening the roundtable, Deputy Director General of the Analytical Center Gleb Pokatovich, pointed out that Russia is vulnerable in terms of debts. “Our public debt is small and a big part of it is represented by debts from corporate sector, which were formed due to the concept that they will get settled by future funding, - said he. - Today new risks appear, rates are rising, ratings are falling and the issue of financing is getting more complicated”. In addition, Mr. Pokatovich added that a large proportion of these funds have been acquired for periods of 1-2 years, and substantial payments on corporate debt are due in 2014 and 2015.

Deputy Head of the Department for Expert Analytics Elena Razumova, considers that there is no apparent tendency for Russian reorientation towards any specific country, and the imposed economic sanctions didn’t have a significant effect on the Russian agro-industrial complex. “We have reduced the import of expensive agricultural machinery from Europe, there is a reduction of vehicles acquisitions from Belarus, but this is not related to sanctions. We simply started to buy cheaper vehicles from China”, considers Ms. Razumova.

The event brought together experts from various agro-industries. According to them, the reduction of imports led to a favorable investment environment in the hog farming at first, and then - in the poultry farming. These changes had the maximal effect on the agricultural market. But in general, the economy may suffer.

General Director of the National Union of Hog Breeders Yuri Kovalev pointed out that sanctions can threaten the economy as a whole, since they lead to a decrease in budget income and as a consequence - the possible limitation of government programs funding. “Over the past year, industrial hog farming has improved by 25%, but this is the effect of previous investments”, - pointed out Mr. Kovalev. He also added that for the past two years, new investment projects did not start.

Roundtable participants expressed the view that some sanctions can be stimulated, for example, by imposing restrictions on food supplies.

During the event, experts also discussed the competitiveness of Crimean products. According to them, a problem appeared in this territory regarding food distribution as transit through Ukraine is impossible, and the cost of transportation by water would raise the cost of goods. As for Ukrainian products, experts consider that they will be competitive in world markets.