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2014.03.31 11:53

Nausėda: What to expect after losing Russian market

2014.03.31 11:53

Although Lithuania’s export to Russia makes 19.8% of the overall export, the export of Lithuanian products to Russia amounts to only 4.8%. The Lithuanian part of the export of goods originating in Russia takes up only eighth place which lags behind Germany, Latvia, and Estonia LRT.lt reported.

Although Lithuania’s export to Russia makes 19.8% of the overall export, the export of Lithuanian products to Russia amounts to only 4.8%. The Lithuanian part of the export of goods originating in Russia takes up only eighth place which lags behind Germany, Latvia, and Estonia LRT.lt reported.

According to Gitanas Nausėda, CEO Adviser at SEB Vilniaus bankas, losing the Russian market would bring significant negative consequences. However, the attention should be given to the fact that the major part of Lithuania’s export to Russia is re-exported.

“At first glance, the impact of losing the Russian market would be tangible, that is almost 20% of all our export. This number is probably causing our fears and concerns. However, it can be noted that it is possible to see that the major part of our export is re-export.  In other words, the first to be affected are foreign companies that take their products over Lithuania’s territory to Russia and our transport sector,” says the economist.

Lithuanian export to Russia in 2013 amounted to 19.8% of the overall export; and only 4.8% of all the production exported to Russia was from Lithuania.  The situation in the market with European countries is completely different: 58% of the overall export to Latvia is from Lithuania, to Estonia – 74.4%, and to Germany – 82.9%.

Last year, the export of Lithuanian products to Russia was 4.8% of the overall export of products and amounted to 2.5 billion litas. Meanwhile, the export to Germany was 9.8% (5 billion litas), to Latvia – 9.6% (4.9 billion litas), and to Estonia – 9.3% (4.76 billion litas).

Dairy and meat products from Lithuania are mostly exported to Russia.  Cars, mechanical devises, parts and vehicles also make a big part of the export.

According to Nausėda, not all the industry sectors that export their products to Russia are equally susceptible to this market.  For example, furniture, machinery and equipment industry sector of the Russian market is only one of many and certainly not the main. Losing this market would be more painful for producers of dairy and meat products.

However, the economist notes that even the industry sector of dairy products that is sensitive to Russian market can manage the negative changes in this market.

“End of last year showed that even if this important market closes, the producers did not stop their production or close down.  Companies moved the production from perishable to slowly perishable products, re-oriented their product flows in the geographical sense and it cannot be said that they have failed or suffered heavily.  The impact was obviously negative, yet manageable,” observes Nausėda.

As the economist says, in the worst case scenario, if the Russian market closes for Lithuania, business would be able to re-orient pretty quickly, but the companies’ financial indicators would fall.  The profit would decrease because of the expenses for entrenchment to other markets and because it is impossible in other countries to profit insofar as in Russia.

“It would be impossible to expect the same things in a new market what has been achieved in Russia’s market for many years.  Russian market is important to us, however it cannot be said that if it closes, the history of Lithuanian economy ends,” says Nausėda.