How Will Russian Invasion of Ukraine Affect Croatian Exporters?

Lauren Simmonds

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As Jutarnji/Novac/Jozo Vrdoljak writes, the alarming situation on the Russian market is changing from moment to moment as a result of sanctions imposed by many countries following the invasion of Ukraine. The only thing that is certain is that it is uncertain and unfavourable for the business of most Croatian exporters in respect to that market.

In addition, the situation was aggravated by a record devaluation of the Russian ruble, so much so that economic analysts proposed to the Croatian Government to facilitate the operations of Croatian companies and in some way compensate for the losses incurred by this unprecedented situation. At the end of last year, one euro stood at around 80 rubles, and now, according to the official exchange rate, 120 rubles should be set aside for that same amount.

Insiders have claimed that the situation is such that in Russia, banks need to set aside as much as 135 rubles for just one euro. The weakening of the Russian ruble reduces the income of companies and this will certainly affect the business results of companies operating in the Russian market, but this isn’t the main problem because this can be solved to some extent by sharing the burden between manufacturers and customers. In any case, it’s necessary to compensate for the negative aspects created by the weakening of the Russian ruble.

This is more or less the common opinion of Croatian exporters and others operating in the Russian market, both of those who wanted and those who didn’t want to publicly comment on the situation regarding the exchange rate of the ruble. They consider the uncertainty and the situation related to the expulsion of several Russian banks from SWIFT to be a bigger problem. In any case, companies can partially protect themselves from the weakening of the exchange rate, but they must talk to the buyers of their products. They also expect the support of the Croatian Government.

Solinski AD Plastik Group has two factories in Russia and their revenue from the Russian market, depending on the situation, amounts to about 25 percent.

”Our Russian factories produce exclusively for the Russian market and for now we’re working according to plan, but there’s a lot of uncertainty. Currently, our business is most affected by the weakening of the ruble, but we’re trying to manage the situation to minimise the consequences. Unfortunately, we’re in a situation over which we don’t really have much influence,” said Marinko Dosen, President of the Management Board of AD Plastik Group.

The Split-based Adria Winch has well protected itself in terms of exchange rates and the collection of completed transactions on the Russian market.

”All of our contracts with Russian partners use euros, we also did something else to protect both us and our partner. We took very high advances for contracted jobs. They amount to about 70 percent. However, the devaluation of the ruble puts our partners in the Russian market at a disadvantage. The question is how they will bridge it. Such a situation cannot make anyone happy,” explained Milivoj Peruzovic, board member and owner of Adria Winch.

This year, Postirska Sardina was supposed to place about 500,000 cans of its fish over on the Russian market. Davor Gabela, sales director and co-owner of that company, says that the interests of Croatian exporters in the Russian market should be protected, including proper compensation for losses caused by the weakening of the ruble.

”After the New Year, we exported one truck to the Russian market, and I can’t say at this moment in time what will happen to the rest of our planned exports. The weakening of the ruble’s exchange rate is such that the question is whether our distributor will even accept the conditions imposed by this circumstance. It’s always worth exporting if the importer agrees to import because the devaluation of the ruble increases its price due to exchange rate differences. The Ukrainian market is much more important to us because we export more there. This week we were supposed to have a delivery that was stopped because it’s almost impossible to deliver the goods to Kyiv. We’re going send humanitarian aid there in the coming days,” Davor Gabela assured.

Gordan Pesic, head of development and business at the well known company Dok Ing from Zagreb, says that for their company, the Russian market is just one of many where they market their products and that it likely won’t have much of an effect on their business.

”I agree that the Croatian Government should help Croatian exporters to maintain their positions on the Russian market and compensate them for the losses caused by the devaluation of the ruble,” said Pesic.

President of the Association of Croatian Travel Agencies, Tomislav Fain, also says that in this situation when air connections with Russia are cut off and Russian planes are banned, it is difficult to think about the arrival of Russian guests and all the accompanying unfavourable circumstances such as the devaluation of the ruble.

”We expect that the war conflicts will stop as soon as possible and that the situation in that region will not affect other markets,” he said, adding that the most important thing above all is that the war ends. In terms of the the total number of passengers in 2021, Russian and Ukrainian tourists accounted for about four percent of the traffic of Dubrovnik Airport passengers.

”The war going on in Ukraine will certainly have an impact on tourist traffic, but what kind of impact that will is currently very difficult to assess. We, as Dubrovnik Airport, aren’t able to do that now. The impact on air traffic across Europe already exists, as parts of the airspace in Ukraine are closed, as is traffic between Russia and the EU. We aren’t able to to provide an answer as to how long these restrictions will last,” said Frano Luetic, the director of Dubrovnik Airport.

For more on Croatian exporters, check out our business section.


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