Baltic companies still trading extensively with Russia

Baltic companies still trading extensively with Russia
Lithuanian trade with Russia was down by a third in January to November, while Latvian imports from Russia rose by 5% in January to October. / bne IntelliNews
By Linas Jegelevicius in Vilnius February 3, 2023

Baltic companies have continued to trade extensively in unsanctioned goods with their giant neighbour Russia since President Vladimir Putin’s invasion of Ukraine, despite their governments' staunch opposition to the Russian aggression.

But they are far from the worst performers in Europe. The Baltic states at least have the excuse of geography and deep trade ties dating from their time as part of the Soviet Union. Some European states far from Russia and without their historic links have actually increased trade with Russia since the invasion.

Only slightly more than half of the Lithuanian companies that export to Russia have cut their business ties there since Putin’s invasion of Ukraine, while some 260 continue exporting, according to Lithuanian public broadcaster LRT. The situation in Estonia and Latvia – which have also taken a very hawkish line on Moscow’s aggression – is similar.

In Lithuania trade turnover with Russia between January and November 2022 decreased by 31% year on year, exports shrank by 26.2% and imports plunged by 35.1%.

“If we looked at the  trade statistics, it is evident that unsanctioned goods continue to flow from Lithuania to Russia. And furthermore, trade with Russia continues to grow. Formally, it is legal but hugely amoral. Interestingly, the names of firms doing business with Russia cannot be made public due to the data protection provisions. It is preposterous,” Sigitas Besagirskas, president of the Vilnius Association of Industry and Business (VAIB), told bne IntelliNews.

Products most often exported to Russia by Lithuanian companies include optics, medical and measuring instruments, vehicles, electrical equipment, video and sound equipment, as well as boilers and mechanical equipment.

“This is bizarre. It should not be happening. Exports ought to have been halted. Period! Here in the Baltics we can just console ourselves that many other European Union countries have had a trade increase with Russia since the breakout of the war. That’s very sad: the nations declare one thing and do the other,” Besagirskas emphasised.

He points to a wave of newly established companies that aim to facilitate trade between Russian and EU companies.

“I’ll put it simply: all they do is to help bypass sanctions against Russia and Belarus so, literally, at the end of day, we have business as usual. The majority of such companies are registered and flourish in the Caucasian region, like Armenia, Azerbaijan, Georgia, Moldova, also Serbia and Turkey,” the Vilnius business enterprise authority chief underlined.

He says that, acting through intermediaries in these countries, increases the cost of goods by 10-15%.

Besagirskas told bne IntelliNews how he was approached last year by an Estonian company. “It proposed to bring sanctioned Belarusian granules into Lithuania. When I asked them straight if they intend to haul forbidden goods to Vilnius, the company representative replied: “Do not worry about it. Invoice will be issued by an Estonian company. This is the practice we have with many EU clients now,” Besagirskas said.

The Lithuanian Ministry of the Economy and Innovation told bne IntelliNews that trade or other business relations with Russia and Belarus are primarily a decision made by business companies themselves.

“It is up to them to assess their reputational and other risks associated with these countries. We believe that businesses should be conscious and willing to terminate such relationships themselves. We would support the idea of making a list of such companies public, as long as this does not conflict with data confidentiality and other legislative requirements, as this would bring more clarity to all,” the ministry’s public relations department said in a written reply, adding: “The ministry does not possess data on specific companies.”

For Latvia, the Public Relations Division of the Ministry of Economics said that the “economic impact of hostilities on Latvia is greater than average in the EU, as Latvia borders Russia and has historical links in economic co-operation”.

Exports to Russia decreased in January-October 2022 by €17mn, or 1.7% y/y.

By product group, the changes in Latvia’s export volumes to Russia in January-October 2022 included substantially decreased exports of electrical appliances and equipment – by €42mn or 37%; decreased exports of machinery and appliances by €16mn or 10%. Meanwhile, exports of vegetable products rose significantly by €23mn, or doubled; exports of pharmaceutical products increased significantly by €21mn, or 28%; and there were higher exports of rubber and articles of rubber by €10mn, or 87%.

The Latvian ministry said that imports from Russia grew by €45mn in January-October 2022, or by 5% y/y.

By product group, the changes in import volumes from Russia in January-October 2022 included imports of mineral products by €324mn, or 61%; increased feed imports by €59mn, or 20 times; greater vegetable imports by €29mn, or 4 times. Meanwhile, there were significantly decreased imports of iron and steel by €319mn, or 73%, and decreased imports of iron and steel products by €27mn, or 54%.

In all, 55% of all imports from Russia in January-October 2022 were composed of mineral products, 8% iron and steel, 6% wood and its products, 4% feed and animal and vegetable fats, 4% for fertilisers and cereals, the ministry said.

Estonia’s Ministry of Economic Affairs and Communications did not respond to bne IntelliNews’ questions.

In terms of other countries, Besagirskas says in some cases their trade has actually increased since the Russian invasion.

“Slovenia clearly stands out in the picture – its trade with Russia, specifically imports, went up 350% in 2022 y/y; that of Luxembourg up by 250%. Really crazy. The Baltics are clearly in [the] minority of European nations in which imports and exports with Russia decreased last year,” the analyst underscored.

“I do not think Slovenia, all of a sudden, needs the massive amount of Russian goods. It is reselling them at a higher price to the other European Union nations…To me, the biggest price is moral, but it seems that few care about it,” Besagirskas added.