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Vulnerable EU states meet embargo head-on

Latvia ranks just second behind Lithuania among EU states in the amount of its national GDP estimated to rely directly upon food exports to Russia. Prime Minister Laimdota Straujuma told the press Friday that Latvia stands to directly lose €53m, half of which is expected to hit the dairy sector.

Bizarrely, neither ice cream nor canned fish are actually yet listed by Russia among the goods currently prohibited by the embargo. But in fact a number of company owners in Latvia’s threatened dairy industry are actually Russian nationals. For instance, the Riga Dairy Plant and Valmiera Milk have merged into the Food Union concern, held by Russian citizen Andrey Beshmelnicky through Cyprus-registered firms. Limbažu Siers also sends most of its cheeses to Russian markets after relaunching last year with the help of foreign investors said to be from Russia. The list of Latvian dairy plants with heavy reliance on exports to Russia includes several other familiar brands.

Speaking after a meeting with sector organization leaders, Agriculture Minister Janis Duklavs and Economics Minister Vjaceslavs Dombrovskis, Straujuma said they discussed possible measures to alleviate the impact of Russia’s countervailing food import embargo against the EU. These could include tax breaks or deferments, as well as financial aid in securing new markets, to be discussed further at an extraordinary Cabinet meeting Tuesday.

Economics minister Dombrovskis told the media a list of affected companies that are likely to need state aid to overcome the embargo effect was being compiled. He declined to specify more precisely how much influence on Latvia’s economy it might have, because it isn’t clear how much prices will come down yet. Nevertheless, afterwards he gave a figure different than the estimate cited by Straujuma during the press conference - €33m in direct losses to the national economy, or about 0.7% of GDP.

The premier said she was sure the EU would grant support to the Baltic states and Poland, which will probably bear the brunt of the mutual sanctions. Also expected to suffer are the dairy industries of Denmark and the Netherlands.

Agriculture minister Janis Duklavs said that dairy producers and farmers cannot wait a single day for solutions, as the sector provides work for over 3,000 people. Duklavs is scheduled to meet Monday with dairy cooperatives for talks on how best to help.

On Thursday the European Commission’s Agriculture Commissar’s spokesman Roger White confirmed to Latvian Radio that the so-called ‘crisis reserves’ are available in the common agricultural policy funding for extraordinary situations like this. However some of this money will also be diverted from direct payments, he said.

Also Thursday, the Foreign Ministry’s press secretary Andrejs Pildegovičs called Russia’s countersanctions a regrettable act. “These steps will only hurt Russia’s own interests, driving it into isolation away from Europe and the world’s processes,” he said.

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