[EN] In response to western sanctions, Russia imposed counter sanctions against the EU and USA on 06 August 2014.
1. Impact on the European economy
With immediate effect, imports of meat, fish, cheese, milk, vegetables and fruits to Russia are prohibited for a period of one year. With this embargo, Russia intends to harm the European economy. As shown in our info-graphic, the impact on the European economy might be limited. However, some specific supply chains and countries strongly dependent on those restricted exportation will be greatly impacted.
Considering that the Russian sanctions will harm some European economies more than others, Poland, Italy and Greece are expecting consequences. According to different experts, it is likely that Russia will suffer more from its sanctions than the EU and USA. Russia imports about 25% of all its groceries from the EU. The sanctions could lead to a price raise and a poorer quality of food offer in Russia.
2. Rising exchange rate risk
As mentioned in our article of 15 March 2014, the current crisis linked to the Ukrainian conflict is strongly affecting the Russian currency volatility. The ruble fell, leading to broad-based losses on most emerging currencies from fears that Russia’s decision to send humanitarian aid to eastern Ukraine could eventually lead to a military invasion. The ruble is one of the most volatile currencies in emerging markets.
The volatility of the ruble over the last weeks has led to a significant financial risk for companies doing business with Russia. For example, if your company holds a sales contract in rubles already signed in January 2014 and you are producing in the Euro-zone, the value of your commercial agreement has probably decreased by 10%. If your cost in euros is not equally impacted, your commercial margin may be directly affected, unless you have covered your position.
DMO, 13 August 2014
About TALA Consult
TALA Consult is a management consultancy company specializing in financial risk management and cost optimization. In particular, we focus on risks inherent to the supply chain. Instead of mere cost killing, our approach combines cost saving and risk optimization levers to deliver true savings as well as to provide a clear and sustainable return on investment to our customers.
Our consulting advice varies from quick recommendations for your on-the-spot needs to sustainable and holistic optimization of your processes and organisation. When needed, we provide efficient and cost effective outsourcing solutions.