Exports to Russia not covered by insurance
Trade between Portugal and Russia is not particularly expressive. Nevertheless, it has been growing over the past five years, particularly in terms of wines, and specifically light naturally sparkling white wines known as ‘vinho verdes’ with overall wine exports up 61% to €45 million.
The prospect of a lengthy and protracted large-scale war in Ukraine and the current tough international sanctions on Russia will have a serious negative effect Portuguese wine exporters whose market share in terms of exports had been growing.
And to make things worse, because acts of war and sanctions linked to them are considered unforeseeable, insurance companies don’t cover the cost.
There are many companies, including Portuguese ones, that have found the Russian market an attractive one to invest in, in recent years, but are there at their own risk since their exports are not insured.
“Since the conflict between Russia and Ukraine broke out, and given the deterioration in the situation to open warfare, new exports to these countries and to Bielorussia are no longer covered by insurance credits” (which protect overseas sales), a spokesperson at the insurer COSEC told the newspaper Público.
And “regarding Ukraine and Bielorussia there are not insurance policies currently available that cover exports to these countries”.
The conflict and sanctions has put a real brake on Portuguese exporting companies, not just in terms of the lack of transport and logistics, nor even the exchange rate or reputation risks. The main issue is a lack of insurance to cover what is known in the trade “political risks”.
As COSEC says, “most policies do not cover “political risk”. Another insurer, Crédito y Caución told the same news source “at present we do not offer cover to the Russian Federation or Ukraine”.
“Any new cover or dispatch of goods under existing cover will be evaluated on a case-by-case basis, respecting the applicable sanctions that have been imposed”, said Paulo Morais, who heads that insurer in Portugal and Brazil.
Wine sales had been growing
That Portuguese wine sales had been growing in these markets was clear from Portugal’s presence this year (February) at Prodexpo, the largest foodstuffs fair in Moscow.
According to Casimiro Alves, a wine exporter at the event, “Currently, Russia is our main market and represents around 30% of our sales overseas. We sell several million bottles and sanctions will harm our business.”
Prodexpo 2022, the first edition since the start of the pandemic, included 29 Portuguese wine producers with several wines winning medals.
Now, with the worst fears of more sanctions now a reality, Luís Mira, the Secretary-General of the Portugal Agricultural Producers Confederation (CAP) who led the Portuguese delegation have some figures before the invasion took place.
“The numbers are very positive. Portugal is the fifth largest wine exporter to Russia, so it is really impressive, especially for green wines which have a huge market here.” (in Russia)
Numbers crunch
Portugal Exports to Russia
According to the OEC, in 2019, Portugal exported $292 million to Russia. The main products exported from Portugal to Russia were Agglomerated Cork ( million), Leather Footwear (US$21.1 million), and Metal Molds (US$17.8 million).
Breaking this down*: cork and articles of cork (US$31.78 million), machinery, nuclear reactors and boilers (US$22.6 million), Products of animal origin (US$17.28 million), Footwear and the like (US$15.95 million, Beverages, spirits and vinegar (US$13.27 million), Furniture, lighting signs, prefabricated products (US$13.10 million, Vegetable, fruit, nut food preparations (US$12.11 million), Plastics (US$8.27 million), Articles of iron or steel (US$6.20 million), Coffee, tea, and spices (US$5.32 million), Stone, plaster, cement, asbestos, mica etc (US$5.27 million).
Other products under US$5 million include ceramics, organic chemicals, clothes, paper and pulp, pharmaceuticals, rubbers, woods and articles of wood, tools, implements and cutlery of base metal. (Source: *Trading Economics).
Russia exports to Portugal
According to Trading Economics exports to Russia currently stands at US$603.80 million (By Jan 2022), up from just $US17.2 million in Jan 2021. Most of this were petroleum products. (Federal Customs Service, Russia).
Russia-Portugal In 2019: Russia exported $US924 million to Portugal. The main products that Russia exported to Portugal are Crude Petroleum (US$511 million), Refined Petroleum (US$119 million), and Cyclic Hydrocarbons ($US43.2 million).
Russia Worldwide exports
The latest figures from the Portuguese-Russian Chamber of Commerce (CCILR) and AICEP Portugal Global websites for November 2021 show merchandise exports jumped 60.0% over the same month in 2020. (+62.4% year-on-year). Meanwhile, merchandise imports rose 22.4% on an annual basis in December (November: +22.6% yoy), marking the softest increase since February 2021.
The merchandise trade balance improved from the previous month, recording a $US 26.7Bn surplus in December (November 2021: $US 21.1Bn surplus; December 2020: $USBn 10.8 surplus). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a $US 190.1Bn surplus in December, compared to the $US 174.2Bn surplus in November.
FocusEconomics panelists had forecast (had the Russian invasion of Ukraine not happened) that exports would have grown 10.9% in 2022 and imports would have increased 8.0%, bringing the trade surplus to $US 203.0 billion. In 2023, FocusEconomics panelists expect exports would have fallen 0.3%, while imports would have risen 3.9%, thus the trade surplus would have grown to USD $US192Bn.
