The war in Ukraine will bring down the profits of Serbian exporters and make it harder for our goods – SCC is preparing an analysis of the impact of the conflict on the Serbian economy

While the war in Ukraine is raging and no one knows how long it will last and what economic consequences it will produce globally, neither Serbian businessmen exporting to these markets, nor importers, can tell in which direction the situation will develop and in that sense they also expect the support of the state.

Thursday night, the Serbian Chamber of Commerce announced that it would establish a crisis headquarters and a call center to help Serbian business people doing business with Russia and Ukraine. The call center was established on Friday.

– The goal of the call center is to start placing all official information we have from Serbian state and international sources, from the World Trade Organization to European chambers and experiences of other countries, through that portal, and certainly SCC will come out with an analysis of the effect on economy in case of imposition or non-imposition of sanctions against Russia by Serbia – advised Vesovic for our portal last week.

He estimated that due to the situation in Ukraine, all export sectors in Serbia will be hit.

– The value of Serbian exports to the Russian Federation last year amounted to almost a billion dollars. 10% of our exports are apples and many large and small Serbian companies participate in it. At the same time, out of the 10 largest exporters to the Russian market, nine are from the EU – Vesovic reminded.

He added that last year’s export to Ukraine was worth USD 200m and that Serbia exports mineral and chemical fertilizers, floor coverings, rubber, paper and cardboard, acetic acid to that country.

– I do not believe that there will be problems, unless the Ukrainian economy stops – says Vesovic and adds that in the structure of imports from Ukraine, the import of steel ore, iron ore and concentrate is very important to us.

Decreased competitiveness and the problem of transport

According to him, one can expect an increase in prices and a decrease in the competitiveness of Serbian products on the Russian market, with an inevitable decline in exports.

– The biggest problem at the moment is large disruptions of financial flows and the fall of the ruble against the euro, which reduces the competitiveness of products pegged to the euro, and our export products are pegged to the euro, so if something costs 1,000 euros and it has a calculated profit of 10% or 5%, due to the change in the exchange rate, depending on how the deals are contracted, you have a serious problem that the price becomes noncompetitive when compared to the Russian product or the one that comes from a third market outside the EU – explains Vesovic.

– Secondly, there is the issue of logistics and transportation of goods, what is happening with goods that do not go through Poland and Belarus, but through Ukraine, and what will happen next. This is followed by a slowdown in transport at best, and there is a possibility that some borders will be completely closed. No-one can predict what will happen in the next week or two. Someone needs to send a truck from Serbia because there is an agreed delivery by the end of the week, whether and how it will arrive, under what conditions, while it arrives there, whether political and military circumstances will change, these are all open questions. And there are goods that go every day and which are still somewhere on the road as we speak- said Vesovic.

Speaking about sanctions against Russia, he reminded that the Free Trade Agreement is valid and that it is an opportunity for our companies to compensate in the circumstances of sanctions for what the Russian market will be denied, but he also reminded that the biggest exporters are in fact European companies operating in Serbia.

– Today we will hear about economic and systemic sanctions, and they will probably be drastic, and in that case the question is whether European companies operating in our country will be able to export from here to Russia, or Russia will respond with some countermeasures. In case we do not impose sanctions, Russia may continue to tolerate it, but the question is whether the headquarters of European companies will allow it in the future. So we are somewhat tied to the attitudes of the EU and European companies doing business here, and on the other hand, as far as Russia is concerned, although we have no customs we have a change in the context of the market there – apples we export there have been less competitive in the previous 4-5 years, our competitiveness was slowly declining, and we would have exported much more in recent years if the Russian economy had been stable. And now you cannot expect a stable exchange rate in Russia – Vesovic stated for eKapija.

He concluded that Serbian business people can expect more complicated and expensive exports and that their profits will decrease, even if we do not to impose sanctions on Russia.

Methods of payment as the biggest obstacle

The president of the ITM group, Toplica Spasojevic, also expects problems such as logistics and financial transactions.

– Transport roads to Russia are difficult, they are going through Belarus, Ukraine is closed. Transport became more expensive even before the war, and now it is unknown how much it will cost or whether it will be possible at all – the chairman of the group that exports most frozen fruits and vegetables into Russia and imports steel from Ukraine, told eKapija.

However, he expects the logistical problems to be resolved quickly, through Belarus.

– Our business people will have to ask for permission from third countries to come to Belarus, and these countries can halt it, but I guess it will not be a problem for us because we export the most food in Russia, and the ban will probably be imposed on technology exports. which they are targeting with sanctions. However, the method of payment will be a larger issue, Russian banks will have to work out a clearing scheme – warns Spasojevic.

He does not believe that if we were to impose sanctions on Russia, the benefits brought by the free trade agreement would be suspended.

– There might be threats, but nothing more than that, because we are still in a gray zone, one of the few that the Russians can rely on at the moment, considering that they have so many serious enemies on the other side.

– As a group, we will wait for things to calm down, there is always a way in business. I advise other companies not to send trucks to war zones, the economy is like water – it always finds its way. Remember 2014 and Crimea, the sanctions that were introduced then are still in force, and yet the business is being done, and that was relatively harmless in relation to what is being prepared now – Spasojevic estimates for our portal.

A chance for certain sectors?

He adds that Western companies will also find a way to do business with Russia, through third countries, as is usually done in the conditions of sanctions.

– It is not in the interest of the German economy to stop the trade, for example, for Mercedes, the second largest market in the world is Russia, and German businessmen are already protesting against these sanctions. At the same time, it is not impossible for us to be that link between the West and Russia, we are already doing that through the free trade agreement and because of the traditionally good relations with Russia. The holes in the Russian market caused by the sanctions will, of course, be filled by their companies, as before, but it will be harder now, and the second option will be through countries that will not join the sanctions, and that will probably be us. So, our companies can get involved with some technology transfer, as we did during the 70’s and 80’s, when IBM sold technology to the Russians through us, and the whole scheme was made by the Americans themselves – says Spasojevic.

He adds that our best chance now is the Serbian know-how, especially in the areas of technological processes for agriculture and IT and hardware.

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