The Western sanctions appear to be having more and more effects on the Russian economy. The value of the rouble reached a low point compared to the dollar on Monday. Investors favour more stable currencies. In addition, Central Asian countries seem to have reacted with a bit too much enthusiasm to the Russian boycott. Many countries announced to significantly increase export, but reality turns out to be more complicated. The countries are unable to increase export on such short notice. Israeli minister Shamir remains optimistic about the chances given to the country by the boycott. According to the minister, the country is able to supply techniques as well as products, to build up domestic cultivation.
Rouble decreases in value
The economic battle between Russia and the West has direct consequences for the position of the Russian rouble. The currency is decreasing in value. On Monday, the rouble reached a new low compared to the dollar: 38 to 1, which is 1.3% lower. Due to the Western sanctions, the currency has become less attractive, and investors favour stable currencies, such as the Swiss franc and the Japanese yen. The Kremlin would like to upgrade the rouble to a so-called 'reserve currency', but that seems a long way off with the declining exchange rate. A reserve currency is a currency which countries and organizations have in their foreign reserves, in large quantities. The euro and dollar are the two biggest ones. The stability of the largest economy where the currency is used, is the most important prerequisite to turn it into a reserve currency. Also, the Russian government is planning to close more trade deals in roubles, in order to limit dependency on the dollar in global trade.
Sanctions "big opportunity" for Israel
Russia is on the lookout for new suppliers of the banned products, and Israel is looking for new markets. That Israel can profit from the boycott has been known for a while, but the statements from Israel minister Yair Shamir in Russian media are interesting. He called the boycott a big opportunity for Israel. The minister also expects trade between the countries to continue after the boycott, "it's cheaper, more stable and there's no political price tag attached." Israel also won't answer to any European requests to support the sanctions. "Remember that the EU imposed sanctions on us recently. They boycott us, and then want us not to help someone else? They can't do that." Israel has more to offer to the Russians than produce alone, by the way. The country is also willing to supply knowledge, and to help the Russians set up production lines in order to become self-sufficient.
More export Central Asia not just positive
In response to the boycott, several countries fell over each other with ambitious plans to increase export of fruit and vegetables to Russia. Putin specifically invited former Soviet republics to export more, but that growing export has a flip side. In the first place, experts warn that the proclaimed boycott will remain in effect for a year; a relatively short period. The question also remains whether these countries are able to increase domestic production on short notice. Also, growing exports also put more pressure on the domestic market, which could cause prices to go up there. Within the Central Asian countries, criticism can also be heard. Expanding the agricultural sector requires time, and there's doubt whether exporters will give up their relations for a year of export to Russia. And then there's the low quality of produce, do Russians actually want that? Finally, some of these countries don't produce enough to meet domestic demand, and are importing from countries like Pakistan and Afghanistan.
There is potential, however. During the Soviet era, the agricultural sector was well-developed in some of these countries. Tajikistan, for instance, was an important producer of agricultural produce, but that time is long gone.
Greece expects 50 million Euro in damages
Market experts estimate that the damage to the Greek economy is at least 50 million. The fruit growers, fish farms and transport companies are the first victims of the ban imposed by Russia. The total damage is estimated to be between 50 and 100 million Euro.
The Greek ministry of Foreign Affairs has announced that growers who have been hit by the boycott, will be compensated. The ministry has also taken measures to divert products to other export destinations. Products that are left over, will go back to Greece to be donated to churches, charity organizations, hotels and other institutions.