Estonian businesses, which depend on goods and raw materials imported from Russia and Belarus, need to understand the risks and find new suppliers, a report by the Riigikogu’s Foresight Center shows. If these imports completely stop it will cost businesses EUR 860 million.
The center has been studying the risks posed to Estonia since the war in Ukraine intensified in February. Producers who import fuels, wooden or metal products will be the most affected, it says.
In 2021, EUR 20 billion worth of goods were imported into Estonia, including EUR 2.1 billion worth from Russia (10.5% of total import) and EUR 0.6 billion worth from Belarus (3.2% of total import).
The rapid rise in the prices of energy carriers has nearly doubled the import of goods from these countries in terms of monetary value compared to 2020.
“Completely ending import from Russia and Belarus would mean EUR 860 million of additional cost for Estonian businesses in 2021 prices,” said center expert Uku Varblane. “As it is not likely that the sanctions would be eased or that trade relations would be restored to the earlier level, businesses need to ground their risks in good time and find alternative supply channels. Many businesses are already taking the necessary steps.”
The analysis of 540 categories of goods showed that in two-thirds of cases alternative supply chains would be more expensive than Russian or Belarus imports. They may also be hard to replace.
Russian and Belarus imports are highly concentrated – the five largest categories form 80% of the import from these countries into Estonia.
“Replacing the import of fuels, wooden product, metal and metal products, but also salt and linen fabric will incur the heaviest additional cost,” he added. “For example, three-quarters of the iron wire imported into Estonia comes from Russia or Belarus and finding replacements would mean an 81% increase in the cost.”
In the 2021 ranking of import partners for Estonia, Russia ranked second after Finland and Belarus ranked 10th. The key imports from these countries were fuels and natural resources (60%), wood and wooden products (13.8%), metal products (9.2%) and products of chemical industry (7.2%).
Among the imports from Russia, 53% were mineral products (mainly fuels), 16.1% were wood and wooden products, 10.3% were metals and metal products, 9.3% were products of chemical industry and other products formed 11.1%.
Of the imports from Belarus, mineral products (mainly fuels) formed 82%.
Sanctions applied by the European Union after Russia’s full-scale invasion of Ukraine on February 24 have limited the import, export and transit of goods to Russia and Belarus.
In 2022, the Foresight Center researched the long-term impact of the Russo-Ukrainian war on Estonia. This included looking at the economic impact, influx of refugees on the population, employment and the revenue and expenditure of the state.
The center is an advisory board at the Chancellery of the Riigikogu that analyses long-term developments in society and the economy. (ERR/Business World Magazine)
