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The Russian embargo has caused 4.5 billion dollars in damage to the Hungarian economy

Friday, February 26, 2016


“The Russian embargo has caused some 4.5 billion US Dollars in damage to the Hungarian economy; this is the estimated value of lost exports”, the Ministry of Foreign Affairs and Trade’s Ministerial Commissioner for external economic measures related to the Russian embargo said at a press conference in Budapest on Friday.

One tenth of this sum, some 450 million dollars, was lost at the expense of Hungary’s agricultural and food economies, Gyula Balog added, stressing that Hungarian enterprises need access to the Russian market.

According to a statement by the Ministry, if the embargo remains in place until the end of the year it could cause a 0.1 percent reduction in GDP, while if the embargo is lifted in the summer of 2016, the GDP is expected to shrink by some 0.05 percent. The imposing of even more serious sanctions could cause major economic damage to Hungary.

It is in Hungary’s interests that the Russian market should once again be open to Hungarian agricultural and food industry products. The embargo has primarily affected the pork and beef, poultry and waterfowl, fruit and vegetable, and milk and milk product sectors, Mr. Balog stressed.

The Ministerial Commissioner highlighted the fact that the Hungarian strategy for counterbalancing the effects of the Russian embargo rests on three pillars: protecting the internal market through giving preference to Hungarian products, the exploration of new markets and the diversification of Hungarian agriculture and food industry exports to for instance Asian countries and the Western Balkan states, and maintaining good relations with Russia.

Hungary is preparing to continue Hungarian exports to Russia from the most favourable position possible once the embargo is lifted, and accordingly Hungarian enterprises continue to regard the retention and acquisition of Russian import licences as important despite the embargo, he added.

The EU wishes to solve the crisis in Eastern Ukraine via political instruments and sanctions against Russia were introduced as the most important element of such a political solution in the summer of 2014, the Ministerial Commissioner reminded the press. In reaction, Russia also ordered sanctions against the member states of the European Union in August 2014. It ordered an export ban on fruit, vegetables, milk and milk products, meat, meat products and fish from the European Union.

At the time, it was impossible to gauge the effects of Russian embargo measures on relations between the EU and Russia. Nobody expected EU member states with significant agricultural and food industry exports to Russia to suffer major economic losses as a result of the measure. Most people didn’t expect the sanctions to stay in place for long; they were wrong, Mr. Balog said.

On 2 September of last year, the EU extended the period of sanctions until 31 January, then again until 31 July of this year. In reply, Russian President Valdimir Putin extended the Russian embargo until 5 August 2016. It is clear, however, that the measures introduced as a result of the crisis in Ukraine have not had the desired and expected effect, while conversely, those EU member states with significant agricultural exports to Russia have suffered greatly from the sanctions. For this reason, the political and economic leaders of such countries are searching for possible cracks in the embargo policy to reduce their losses.

The Russian market is also important to Hungary, not least in view of the fact that Hungarian agriculture and food industry exports to Russia had been steadily increasing prior to the introduction of sanctions and reached their peak at around the time when the Russian embargo was put in place, achieving record export volumes unseen since the 1990s. According to the information provided to the press, sales of the food, beverage and tobacco product groups affected by the embargo fell by 37.5 percent on the Russian market during the first 11 months of 2015 (less than the total reduction in Hungarian exports).

(MTI - kormany.hu)

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