Raw material imports from Russia to Estonia winding down

Russia's full-scale invasion of Ukraine has prompted economic sanctions as well as talk of terminating business in Russia, but the import of raw materials from Russia to Estonia is still in the process of winding down. According to involved parties, however, things are heading in that direction, with companies taking full advantage of contracts concluded prior to the invasion until then.
Wood, fertilizers and petroleum products account for the top three materials currently being imported from Russia to Estonia, none of which have yet to be subject to sanctions.
While Russia's full-scale invasion of Ukraine began in late February, according to Statistics Estonia's data, the transport of fertilizers in the first quarter of 2022 was up threefold on year in terms of monetary value, as prices have gone up. According to customs data, however, volumes being transported across the border have decreased each month since the beginning of the year, by half in March and by 81 percent already in April.
Fertilizer transport halted altogether in April due to sanctions imposed on two fertilizer oligarchs.
"The primary reductions in volume have taken place during the past two months," said Ants Kutti, head of External Border Customs at the Estonian Tax and Customs Board (MTA). "If we're talking about fertilizers specifically, then in May, for example, not a single train formation with fertilizers has come in; the reduction is 100 percent."
"While last year we transported 1.6 million tons of fertilizers by rail in the first quarter of last year, in the first three months of this year it has been around 1 million tons," said Arthur Raichmann, commercial director of Estonian Railways (EVR). "Fertilizers, which have made up the bulk of transit, then an entire slew of petroleum products, which in Russia have historically been goods in transit via Estonia — they've all disappeared."
In connection with the war, forestry associations made the decision to stop importing Russian wood into Europe starting in April. In reality, however, there has been no change on that front yet in Estonia.
"Wood is being imported at essentially the same volume," Kutti said. "Meaning that it has increased somewhat, and then in connection with sanctions has started to fall. Wood imports in May have decreased by nearly 20 percent by now."
"Wood is currently continuing to arrive in Estonia from Russia because the sanctions imposed by the EU won't be fully implemented until mid-July," Estonian Forest and Wood Industries Association (EMPL) CEO Henrik Välja explained. "Until then, it is possible to retrieve orders based on previously concluded contracts, as when conducting raw materials-related business with Russia, contracts are mostly paid in advance. Many companies are facing a situatio in which they sent their money there in December already, but the materials still have yet to arrive."
According to Välja, however, member companies of the EMPL imported just ten percent of all wood volumes imported from Russia last month. Of the remaining 90 percent, most won't even remain in Estonia, thus disappearing as though without a trace.
"These are likely intermediaries via whom the material will reach Estonian construction projects, for example, or Estonia retail sale, but also in large part also to third markets, simply in transit via Estonian ports meanwhile," he explained.
According to Marie Allikmaa, foreign economics director at the Ministry of Economic Affairs and Communications, EU sanctions will enter into force on July 10, and currently underway is a transitional period in which time companies are trying to get ahold of their goods.
"If there are any contracts that were concluded prior to the imposing of sanctions, which was at the beginning of April, then these may be fulfilled through July 10, meaning these fertilizers can still be brought in through mid-July," Allikmaa explained. "Excluded from sanctions, however, are mineral fertilizers, which affects an estimated 50 percent of fertilizers imported into Estonia."
The need to quickly retrieve orders is affecting other categories of goods as well, including cement, aluminum and wood.
"The first quarter has shown that imports, including wood imports, from Russia have grown in terms of both volumes and value," Allikmaa noted. "But if we ask why, in a situation where the EU has actually imposed sanctions on wood, then the impact of these sanctions simply wasn't reflected in the first quarter yet; we'll be seeing it starting in summer."
--
Follow ERR News on Facebook and Twitter and never miss an update!
Editor: Aili Vahtla