Effects of the sanctions on business In Russia

Effects of the sanctions on business In Russia and The Netherlands Practical project introduction Kom verder. Saxion. Jacques Bazen, Saxion University of Applied Sciences

Kom verder. Saxion. Overview of the session • Development of Trade • Consequences of sanctions for The Netherlands • And for Russia?

Kom verder. Saxion. Historical overview Trade relations between Soviet Union and the Netherlands exist already for a long time. But: trade volumes were pretty low, as with the rest of the world. Changed because of Globalization and trade liberalization.

Kom verder. Saxion. And then… There were the sanctions: https: //www. youtube. com/watch? v=mz 80 t. Y-YFa. A

Kom verder. Saxion. Problems of trade in the last few years S? N Trade relations between NL and RU Billions 25 S 20 15 10 5 0 2008 2009 2010 2011 Import to NL 2012 Export from NL 2013 2014 2015 TI NC A O

Kom verder. Saxion. Trade relations between NL and RU Total import and export to/from The Netherlands Billions 25 Billions 500 450 20 400 350 15 300 250 10 200 5 150 100 0 50 0 2008 2009 2010 2011 Import to NL 2012 2013 Export from NL 2014 2008 2009 2010 2011 2012 2013 2015 Import to NL Export from NL 2014 2015

Kom verder. Saxion. Trade consists of both goods and services (services you could describe as goods that you can’t touch) Next to that there also foreign investments First of all let’s look at Goods

Kom verder. Saxion. Goods import export Goods import / export 25 20 15 10 5 0 2008 2009 2010 2011 Import 2012 Export 2013 2014 2015

Kom verder. Saxion. Goods import / export Does this mean that imports and exports go down a lot? First of all…what are the most important goods that we as Dutch buy from Russia?

Kom verder. Saxion. Mineral fuels - Value Import value of mineral fuels in NL Billions 120 100 80 60 40 2011 2012 From all the world 2013 From Russia 2014 2015

Kom verder. Saxion. Mineral fuels - Volume of imported mineral fuels in NL Billions 180 160 140 120 100 80 60 40 2011 2012 From all over the world 2013 From Russia 2014 2015

Kom verder. Saxion. Goods import / export Conclusion: It is not the sanctions that decrease Russian export values to The Netherlands the most, it is the low oil price!

Kom verder. Saxion. Service sector Another way of earning money is to provide services abroad, for example: transport, financial services or payment of royalties. Is there (indirect) influence of the sanctions on this?

Kom verder. Saxion. Services import / export Export of services: Services between NL and RU Dutch companies providing services to Russian companies 1600 1400 1200 Import of services: Russian companies providing services to Dutch companies 1000 800 600 400 2003 2004 2005 2006 2007 2008 Import of services 2009 2010 2011 Export of services 2012 2013 2014 2015

Kom verder. Saxion. Services import / export Main service sector involved: Professional services That means management support services, legal services, trade related services, business consultancy, IT related services. Import of these services to NL decreased…if the weak Ruble would play a role, it would have likely increased. (These services would have become cheaper!) Could it be the (indirect) effect of the sanctions?

Kom verder. Saxion. Business trips & Tourism Money spent on private trips between NL and RU Money spent on business trips between NL and RU 18 30 16 25 14 12 20 10 15 8 6 10 4 5 2 0 2014 II 2014 III 2014 IV 2015 II 2015 III 2015 IV 2016 II Money spent in Russia by Dutch Money spent in NL by Russians

Kom verder. Saxion. Business trips in general International Business trips (mln euro) 1200 18 16 1000 14 800 12 10 600 8 400 6 4 200 0 Money spent on business trips between NL and RU 2 2014 III 2014 IV 2015 III 2015 IV 2016 II Money spent abroad by Dutch Money spent in NL by foreigners 0 2014 III 2014 IV 2015 I Money spent in Russia by Dutch 2015 III 2015 IV 2016 I Money spent in NL by Russians 2016 II

Kom verder. Saxion. Tourism expenses in general 6000 Private international trips (mln euro) Money spent on private trips between NL and RU 30 5000 25 4000 20 3000 15 2000 10 1000 0 5 2014 III 2014 IV 2015 III 2015 IV 2016 II Money spent abroad by Dutch Money spent in NL by foreigners 0 2014 III 2014 IV 2015 I Money spent in Russia by Dutch 2015 III 2015 IV 2016 I Money spent in NL by Russians 2016 II

Kom verder. Saxion. What about the EU sanctions?

Kom verder. Saxion. EU sanctions At least for The Netherlands: The EU sanctions for dealing with Russian military companies have mainly a symbolic “for show” effect. Trade volumes before the sanctions were already very low.

Kom verder. Saxion. Russian sanctions The Russian government used the sanctions to develop “Import substitution policies”. That means, to develop the local producers, in order to shift consumption from imported goods to home production. Two problems with import substitution: 1. Do people want it? 2. What about inefficiencies?

Kom verder. Saxion. Effects of the sanctions? Any effect on Dutch businesses? Or have they shifted to different markets?

Kom verder. Saxion. Development of bankruptcies in NL 140 Development of bankruptcies in NL (2009 = 100) 120 100 80 60 40 2009 2010 2011 All sectors 2012 2013 Agriculture & Fishery 2014 2015

Kom verder. Saxion. In individual cases: Bankruptcies Dutch Flower farmers have an especially hard time…

Kom verder. Saxion. Individual cases: Bankruptcies Most food exporting companies shifted to different markets, or shifted into providing technology for Russian farmers instead of products.

Kom verder. Saxion. Assignment 1 Farms in Russia: - Find out if the production volume, prices and turnover of the agricultural sector (farms) in Russia increased because of the import substitution policy. - Did import of agricultural products come from different areas than the sanctioned ones? Did export increase? - Use statistical data on national production and import of agricultural products - Interview at least two key players in the transport sector to learn about changes in production flows.

Kom verder. Saxion. Assignment 2 Food processing industry - Find out if the production volume, prices and turnover of the food industry in Russia increased because of the import substitution policy. - Did import of food products come from different areas then the sanctioned areas? Did the export increase? - Use statistical data on national production and import of agricultural products - Interview at least two key players in the transport sector to learn about changes in production flows.

Kom verder. Saxion. Assignment 3 Tourism industry - Find out in how far the tourism industry was affected by the sanctions. Find statistical information about the development of international tourism from/to Russia. - Are tourist flows decreasing only to sanctioned areas, or everywhere, because of the weak ruble / economic crisis. - Interview at least 3 key players in international tourism, to learn about the latest developments and if there are shifting geographical patterns.

Kom verder. Saxion. Assignment 4 (International) Professional service industry - Find out in how far the professional industry was affected by the sanctions. Find statistical information about the development of this sector. - Is the turnover of the international professional service industry decreasing only to sanctioned areas, or in other areas as well? - Interview at least 2 key players in professional services (eg. KPMG, Ernst & Young or law firms), to learn about the latest developments.