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. Last Updated: 07/27/2016

Financial Crisis Disrupts European Union Exports

PARIS -- The Russian financial crisis has already triggered severe disruptions in European Union food exports to the region and is likely to put pressure on production prices in some sectors, analysts said Thursday.

And wary credit insurers were contributing to the crunch, with Dutch insurer NCM saying it would not cover exports to Russia for the foreseeable future.

"Food exports [to Russia] have been at a standstill for the last few days. Production prices will feel the impact within several weeks. This could be difficult to manage in some sectors," said an analyst from the French External Trade Center.

The European Union is among the main suppliers of food products to Russia and although it is still difficult to measure the impact of the crisis, producers are already worried over financing and finding alternative markets for their products.

"Russia has become a large outlet for most agri-food products, and its impact on world prices is very strong," the analyst said.

EU suppliers had started to worry in the spring when some Russian firms requested payment delays and started cutting down on orders.

EU beef sales to Russia have fallen by 20 to 30 percent since April and May.

"There are not many destinations for our [beef] exports. Russia is the number one outlet," another CFCE analyst for the sector said.

Beef and dairy products could be hardest hit by the crisis, experts said.

As food exports fell, Trevor Parry, NCM's underwriter in charge of Russia, said the credit insurer would not cover exports to Russia for some time because it did not expect the political and economic situation to improve soon.

"It is not an acceptable commercial or economic risk so we will not move until things develop quite positively and this looks quite some way off," he said.

NCM bought the short-term business of Britain's Export Credits Guarantee Department in 1991 and offers credit coverage for periods of up to 180 days.

It sent out letters to its customers a few weeks ago canceling credit coverage on business done in Russia. At the time, it asked firms to reapply for such coverage but has since decided it would not reinstate cover.

Parry said most British firms that have not been receiving payments from their Russian customers have stopped shipments after balances were unpaid for a month.

In 1997, Russia imported 650,000 tons of beef, of which nearly 340,000 tons came from the European Union.

The biggest EU beef exporters to Russia were Germany with 105,095 tons, Ireland 50,463 tons, the Netherlands with 49,150 tons and France with 34,444 tons.

Russia also buys around 200,000 tons of butter per year, one sixth of world trade estimated at 1.2 million tons.