Sanctions Against Russia Would Hurt Israeli Exports

The Israeli Credit Insurance Company (ICIC) warns that sanctions could cause European exports to Russia to plummet by 15% and the $1 billion in Israeli exports to Russia would fall by the same amount, or about $150 million.

Economic sanctions, if they come, reportedly would include an arms embargo, and restrictions on the import and export of certain goods and of capital inflows. Most Israeli exports to Russia are agricultural produce, chemicals, and telecommunications equipment.

But trade in military hardware — of Israeli unmanned aerial vehicles (UAVs) to Russia, in particular — could also be adversely affected.

Actually, Russia and its trading partners are already bracing for rough weather, even without sanctions.

“Even without the worsening of the crisis, the 2.5% growth forecast for Russia in 2014 is changing. It won’t happen. Under the current circumstances, growth will be just 0.7%. If the crisis worsens to the point of Western sanctions, industries that will be most affected are pharmaceuticals, telecommunications equipment, and machinery. At the same time, the price of a barrel of oil will soar to $130, reducing the European economy’s growth rate by 0.4%,” says ICIC CEO David Milgrom.

Milgrom says that most Israeli exporters to Russia and Ukraine have foreign trade risk insurance, which will indemnify them in the event of tighter sanctions against Russia. “If there is further escalation in the crisis, if these companies become distressed because of payment problems by customers, most Israeli exporters are covered. They are mostly longstanding exporters which take precautions and hedges. However, there are fairly new companies, such as in high tech, which are exposed to risks in this situation and market, but which have not taken suitable hedges,” he says.

This article appeared in print on page 7 of the May 8th, 2014 edition of Hamodia.