Washington Notebook: Ukraine unrest impacts trade
The diplomatic crisis ensuing from Russia's military intervention in the Ukrainian region of Crimea could harm trade with Ukraine. The biggest potential impact so far is on Ukrainian grain exports, which could benefit U.S. farmers.
Sanctions imposed by the European Union, the United States, Switzerland, Austria, Lichtenstein and Canada are primarily targeted at about 20 individuals in the former Ukrainian government and others involved in the unrest. The measures against former President Viktor Yanukovych, his family and associates are mainly aimed at punishing those who contributed to the violence in Ukraine during several weeks of protests against the government. Britain's Department of Business, Innovation and Skills has also restricted the sale of equipment that may be used for internal repression, while European Union member states have also agreed to suspend export licenses on such equipment.
But the West could impose broader sanctions if the standoff with Russia continues.
Exporters should regularly screen counterparties, end-users, banks and other third parties potentially benefiting from a transaction to verify that they are not a designated person, or owned or control by designated person, the trade law firm Baker & McKenzie recommended in a client bulletin. Companies should assess whether any products or technology being sold or supplied might be used to suppress the citizenry, keeping in mind that regulators may have a broad definition of what constitutes such equipment, the firm said. Companies should also exercise caution in negotiating contracts with parties that could be the target of any U.S. or EU sanctions against Russia, including the state-owned financial and energy sectors, it added.
Meanwhile, the U.S. Grains Council suggested that a portion of the Ukrainian grain harvest may not make its way to export markets. Ukraine is one of the largest grain producers in the world and is projected to export 18.5 billion tons of grain during the current harvest season, according to the U.S. Department of Agriculture.
About 3.5 million tons that remain to be exported would normally be shipped between now and June, but the fluid situation could make transport difficult.
"Ports are open and vessels are loading, but shipments are becoming increasingly difficult," Cary Sifferath, USGC's regional director for the Middle East and Africa, said in a statement. "We're seeing farmers holding grain to hedge against a devaluing currency. We hope for a peaceful and speedy resolution of Ukraine's crisis, but the instability is creating opportunities for additional U.S. exports to North Africa, the Middle East and China."
Corn planting in Ukraine is due to start in the next 30 to 45 days, and credit availability in the country may become an issue, according to the USGC.
"The economic instability will affect Ukrainian farmers looking to plant this year's crop," USGC President and Chief Executive Officer Tom Sleight said. "Ukraine is in a tough spot financially, and planting season is just around the corner."
The USGC urged U.S. grain exporters to do their best not to co-mingle genetically modified corn with regular corn so as not to jeopardize potential new sales to EU countries and China that restrict their sale.
We’ll send it to you!
Register now and get the free AS Daily.