January 2016

The impact of Russian sanctions on the Polish agri-food sector

Restrictions on the import of agricultural products and foodstuffs from the EU imposed in 2014 by Russia were not merely a retaliatory measure taken in the aftermath of the EU sanctions, but were also an attempt to raise the political cost of the sanctions by targeting an influential interest group. Poland was highlighted as one of the major targets of the counter-sanctions. Revoked access to a key sales market was meant to lead to huge losses and prompt Polish farmers, both arable and livestock, to exert pressure on political elites prior to local (November 2014), presidential (May 2015) and parliamentary (October 2015) elections.

It is sufficient to take a glance at the statistics for 2013-2015 in order to assess the real damage sustained to the agricultural market by these restrictions. In 2013, Polish producers sold agri-food in the value of 20.4 billion euros abroad which constituted 7.1% of total exports. Of this, sales to Russia amounted to 1.25 billion euros. Food exports to Russia had dropped by 30% to 0.88 billion euros as a result of sanctions a year later whereas the total value of food-stuff exports had increased by 7.1% rising to 21.9 billion euros. Positive dynamics was also observable in 2015 when the value of food sold abroad increased by 7.7% rising to 23.6 billion euros (19.3 billion worth of foodstuffs were sold to the EU), which happened despite plummeting sales to Russia in the value of 398 million euros (a drop of 55% on 2014). The share of the eastern neighbor in revenue from the export of agri-food products fell to 1.7%. The value of Polish exports rose by 1.1% in the first half of 2016 whereas sales to Russia fell 5.1%. According to the classification of the recipients of these products, Russia slipped from 15th to 18th place. It is noteworthy that Polish exports to countries outside of the EU and the CIS increased by 13% i.e. from 2.8 billion euros to 3.1 billion euros in 2015 (positive dynamics was also observed in early 2016). The Polish agri-food sector managed to successfully offset losses brought on by Russian sanctions not only due to a greater presence in the EU, but in other markets also.

One should obviously not dismiss the losses incurred by certain sectors and producers largely dependent on Russian customers. Poland recorded a drop in the volume and value of fruit exports (by 12% and 2% respectively) in 2015, for example. Apple exports suffered in particular (a fall of 19% both in volume and value). A drop in revenues from sales of dairy products (a fall of 15%; it was accompanied by a slight increase in volume which indicates that not only did the embargo have an impact, but so did unfavorable economic conditions) was also observed. Restrictions introduced by Russia therefore hit certain quarters of the agri-food sector. Still, the blow was incommensurate to both the intentions behind them and expert forecasts which had it that colossal losses were afoot.

The sanctions serve to invalidate a long-held hypothesis: that the fate of Polish food producers largely depended on the Russian market. The sanctions have obviously hampered the activities of numerous Polish companies. Some businesses – especially those with poorly diversified sales markets – have not coped well with the challenge. They have failed to redirect the export of apples, pears, pork and cheese to other markets. However, EU compensation, governmental support provided to businesses searching for customers in East Asia, the Middle East and North Africa as well as the adjustment of export strategies to unfavorable political and market conditions (which is of utmost importance) have enabled not only survival, but also maintenance of positive export dynamics by Polish businesses.

Assumptions behind Russian counter-sanctions proved to be wrong and the policy derived from them brought about results which were not intended. The Polish agri-food sector coped quite well with the embargo and hence, demands to change policy as regards Russia have never entered the mainstream agenda in Poland. The trade restrictions imposed by Russia were not the first during the last decade and they have merely strengthened entrepreneurs’ conviction concerning the necessity to diversify exports given the high-risk related to the excessive dependence on the instable Russian market. Aside from that, Russian counter-sanctions have prompted greater activity in non-EU markets.

Although restrictions have brought about serious losses for some Polish producers, they have also induced measures of adjustment. If further developed, these measures will have long-term positive effects. A state with a differentiated export profile and diverse sales markets is less susceptible to troubled relations with an unpredictable partner.

 Author: Ernest Wyciszkiewicz

December 2016

The Russian-Ukrainian war’s imprint on Polish-Russian trade

Relations between Russia and the West have been at their lowest ebb since 2014 which witnessed aggression against Ukraine, the annexation and occupation of Crimea and the destabilization of the situation in the Donbas. Political tensions are leaving an imprint on economic relations. Reciprocal sanctions, coupled with the Russian recession triggered by a slump in oil prices, have influenced trade dynamics both at a European level and bilaterally. The argument which has it that European economies are suffering serious losses due to these restrictions is often raised in discussions about the future of sanctions. Poland serves as a good example as to why such generalizations should be treated with caution.

Trade relations between Poland and Russia had a very positive dynamics prior to the crisis. Turnover increased from EUR 7.2 billion to EUR 27.2 billion from 2004 to 2013. The composition of traded goods was at that time and it is still now typical of Russia’s relations with other developed states. Russia mostly supplies fuel and energy carriers to Poland (in 2015: fuels, lubricants and related materials, inedible crude materials – 67.1%, manufactured goods – 7.2%, chemicals – 5.4%, machinery – 2.4%, food and beverages – 1.2% and other – 16.6%) while Poland supplies a wider array of goods (2015: machinery – 36%, manufactured goods – 34.7%, chemicals – 20.4%, food and beverages, oils – 7%, fuel and inedible crude materials – 1.8%). Poland has traditionally maintained a significant trade deficit with Russia due to high crude and natural gas prices.

Numerous commercial disputes, primarily related to the export of Polish food, broke out after 2004. Russian phytosanitary services repeatedly limited Polish producers’ access to the Russian market. Similar practices were also employed with respect to producers from other countries. These steps were thought to weaken foreign competitors of Russian interest groups and to create divisions within the EU. Recurrent disputes resulted in periodic fluctuations in the turnover of individual groups of goods but had no significant impact on the overall positive dynamics of Polish exports.

Table 1. Trade between Poland and Russia: 2004-2016


Value in billions of euros














I-VI 2016
















to Russia





























from Russia





























with Russia














Source: Yearbook of Foreign Trade Statistics (2007-2015), Central Statistical Office

The value of Polish-Russian trade turnover has ostensibly suffered a decline since 2014. Fewer exports to Russia were not only down to the restrictions on imports of Polish food but also flailing domestic demand in Russia brought on by the recession and the weakening of the ruble. The drop in the value of imports from Russia can be mainly explained by lower oil prices. However, weaker trade relations between Poland and Russia did not affect the overall, positive dynamics of Polish exports which rose by EUR 24.6 billion from 2013-2015, despite the drop in the value of exports to Russia by EUR 3.1 billion. Total turnover from Polish exports amounted to EUR 179.6 billion in 2015. The major importers were Germany (EUR 48.7 billion – 27.1%), the UK (EUR 12.1 billion – 6.7%), the Czech Republic (EUR 11.9 billion – 6.6%), France (EUR 9.9 billion – 5.5%), Italy (EUR 8.7 billion – 4.8%), Russia (EUR 5.1 billion – 2.9%) and the Netherlands (EUR 7.9 billion – 4.4%). Thus, the value of Polish exports to the Czech Republic - a country whose population is a quarter of Poland’s - was more than double the value of exports to Russia which has a population four times the size of Poland’s. This fact underlines the dichotomy between the real and perceived importance of the Russian market for Polish producers. Polish exports are mostly directed towards the EU market (nearly 80% in 2015).

Moreover, foreign-trade aggregated data indicate that Poland benefited from the drop in fuel prices as there was a significant decrease in Poland’s trade deficit with Russia from EUR 10.4 billion in 2014 to EUR 7.8 billion in 2015.

To conclude, the Polish economy has virtually been unaffected by EU sanctions against Russia and the Russian counter-sanctions. Other factors have determined the dynamics of foreign trade and economic growth. Polish economic losses due to reciprocal restrictions can largely be attributed to sectors or even producers whose composition of trade partners was insufficiently diversified, preventing them from switching to other markets quickly. Still, Polish exporters did undertake effective measures aimed at adaptation in most cases.

 Author: Ernest Wyciszkiewicz

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