Ireland's €637m export trade with Russia at risk over Ukraine crisis
Published 10/03/2014 | 02:30
IRELAND could lose hundreds of millions of euro worth of exports to Russia if the ongoing crisis over Ukraine and its weakening economy continues.
Irish firms export goods and services worth about €637m to Russia every year, making it one of our more important trade partners outside the EU and US.
However, the collapse in the ruble over the last week, combined with problems in Russia's domestic economy, are likely to cut back the popularity of Irish goods over there.
Analysts at currency trader Clear Currency warned this trend was likely to hit trading this year.
"Ireland exported goods worth €637m to Russia last year and the weaker Ruble and economic destabilisation has the potential to impact this level in 2014.
"Economists are now warning that the rush to increase interest rates will stifle economic growth and could lead to recession in Russia," the firm said.
The ruble has fallen more than 10pc since Russian troops moved into Crimea, and traders estimate the Russian government has spent more than $10bn of its foreign currency reserves trying to prop up the currency.
As well as stifling exports, the falling ruble could lead to higher energy prices across the eurozone, and ultimately higher electricity bills for Irish households, says Clear Currency.
"Speaking at the ECB press conference last week, President Mario Draghi passed comment on the potential implications on Europe should tensions continue in Crimea. He described the impact so far as mild, with little impact on the European economy – although he expressed concerns, particularly on energy prices should the situation escalate.
"Although it is difficult to gauge larger impacts on energy prices should we find ourselves in the same position in six months, any upward price pressure on energy prices will likely further impede the pace of the eurozone recovery."
Energy price rises in Ireland would be particularly unwelcome given the financial pressures consumers are facing, notwithstanding gains seen this week in the ESRI Consumer Confidence Index," Clear Currency added.
Meanwhile, wholesale energy prices fell in February, but Ukraine is likely to have a long- term impact on energy prices.
The Bord Gais Energy Index dropped 5pc in February due to month-on-month falls in wholesale gas and electricity prices. In February, about 23pc of Ireland's electricity demand was met by wind, which displaced more expensive gas-powered plants and this helped lower wholesale electricity prices.
While protests in Kiev failed to have an effect on wholesale gas prices in February, the subsequent international crisis resulted in a short-term spike in early March.
Any further escalation of the Ukrainian crisis is likely to influence wholesale energy prices over the coming days and weeks.