Czech firms could suffer losses of up to 19 billion crowns due to EU sanctions & Russian response

Companies, state institutions and insurance companies have been busy tabulating potential losses for Czech businesses due to EU sanctions as well as restrictive measure taken by Russia.

Photo: European Commission

According to Czech Radio, citing Lidové noviny, the number could climb as high as 19 billion crowns, the equivalent of almost 690 million euros, an estimate compiled by the state-owned Export Guarantee and Insurance Corporation (EGAP). The estimated sum includes business deals under negotiations which could easily collapse and projects in Russia which are not possible to insure, where there are no longer guarantees. According to the firm’s spokeswoman, Hana Hikelová, the estimate is based not only on the impact of sanctions, but the overall increase of uncertainty on the markets. She spoke to Czech Radio’s flagship station Radižurnál:

“On the one hand, you have projects which are automatically affected, which will not be insured because they come directly under the sanctions. But that’s not the only factor complicating matters. You also have the impact on Russian banks, the Russian currency, nervousness or fear on the markets which is enormous. For that reason, no one can really say how the situation in Russia will develop further.”

The estimate covers the period of one year, from September 2014. Potential deals which could fall through are primarily in the area of engineering and parts manufacture, which includes dual-use technologies and software which could be used for both civilian and military purposes. Hana Hikelová again:

“Exports to Russia are insured by EGAP and state support comes primarily in the sectors of energy and engineering. Both areas, in recent years, were extremely successful on the Russian market.”

According to an estimate by the Ministry for Industry and Trade, those sectors alone will lose revenues of around 2.2 billion crowns. The ministry’s spokesman, Filip Matys, confirmed for Czech Radio how sectors were divided based on the sanctions:

“The first sanctions concern weapons, the second limits the export of sensitive technology in the petroleum industry and related fields, the third covers technology which is dual-use, and the last restrictions affect capital markets.”

The Russian response is also impossible ignore. There, sectors in the Czech Republic which are expected to be hard hit are the agriculture and food industries. A ban on the export of foodstuffs into Russia is expected to lead to a loss in revneues between 300 and 350 million crowns by the end of this year alone.