Armenian exporters of agricultural products, processed foodstuffs and beverages to Russia are incurring growing losses because of the dramatic depreciation of the Russian ruble, an Armenian business association said on Friday.
According to the Union of Employers, dozens of such firms have stopped shipments to Russia in recent months following sharp decreases in their real revenue. The union’s chairman, Gagik Makarian, claimed that some of them, small and medium-sized enterprises (SMEs), are now on the brink of bankruptcy.
The Russian ruble has depreciated by almost half over the past year due to the combined impact of falling oil prices and Western sanctions imposed on Russia. By contrast, the Armenian dram has lost less than one-fifth of its value against the U.S. dollar, making Armenian exports to Russia much more expensive.
Citing research conducted by his organization, Makarian said that 20 Armenian agribusiness SMEs specializing in the Russian market suffered a combined loss of around $8 million from December through February.
Larger firms such as the Proshian Brandy Factory are also being hit hard by the much weaker ruble. Proshian’s executive director, Alik Gasparian, warned that Armenian brandy and wine distilleries as well as canneries will have to drastically cut back on purchases of fruits and vegetables this summer unless the government provides financial assistance to farmers growing them.
“When the purchasing period starts in July, things will be very bad because enterprises will have no cash at their disposal to buy produce,” Gasparian told a roundtable discussion in Yerevan with other industry executives and government officials. His concerns were echoed by the chief executives of smaller agribusiness firms.
Two senior officials from the Armenian Economy Ministry present at the meeting acknowledged the gravity of the situation. One of them, Gagik Kocharian, drew parallels with the economic recession of 2009.
“We are looking into the situation right now and plan to discuss possible solutions together with the private sector,” said the other official, Armen Yeganian. “I think we will come up with some proposals in the coming days.”
Meanwhile, Prime Hovik Abrahamian and Agriculture Minister Sergo Karapetian promised specific government assistance to farmers as they visited the fruit-growing Armavir province in southern Armenia on Friday. Karapetian said that the government will continue to provide them with relatively cheap seeds, diesel fuel and fertilizers and to subsidize loans extended to them by commercial banks.
A government statement also quoted Karapetian as telling local government officials and villagers that “adequate steps are being taken to expedite the process of storage, purchase and processing of crops in a coordinated and organized manner.” The statement did not elaborate.
Abrahamian, for his part, was reported to urge farmers to “maximize” production of tomatoes. The premier cited “strong demand” for the vegetable and said the government is ready to also “assist” tomato-processing companies.