In many business agendas in the Westland, March 8 is circled with a thick marker. On International Women’s Day, it is tradition in many Eastern European countries, including Russia, to honor women with a bouquet of flowers. The period before that means peak times for Dutch flower exports every year. Although the longer-lasting ‘green’ in the bouquet is already in Russia, the last trucks with fresh flowers have yet to go that way. The sanctions therefore create great uncertainty for export companies, who do not know whether their delivery can be paid for.
“It’s a drama. Several trucks are now on their way back, carrying loads for 50,000 euros each. Other merchandise is already rotting at the border. It’s all screwed up,” sighs an account manager of a flower export company from the Westland, which focuses on Russia and Ukraine. His director does not want the company name in the newspaper. More companies in the sector do not want to respond. “For us, the continuity of our company is now the most important, I don’t want to throw any more fuel on the fire. We are greatly helped by our growers, who support us by taking back a few carts. Everything else is uncertain now.”
Despite sanctions that have existed for some time, Dutch producers still exported 237 million euros worth of flowers to Russia in 2019. That is almost two thirds of the export value of agricultural products to that country that year, according to figures from the Central Bureau of Statistics. The 5.3 billion euros in total goods exports to Russia comprise 1 percent of the total goods exports of the Netherlands. This does not alter the fact that the country is a major market for a number of sectors, for example for machines in addition to floriculture.
Ornamental growers trading with Russia are now holding their breath for what prices are doing on Monday. Then the auction clock starts spinning – without Ukraine and Russia as markets. After tomatoes, chrysanthemums, very popular in Russia, are the most expensive greenhouse products because they require a lot of heat and light during cultivation. “If gas prices continue to rise, the question is how long the growers can handle this before they work below cost,” says the director of the flower export company.
Agricultural machinery
Machine builder APH Group from Heerenveen has temporarily stopped supplying agricultural machinery. The containers that will arrive in the port of Rotterdam next week with destination Ukraine will be temporarily stored in Friesland. “We are in talks with our team in Ukraine and above all want to make sure they are safe. That is the priority, business will be put on the back burner for a while,” says managing director Wytse Oosterbaan on the phone.
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The Frisian company exports for about 75 million euros to thirty countries, sales to Ukraine and Russia make up a large part of their turnover. The sanctions against Russia will probably not be a problem yet. “We are not in the financial sector or oil and gas, only in agricultural machines and they are not subject to the current sanctions,” said Oosterbaan. “In Russia we will do our best to deliver the already agreed deals. But new deliveries are on hold, the exchange rate is very erratic and purchasing and delivery times are uncertain.”
Uncertainty about contracts
There are feverish consultations in many Dutch export companies that supply to Russia. Can we still deliver? What to do with contracts? Sanctions lawyer Sebastiaan Bennink is currently busier than ever. “Two of our clients are really hit hard by this. One works in the petrochemical industry, the other supplies parts for aircraft construction. We recommend making lists of all their suppliers, customers and Russian banks they do business with. This way they can see if they are not violating sanctions.”
According to Bennink, the greatest short-term uncertainty has to do with payments. “If you still have to get money for goods that have already been delivered, then this is of course a killer for your company. The other way around, the question is whether they can contractually hold you to it in Russia if you are not allowed to deliver due to the sanctions. We are now looking for clients to see whether there is a sanction clause in their contract, or whether there is a possibility to invoke force majeure.”
In addition to the financial uncertainty, there is another, much more personal aspect to the war among companies.
‘Staff want to fight’
In addition to business contacts in both countries, the war sometimes also moves to the workplace. “This week I had to separate employees from Russia, Ukraine and Lithuania because they collided with each other,” says the director of the said flower export company. “Some here hear that their 18-year-old nephew has to go to the front. Yesterday I got a tearful call from one of our people from Poland, just over the border. What is happening there is not a computer game, it is horrific and of an unprecedented scale.”
Agricultural machinery exporter APH is also closely confronted with the war. Of the 200 employees, 10 work in Ukraine and 60 in Russia. “There are shots and impacts everywhere, but our workers in Ukraine do not want to leave the country. They want to stay and fight.”
On the other hand, Oosterbaan notices that Russian customers feel ashamed and uncomfortable. “They don’t want that war either. Someone who actually wanted to come and see machines next week wonders if he should. While there is nothing they can do about it.”
A version of this article also appeared in NRC Handelsblad on 26 February 2022
A version of this article also appeared in NRC on the morning of February 26, 2022