„This would be serious - those goods are the basis of Polish exports to Russia,” says Andrzej Malinowski, the president of the Confederation of Polish Employers (KPP). According to estimates, by limiting these goods, Russia could cut the value of Polish exports to that country from over $4 billion (zł.11.9) to around $2-2.5 billion (zł.6-7.5).
Making life difficult
Malinowski points out that if this policy is implemented, it would make life very difficult for many Polish companies that make their living solely from trading with Russia. Furthermore, because Russia buys goods that are not necessarily hi-tech items, the market provides a big opportunity for Polish SMEs, which could be badly hurt. „Not to mention the fact that in general we will have limited access to a large consumer market,” says Malinowski.
Pharmaceutical-producer Polfa Warszawa could be one of those companies to suffer. „The consequences for Polfa Warszawa could be very painful,” says the company‘s spokesperson, Karolina Pokorowska. The bulk of the firm‘s exports, which amounts to 30 percent of its revenue, goes to Russia. Pokorowska adds that in recent years doing business in Russia has become harder. „Registration problems and problems with acquiring the necessary certificates have caused our sales to decrease,” she says. „The latest sales level in Russia dropped dramatically in comparison to [constituting] 60 percent of our exports in previous years,” Pokorowska explains. However, on a more positive note, she added that her company‘s Gałozolin nose drops received the Russian Superbrands award last year.
Price of disagreement
Experts agree that this is a new phase in the ongoing dispute between the two countries, which started in October 2005 when the Russians introduced a ban on Polish meat, claiming it did not meet their hygiene standards. One month later Polish vegetables were also banned. After bilateral efforts to resolve the issue failed, Poland took the matter to the EU. Seeing the food ban as more of a political than an economic issue, late last year Warsaw vetoed the start of EU-Russian negotiations on a new trade agreement. The export restrictions described in Kommersant are seen as Russia‘s answer to the Polish veto. The article also states that the Kremlin wants Polish businesses to pay for what it sees as the Kaczyńskis‘ lack of common sense and for not preventing the government from taking irresponsible steps.
„This is politics influencing business � it gives Russia a bad image just as it is getting ready to enter the World Trade Organisation,” Malinowski claims. He adds that by threatening to limit Polish imports, Russia is punishing Poland for not accepting the meat ban, which, Malinowski says, „is a mysterious case to say the least.” The KPP president is not afraid to use strong words. „This violates the principles of decency. The Kaczyński brothers have a mandate from the Polish people. [Russia] cannot set Russian standards for everyone, but should rather adapt to civilized rules,” Malinowski says.
Big money is politics
„Trade should be taking place without any interference from politics and administration,” says Stanisław Ciosek from the Polish-Russian Chamber of Commerce and Industry (PRIHP), a former Ambassador to Moscow. But he underlines that using economics to aid foreign policy is nothing new. „Small money is small money, but big money is politics,” he says.
The recent events in the economic relations between the two countries reflects the political climate between Moscow and Warsaw. „Tense” is what political analyst Ernest Wyciszkiewicz from the Polish Institute of International Affairs (PISM) calls it. „We have been especially disliked in Moscow since Poland‘s accession to the EU,” he says. Wyciszkiewicz claims that Poland‘s strong position in the EU‘s decision-making process, which makes it the sixth-largest country in the Union, and the fact that it can influence the decisions the EU makes is something that the Russians are not used to.
Arrested development
„Economic relations were developing very well despite the somewhat cool political climate, but this has changed in the last year,” Wyciszkiewicz points out. Trade between the two countries was steadily growing after 2000, getting back to normal levels after a slump following the 1998 economic crisis in Russia. It really exploded after Poland‘s accession to the EU - in 2004 Polish exports reached $2.84 (zł.8.49) billion, surpassing the previous best, 1997‘s result of $2.16 (zł.6.45) billion. The following year Polish exports reached $3.96 (zł.11.83) billion, but in 2006 the dynamic growth suddenly halted. By the end of November 2006 Polish exports to Russia stood at $4.3 (zł.12.85) billion, with overall trade at $15.3 (zł.45.7) billion (in comparison to $12.2 (zł.36.45) billion in 2005 and $7.6 (zł.22.7) billion in 2004).
PISM‘s expert claims that the meat ban was just a pretext. „It‘s not about meat, it is about principles,” Wyciszkiewicz says. He points out that even if there were some mistakes on the Polish side with regard to the meat issue, the response from Putin Russia‘s was not proportional. „There were no negotiations, only the ban right away,” he says. „This just proves that the climate already wasn‘t good at that point,” Wyciszkiewicz concludes.
He doesn‘t agree with the Russian argument that Poland is making a political issue out of an economic one (referring to the Polish veto). „If it wasn‘t meat, then the Russians would have found another restriction, another barrier,” Wyciszkiewicz claims. He adds that Poland didn‘t have much choice except to respond as it has.
A test for the EU
According to Wyciszkiewicz, the Polish-Russian dispute is a test for the entire EU. „Russia is trying to treat Poland differently from other EU nations,” Wyciszkiewicz says. He points out that, in its policy towards EU members, Putin contacts each state individually rather than dealing with the EU as a whole. „Poland fears this. Hence our policy of resorting to EU mechanisms, notably the European Commission, in an effort to neutralize Russian policy,” Wyciszkiewicz sums up.
Ciosek also counts on the EU‘s involvement in solving the issue. But he sees it differently to Wyciszkiewicz. „The EU is about compromise - all sides need to give up some of their demands to reach that compromise. Both [Poland and Russia] need to learn the European culture of compromise,” he explains. „It is absurd to have stories like this in the center of Europe in the 21st century. Of course both sides can continue to flex their muscles and spite each other, but what‘s the point?” Ciosek asks.
Just probing
KPP‘s president Malinowski doesn‘t think that Russia is seriously threatening Poland with an import ban. „They are just probing. The [Kommersant] article was published to see what Poland‘s reaction would be,” he says. „This is typical for Russian diplomacy.”
Wyciszkiewicz agrees: „It would be an absolute precedent and I think the reaction from Brussels would be very firm.” The PISM expert claims that Russia has done enough to undermine its credibility as an economic partner in recent months and should not take any more controversial steps.
But the fact that the import ban is unlikely to be implemented doesn‘t mean the countries will reconcile their differences quickly. Nor will this happen if the Russian veterinary experts behind the meat ban give Polish producers the green light. „A few visits by veterinarians will not remove the tension,” Wyciszkiewicz claims. In his opinion, all the cards are in Putin‘s hands. First, because Russia is the more powerful nation, and it decides on the state of relations with a smaller partner. Second, because „it was not Poland that initiated the tension. We are just reacting.”
However, while the threat of export limitations hangs over Polish companies like a dark cloud, and Moscow and Warsaw continue to exchange blows on the international scene, some people are just getting on with business as usual. Clothing producer Artman, for example, has just opened a store in a prestigious shopping center merely a stone‘s throw from the Kremlin and is looking to expand its Russian chain from 25 to 41 outlets this year.
A Russian newspaper has reported that the Kremlin may introduce a cap on Polish imports that could reduce sales to the country by as much as half. This is the latest in a series of threats that the two countries have been exchanging since Russia imposed a ban on Polish food products a year and half ago, which has cooled Polish-Russian relations to a new twenty-first-century low.
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