"All sanctions are aimed at eliminating competitors by unfair means"

The development of logistics corridors, adaptation to sanctions pressure and the restructuring of export flows have become key areas of transformation of the Russian economy in recent years. On June 4, Veronika Nikishina, head of the Russian Export Center, spoke to Izvestia on the sidelines of the St. Petersburg International Economic Forum (SPIEF) about the impact of global crises on logistics and exports, the lessons of the pandemic and the development of new transport routes.

"Russia has never been a country with one logistics corridor"

— There is a lot of talk about the rising transportation costs associated with the situation around the Strait of Hormuz. How much does its instability really affect the cost of transportation? Which sectors of the Russian economy and which export products were most sensitive to the increase in transportation costs?

— First of all, I want to say that logistics is an important component. It is necessary not only to produce the goods, it is necessary to deliver them. Therefore, any imbalances or disruptions in logistics chains, if they occur, begin to negatively affect the ability to deliver goods to the export market.

The problem of the Strait of Hormuz for the entire world trade should not be overestimated here. However, it would also be irresponsible to underestimate. Cargo and container shipments mainly pass through the Strait of Hormuz.

The share of container traffic that goes through the Strait of Hormuz is only 4% in terms of global trade. It doesn't seem to be much, but, of course, there has been a serious increase in the cost of global logistics due to the fact that the failure of the existing logistics corridors that transported goods through the Strait of Hormuz has affected a lot.

If we talk about Russia, then for us, first of all, it negatively affected all routes that went to ports, for example, the United Arab Emirates. Because these ports were hubs for the subsequent distribution of products in the markets of the region. As a result, the route lengthens due to the choice of some other delivery methods.

Therefore, the volume of goods that are exported has remained the same, but the delivery hours and kilometers have increased. This has all had an impact on additional costs. The products of the agro-industrial complex, which we exported to the markets of the Persian Gulf countries and did so through the Strait of Hormuz, suffered the most.

On the other hand, Russia has never been a country that has only one logistics corridor. We have always worked very hard to diversify shipping methods and delivery routes. And our main export logistics corridor is the Eastern Landfill. These are shipments to Southeast Asia via China and other countries. And 30% of our total export flow goes through the Eastern Landfill. On the other hand, this is also a lot, because the load on the infrastructure that transports export goods is quite high, which creates certain queues there.

These are both railway and so-called multimodal transportation, when there is an overload, for example, from a car to a port, then a sea shoulder, a railway shoulder. That is why Russia has been systematically engaged before, and especially now, in making sure that routes are either straightened as much as possible or extra shoulders are removed. That is, to make multimodal transportation as much as possible by one type of transport.

The so—called rollout of new routes, that is, the creation of alternative logistics routes, is also a task that Russia systematically dealt with before the sanctions and before the situation with the Strait of Hormuz, and this is our strategy for the development of logistics corridors, which also continues to be implemented.

On the one hand, this strategy is aimed at eliminating bottlenecks in existing corridors, such as expanding the capacity of product export channels, increasing the number of checkpoints and speeding up regulatory procedures, which are mandatory but can reduce costs if organized more quickly. On the other hand, it is the development of new routes: the Northern Sea Route and the North—South corridor.

New alternative routes are also being developed, which budget funds are being allocated to in order to enter new export markets. These measures make it possible to reduce dependence on the current situation, in particular around the Strait of Hormuz.

The strategic initiative is to see what the situation in a particular industry should be like tomorrow and the day after tomorrow and start systematically dealing with it. Those countries that form a strategic initiative and can look at the situation from the day after tomorrow and start working on it win the competition.

If we talk about trade routes, they are being formed. Despite all its difficulties, both political and economic, the Northern Sea Route is already developing, and Russia is doing this ahead of its competitors. At the same time, we see that this causes significant dissatisfaction.

In fact, all the sanctions that have been imposed, are being imposed and, unfortunately, will be imposed, for political reasons, are aimed at one thing — eliminating competitors by unfair means. And wherever Russia demonstrates some kind of competitive advantage, sanctions immediately arrive. This should be treated quite calmly.

No one else will solve our problems and tasks. It would be irresponsible to assume that anyone is interested in Russia being a strong country with a strong economy. We must set our own goals and solve them on our own. Both the Northern Sea Route and the North—South corridor are strategically challenging projects, but they must be implemented consistently and without hesitation.

If we talk about the North—South corridor, before the escalation of the situation between Iran and the United States, which has now entered a hot phase and led to military clashes that negatively affect the implementation of its logistical capabilities, Russia initiated the creation of an inter-country logistics corridor several years ago.

Such a corridor functions only when all countries are building their infrastructure in it. Russia, in turn, has engaged in both negotiations and the construction of the necessary infrastructure to ensure seamless cargo delivery.

If we talk about the current acute phase, the North—South corridor is still operating through the Rasht-Astara section to deliver goods to the Iranian market. Iran's transit arm and export through Iran's southern ports to other countries, as planned, are currently not feasible.

However, we hope that common sense will prevail in the near future anyway. Now everyone understands perfectly well that eliminating dependence on some routes, including those that existed earlier - we see this in the situation with the Strait of Hormuz — is critically important. Therefore, it is necessary to create alternative routes.

Now, more than ever, it is becoming clear that the further development of logistics corridors that will work stably to deliver those volumes of goods to those markets that we are interested in is a strategic task that should never be stopped.

"The pandemic helped prepare for the sanctions pressure"

— During the pandemic, global logistics was already experiencing a serious crisis and rising transportation costs. Is it possible to compare that situation with the current challenges related to the Strait of Hormuz and sanctions pressure? To what extent has the experience of the pandemic helped prepare for these risks?

— Absolutely, we have taken this into account. Moreover, we now perceive the coronavirus as such a first stress test for force majeure circumstances that we need to face. The experience of the pandemic is very important to us, it shows that the crisis management actions that were taken to urgently find new solutions to all previous processes that were built up before, or support measures that were built up, is the speed of decision—making that Russia, the Russian government demonstrated during the pandemic. It's worth a lot.

And the fastest possible restoration of logistics and other international relations involved in Russia's foreign economic activity and activity, compared with other countries, shows that we passed this stress test very well.

In 2022, we have not yet relaxed after the coronavirus, after the mobilization that took place during the pandemic. So we just kept rolling out new support measures and solutions.

Mobilization and the pandemic have greatly helped us in responding to sanctions and building various anti-sanctions measures that have prevented us from destroying our foreign economic activity and creating isolation.

"Our products continue to be supplied even to closed markets"

— How did the sanctions imposed after 2022 affect the volume of Russian exports? Can we say that today these losses have already been largely compensated?

— If we are talking about non-primary, non-energy exports, which is our mandate, then we have not lost much in terms of these exports.

We have a slight drop in individual industries, but we must understand that when countries announced the imposition of sanctions, consumers of these countries stocked up on Russian products, realizing that they needed them and it would be economically difficult to exist without them.

Therefore, somewhere we have retained the volume of trade that we had, and somewhere it has grown, because we have shifted to new markets, and somewhere our products continue to be supplied to the markets of countries that have closed off Russian products, but under the so-called deflagization. If countries like shooting themselves in the foot, we can't influence that.

— I wonder which Russian goods are in the greatest demand abroad today. This will allow us to better understand the basis on which our exports are currently based.

— Since the beginning of this century, we have already become established very powerful export leaders in metallurgy, the forestry industry, timber processing, fertilizers, and petrochemicals. This also applies to basic agricultural products such as grain and vegetable oil.

These are what have already become our export locomotives, but these are products that participate in the so-called B2B segment. That is, something is further made from it. It participates in the so-called value chains.

The demand for these products continues to exist anyway, although, of course, our "enemies" are trying to make these products the object of sanctions in order to hit the Russian economy and Russian large enterprises the hardest.

Over the past 10-15 years, Russia has begun to actively expand the range of export products that we are rich in, which have export opportunities and which should complement these basic products. And we have succeeded quite well here. For example, ready-made food products, which have never been the subject of our export activities before, are now becoming a very active subject of export entrepreneurship.

These are no longer raw materials in the form of meat, but processed products — sausages and other products. It is the same with grain: we are talking about finished confectionery products — biscuits, wafers, dryers, bagels, which are now being produced by more and more enterprises across the country.

Together, this creates a fairly stable export flow: ice cream, various types of water, including mineral, alcoholic and low-alcohol products.

In addition, a large number of Russian brands are represented in these segments. It is also a cosmetic product that has formed the B2C segment — that is, products aimed directly at the end user, and has become an important area of export activity for many Russian companies.

We now see the expansion of our product range as one of the main tasks. First, we need to generate demand, because many potential consumers simply do not know about it.