Sanctions block Sh13bn Russia exports to Kenya


Economy

Sanctions block Sh13bn Russia exports to Kenya


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The new container terminal at the Port of Mombasa. PHOTO | KEVIN ODIT | NMG

The Russia-Ukraine conflict knocked off Sh13.3 billion in imports from Moscow in the three months to March, forcing Kenya to turn to expensive sources of wheat, fertiliser and steel that helped drive inflation to a 58-month high.

Latest data from the Kenya National Bureau of Statistics (KNBS) shows that the sharpest decline happened in the three months to March, as troops from Moscow marched into Ukraine, with imports from Russia dropping 66 percent from Sh19.9 billion to Sh6.6 billion.

European nations and the US have imposed sanctions against Russia in the wake of its invasion of Ukraine in February, restricting the flow of its exports. They have sanctioned more than 1,000 Russian individuals and businesses and restricted the purchase of Russian oil.

Major Russian banks have been removed from the international financial messaging system SWIFT, which is delaying payments to Russia for its exports.

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Traders have shunned Russian supplies, fretful of repercussions following the sanctions.

Kenyan exports to Russia dropped marginally by three percent to Sh2.8 billion during the conflict period, as traders sought alternative routes to ship goods into the country at a time when the international community was announcing sanctions.

“The issues on logistics are due to shipping challenges, wheat not leaving the country (Ukraine) and security around the war zone region imposing high risk even for delivery of our exports,” said Julius Opio, the Kenya National Chamber of Commerce and Industry (KNCCI), Nairobi County chairman.

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Russia is the fifth-biggest buyer of Kenyan tea, having taken up produce worth Sh6.2 billion in the 11 months to November 2021. On a year-to-year basis, the data shows that the value of imports from Russia in the 12 months to March dropped by more than half to Sh24.7 billion from Sh51.9 billion in the year to March 2021.

Kenya imports iron and steel, wheat, fertilisers, paper and board, copper and oil from Russia. It imports fuel, wheat, crude edible oil and fertilizer from Ukraine. Russia is the world’s leading wheat exporter, and Ukraine the fourth, and the commodity is ranked as the third-most consumed food in Kenya, behind milk and maize.

Data from UN Comtrade, a repository of international trade statistics, show Kenya’s wheat and meslin imports from Russia were valued at Sh12.6 billion ($106.37 million) in 2021, ahead of Sh9.2 billion ($78.26 million) value of the products from Ukraine.

Avocado farmers have been some of the worst hit. Kenyan farmers say about 90 percent of their avocado shipment to Moscow has been cut off from the market and this is one of the reasons behind the halving of the price of the produce.

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Russia is a key market for Kenya’s Fuerte avocado variety, coming second in terms of purchases after the European Union bloc.

The chief executive officer of the Fresh Produce Consortium of Kenya, Ojepat Okisekere, said the war has had a negative impact on the country’s produce.

“We are not selling 90 percent of our produce to Russia at the moment because of the ongoing war and the sanctions that have been slapped on Moscow. We are now relying on the Middle East market, whose price is half what farmers would have earned selling to Russia,” said Mr Okisekere.

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A kilogramme of Fuerte avocado in the Middle East is retailing at $7 compared to $14 in Russia. Imports from Ukraine declined by 18.4 percent to Sh1.96 billion in the quarter ended March 2022 compared to Sh2.4 billion in the three months to March 2021, also three times less than Russia’s in the period.

Traders have associated the drop in shipment from Russia to logistical constraints and unprecedented sanctions on Moscow restraining financial transactions to importers and exporters.

“The cost of importing has stopped many importers from shipping goods. The dollar gain has also seen the cost of goods go up by at least 30 percent,’’ said Clement Tulezi, chairman of the National Horticulture Taskforce.

KNBS data show imports from Russia and Ukraine to Kenya were on an upward curve in 2021 following the reopening of global economies and gradual recovery from the pandemic before they were abruptly disrupted by the conflict.

In February, Kenya was among 58 countries that chose to abstain from the United Nations General Assembly vote to expel Russia from the UN Human Rights Council as punishment for invasion of Ukraine.

Russian forces invaded Ukraine on February 24 in a mass assault by land, sea and air, the biggest attack by one State against another in Europe since World War 2.

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The Tea Board of Kenya said the export earnings from Russia declined by Sh598 million in March as volumes dropped 74 percent to 686,072 from 2.6 million kilos that were achieved in the corresponding period last year.

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