Scotch Whisky Avoids Russian Trade Sanctions For Now

August 8, 2014 – The escalating battle of economic sanctions between Russia and Western nations over the situation in Ukraine has already seen restrictions on Russia’s energy and financial sectors from the West, while Russia upped the ante this week by imposing a year-long ban on food imports from the US, Great Britain, Canada, and major European nations.

Scotland will be affected by the sanctions, according to First Minister Alex Salmond. In a Scottish Government news release, Salmond was quoted as saying the Holyrood government is already responding to the sanctions:

“This action by Russia will clearly have an impact on some sectors within the Scottish economy, most notably on the mackerel industry which exports £16 million worth to Russia annually from the UK. The Cabinet Secretary for Rural Affairs, Food & Environment, Richard Lochhead, has already spoken to representatives from the fishing industry and will be meeting with industry heads as a matter of urgency.  We will continue talks with companies and producers who export to Russia most likely to be impacted to fully understand the effect of the ban, and also to gauge the ripple effect caused by the ban across the rest of Europe.”

Scotch Whisky is Scotland’s biggest export to Russia, with around £25 million GBP ($41.9 million USD) of exports annually. While whisky was left off the Russian sanctions list, Scotch Whisky Association government and communications director David Williamson told WhiskyCast’s Mark Gillespie that the industry cannot become complacent.

“We’ve been monitoring the situation very closely in Russia in recent days working very closely with the UK Government,” Williamson said. “It’s very fortunate the current sanctions list don’t affect Scotch Whisky…it’s focused more on food and vegetables, meat and dairy products, but certainly that shouldn’t make anyone complacent in the spirits industry. We have to watch very carefully to ensure that we’re not caught up in any future sanctions.”

Listen to Mark Gillespie’s interview with David Williamson:

Scotch Whisky accounts for about 1.5% of Russia’s total annual imports of European spirits, according to Williamson. While that percentage has been growing, he describes Russia as a “challenging market” for many reasons. “We had hoped that with Russia’s accession to the World Trade Organization, that that would mean there was a greater approach to a legal framework in our area, that there would be an opportunity to improve the trading framework, and this of course is a step in the wrong direction.”

So far, only one whisky has been targeted for sanctions by the Russian government. Earlier this week, Russia’s consumer protection agency moved to ban imports of Sazerac’s Kentucky Gentleman Bourbon produced at the 1792 Barton Distillery in Bardstown, Kentucky. The agency cited improper registration of the brand in the customs union that encompasses Russia, Belarus, and Kazakhstan, along with laboratory analysis showing evidence of phthalates in the whisky. The organic compound has been linked to various health problems, including infertility and neurological damage. Sazerac executives have declined to comment on the government’s allegations.

Links: Scotch Whisky Association | Sazerac