Albanian daily news

The Albanian economy will suffer direct and indirect shocks from Russia’s attacks on Ukraine. Fuel and flour prices are expected to rise, as the country imports 47% of its annual grain needs and 12% of oil from Russia. The indirect consequences will come from the global increase in food and energy prices and negative impacts on tourism. Wholesalers claim there are supplies of oil for three months and wheat for 45 days, but say new supplies will come at higher prices. Three scenarios of the impact of war on the world economy.

When Russia’s attacks on Ukraine began at dawn on Thursday, February 24, beyond security, states around the world began calculating the economic costs of war. Global markets that had just begun the fragile recovery from the pandemic fell into difficulty. Commodity prices, especially oil and grain, immediately increased by 5-8% overnight.

As history has shown, crises do not affect all countries in the same way. In times of war, supply chains are damaged, so states with large supply reserves suffer less, because often even monetary power is not enough if goods are in short supply.

If the war continues and the sanctions too, Albania will be affected by its supply of the country’s main basic products, bread and oil. The next confrontation will be that of the inability to curb the rise in prices that the war will cause for all imported products.

It will affect our country directly, due to the dependence of oil and wheat supplies on Russia, and indirectly, with rising commodity prices, Ukraine being a major global exporter of raw materials for the food industry (cereals, sunflower oil, etc.). ).

Albania supplies 47% of the annual wheat needs of the Russian market and 3.3% of Ukraine, according to INSTAT. The chairman of the Association of Flour Processors, Adi Haxhiymeri, said that our country’s wheat reserves are sufficient for 45 days. He ruled out the possibility of running out of supplies, but said grain prices would rise further.

Luigj Aliaj of the Association of Hydrocarbon Companies said fuel reserves are sufficient for three months, but added that the supply and price situation will change depending on the situation.

Russia’s economic isolation from Western sanctions will block the world’s 11th largest economy, the weakening of which will make it difficult to supply the world with raw materials, especially oil.

In the worst case, i.e. a total cut off of gas from Russia, the European economy would contract by 3%, according to an analysis carried out for this purpose by the American press agency “Bloomberg”. . The war will also affect the tourism sector in Albania, as Ukrainians accounted for 22% of charter movements to Albania.

In 2021, Albania achieved 2.7% of foreign trade with conflict zones, Russia and Ukraine. Albania’s trade volume reached ALL 701 billion, while with Russia and Ukraine trade in value was ALL 19 billion, or 2.7% of the total.

The volume of trade is dominated by imports of goods from these two countries. In 2021, Albania imported from Russia and Ukraine ALL 19 billion of goods, which constitutes 99.5% of the trade volume and the rest, 0.5%, is represented by Albanian exports to these countries, mainly agricultural products.

Despite the fact that the volume of trade in these countries is low, Albania is highly dependent on the import of vital materials, such as cereals and oil from Russia. From these countries we import 50% of the annual quantities of cereals and 12% of oil.

But the indirect dependence on the Ukrainian and Russian markets is higher. Ukraine is the largest producer and exporter of cereals and sunflower oil in the world, which Albanian wholesalers buy processed from other countries, mainly Italy.

50% of grain from Russia and Ukraine, national reserves are enough for 45 days

The attacks in Ukraine were the darkest day for grain importers, who tied their business directly to Russian supplies. Adi Haxhiymeri, one of the main wheat importers, said the dispute between the world’s main grain producers, Russia and Ukraine, will challenge supplies around the world.

Customs data shows that in 2021, a total of 326,000 tonnes of cereals were imported, 50% of which came from conflict areas. Albania imported 47% of cereals from Russia in 2021, 36% from Serbia, 4% from France and 3% from Ukraine. Cereal import sources are dominated by Russia, Ukraine and Serbia with 86% of total consumption requirements.

Wholesalers claim that the reserves are not large, because part of them has been exhausted due to the pandemic, while in the last two years there have been supply problems due to the decline in production.

Adi Haxhiymeri said the war in Ukraine came at a time of multiple crises, created by declining wheat production and high energy prices. He said wholesalers had enough reserves in warehouses to afford 1.5 months of imports, but in the meantime the government had no grain reserves like other states have in these situations.

According to Haxhiymeri, wholesalers are trying to find new sources of supply from France, Argentina, Romania, etc. The possibility of not stocking up, he says, is very small, but the price of new imports will be higher. In the meantime, importers currently need significant liquidity to switch sources of supply and face high prices.

Bread market players say that if the conflict lasts and the sanctions too, it will no longer be a question of price but of the existence of the product. Russia is the world’s largest grain supplier and, together with Ukraine, accounts for almost a quarter of total world exports. In countries like Egypt and Turkey, Russian grain covers 70% of domestic needs.

12% of oil in Albania, from Russia

Russia is one of the world’s largest suppliers of grain, gas and oil. In 2021, our country imported 12% of Russia’s oil quantities. Even oil imported from Italy comes from Russia, but is simply processed in its refineries. In 2021, imports of fuels and minerals (oil, gas) amounted to around 1 million tonnes, but almost 70% of the quantity is dominated by oil.

Importers no longer calculate the price, but worry about security of supply. Luigj Aliaj of the Hydrocarbons Association said security reserves are sufficient for 3 months, and added that further supplies will depend on the course of the war. Before March 15, he said, the price in international markets could exceed USD 135 a barrel and therefore the increases will trickle down to domestic markets.

Albania recently destroyed the only oil refinery in the country, which, with all the problems it has encountered, could cushion the acute situation due to the lack of supply to some extent. Oil produced and refined in the country, according to earlier estimates, met almost 30% of the needs of the domestic market.

The refinery is currently being dismantled for scrap, while oil extracted from the country’s subsoil is sold raw in overseas markets.

Currently, a liter of oil in the country has reached the level of 192-194 ALL, but with the latest developments, prices will reach 250 ALL very soon.

Negative effects on tourism

Last year, the share of Ukrainian tourists in domestic tourism increased. According to TIA data, last year, in July-August, flew to Rinas and vice versa, 38.5 thousand passengers from Ukraine, which is 65% more than in the same period before the pandemic. Ukrainian tourists accounted for 22% of charter traffic and were the second largest group after Poles.

Albania was to be an important destination for Russian and Ukrainian tourists in 2022. Ukrainians have been discovering Albanian soil for several years, with very attractive tourist offers, among which the unknown Albanian nature was the strong point.

Besnik Vathi, head of the travel agency ATHS, with a long experience in the market, told Monitor that this war would have catastrophic consequences, in all tourist markets where Ukrainians are in the majority.

Rrahman Kasa from the Albanian Tourist Union explains that due to the escalation of the Russian-Ukrainian conflict, the negative effect is not only in the cancellation of reservations, but in the pattern of their operation.

“International partners have certain guarantee contracts by prepaying 20-40% of the tourist offer, I think that is the main problem. They are worried about their money, the continuation of customer relations, as well as the partnership relationship between accommodation structures, agency partners, etc.

Reservations there are canceled and may have a chain effect, as they could demand reimbursement and the country’s tourist facilities would be put in difficulty. This happened in crisis situations, it was demonstrated by the case of the earthquake or even the pandemic situation “- concludes Mr. Kasa.

Commodity prices will rise

For Russia, Ukraine is known as an industrial base, producing everything from cars, ships, helicopters, armaments to nuclear power plants, while for Europe, Ukraine is the main supplier of the food basket .

The country under occupation is one of the world’s top ten producers of certain crops such as wheat and maize. Ukraine is the world’s largest producer of sunflower oil, a major global producer of cereals and sugar, and a global player in the meat and dairy markets.

It is also one of the largest producers of nuts. A conflict will bring difficulties in the European markets, or at best, increase the price of the basic items in the basket, because Europe will try to find new sources of supply on the most distant continents and this will increase the cost.

They will also be reflected in Albania, since our country is a net food importer.

(Source: Monitor)