Bexheti: An Alternative to the Markets after the Invasion of Ukraine will be Found, but There Is No Alternative to the Loss of Human Lives
Russia, says Bexheti, should think about how to find alternative markets, because Russia’s export component is over 60 percent, only in Europe.
Engineered news is circulating on social networks and in some media after the invasion of Ukraine, which is done with a certain intention, to spread fog, said in an interview with Truthmeter academician Abdylmenaf Bexheti. According to him, the losses due to the Russian-Ukrainian crisis expressed in finance are minor, because alternative markets can be found for everything, but there is no alternative to the losses in human lives. Russia, says Bexheti, should think about how to find alternative markets, because Russia’s export component is over 60 percent, only in Europe.
Under the syndicating agreement between Truthmeter.mk and Meta.mk, we republish the interview below:
Author: Zoran Dimovski
The Macedonian-Russian Chamber of Commerce said that at the moment due to the invasion of Ukraine, the country has no alternative for exporting some agricultural products, of which a third have been exported to Russia, and Europe does not need such products. Is there an alternative to this issue?
Usually, when such crises occur, the first estimates always lead to surprises and great uncertainty. At the moment, if we ask ourselves, we cannot find alternative markets, when the existing market due to the crisis disappears in 10 days. And from that point of view, there is no automation to find other markets, given the large markets such as Russia. But, in general, Russia is not a big trade partner of Macedonia, but it is big in terms of the structure of products that we export and import from both sides, and these are strategic products. We import oil, gas, steel, minerals, which due to their nature can hardly be found in the short term. But in general, in any crisis, economic agents are pragmatic and always find an alternative. There is nothing without an alternative. We have a crisis every five to ten years. We were in a global financial crisis, and then a Covid-19 crisis. And now we cannot find a solution so rapidly. But businessmen from both the import and export component who are affected by such situations will find markets and ultimately it is an economy, you have to cope with the replacement of markets. The question is what the price will be. This is not about losses expressed in finance, when losses in human lives are more important, especially in such an economy, which is a drop in the ocean for the exchanges we have with Russia. If you ask about the situation in Russia, they are the ones that should think about how to find a replacement, because Russia’s export component is over 60 percent in Europe and three countries dominate in their exports. The Netherlands, Germany, and Italy make up 40 percent of total exports and if the United States is added, they cannot find a replacement. We have an annual import of 120 million dollars with Russia, and the export is 60 million, which means that we have a deficit of 60 million and if there is no alternative, we will not fail, because the numbers are not high.
What will be the great economic consequences for the country, given the invasion of Ukraine, if we know that trade with Russia is 2 percent, and with a foreign direct investment this country participates with 0.5 percent, and only 0.1 percent of remittances come from Russia and Ukraine? The question is in the context of the great fear of the Macedonian businessmen, and the titles of some analyzes suggest that they fear that they will be left without any bread.
In this issue, the critical part is that of the indirect consequences, which will be far more pronounced than those that would directly affect us. However, there will be consequences, because that one or two percent are important, in which branches and in which products. And those percentages are much more important for those who produce it, but the indirect effects, I will say, will be much greater. Germany is the third world partner with Russia, and Germany is our first partner, so the indirect impacts will be much greater.
Some experts claim that 30% of us are dependent on wheat from Russia and Ukraine and that all this will have an impact on this sector. Can another alternative be found and how dangerous is this for the shortage of grain, i.e. flour, in our country?
I hear such fears and reactions and I think they are exaggerated. There is an alternative, let’s say, from Canada and Australia. The issue is the more expensive import. Otherwise, there is enough supply in the world for these products.
What is your view on the supply of Macedonia, primarily to Macedonian companies, with natural gas, if we know that we get almost all the gas from Russia, which is also used as energy in industrial zones. Some experts say that this will be the biggest problem due to the war in Ukraine. Will the state have an alternative here?
If Germany finds an alternative that is about 60 percent dependent on Russian gas, then what happens to us? These things are overemphasized. The disintegration of order, the questioning of the existence of small states, is a more painful issue. We as a country in the early nineties had blockades from both the south and the north, but we found alternative markets. A tanker will come to Thessaloniki with gas and will supply us with gas for 4 months, there is the alternative. However, there is no alternative to the lives lost there.
In this context, Russian oil is imported to our country with about 25 percent of total imports. Will this, as some analysts warn, lead to an increase in the price of oil, but also of other energy sources as well as electricity, like a domino effect of the Russian-Ukrainian crisis?
This is already seen in strategic goods – prices are rising. These are raw materials, i.e. inputs that are needed. However, I do not think that alternative solutions will not be found. The only question is what prices we will find from those alternative products. Pressed by the inflationary spiral, national banks may be forced to raise interest rates to keep inflation in check. And now the question is how much that shift will lead to a reduction in investment, given the reduction in supply. The institutions are observing these movements quite closely. I observe the budget dynamics daily and believe me when I say that it is ideal. For the first two months, both in a crisis and in these tense situations, around 14 percent of the budget revenues are realized in such crisis months, and the expenditure side is 15 percent, which is quite balanced. So, the situation is not for any alarm. Okay, yes, we need to be aware of monitoring the situation daily, but not to panic, given that the economy is sensitive to panic.
Due to the crisis in Ukraine, some businesses fear a shortage of steel and iron, which is mainly imported from Russia, Ukraine, and Romania. Should we really have such fears, if we know how big the industry is in the country, but also that there are other markets for these products?
This has a great impact on our country, given that construction has a large share in GDP, and brings a large number of jobs. But serious investors have the reserve to survive this period. This is not ten days ago, it was announced before, but the construction season has not started and I think that by then the situation will stabilize, and I will say again, in our country, some things are overemphasized.
The most painful question for citizens is how the Ukrainian crisis will affect the food market?
I think it will have an impact, I am sensitive in that part and I think it will affect the poor layer of society if the price of oil rises by up to 3% or the price of some other basic groceries. But, here the state should step up, to subsidize such products for a certain period, because the purchasing power will be endangered mostly among the socially endangered citizens.
As an expert on the situation, but also as a person who follows the economic trends, have you come across any information that you as an expert consider being disinformation, and is related to the economic consequences of the war in Ukraine?
Yes, of course, such engineered news circulates on social media and in serious media outlets as well, which are published with a certain intention – to spread fog. Everyone spreads that disinformation in their own interest and in their own way. For example, in terms of the ruble reduction and what this means for Russia. Or that capital markets have lost up to 77 percent of their wealth. One should pay attention to those speculations, because for example, in the mentioned case there are rules, if the stock market falls more than 20%, it closes. And even today, Moscow Stock Exchange and the Petersburg Stock Exchange are closed because they fell very low. There is a lot of such speculative news that is abused in some way, for some individuals to create positive expectations, and for others to have negative expectations, and that is evident. Or, for example, there is disinformation that the Swift mechanism, which is an artery of financial channels and payment in the international economic scale, could be substituted with international currencies. This is nonsense, those who know these things will immediately recognize them, and these are folk interpreters or so-called economists, who do not know what it means. In the past we had paradoxical situations in the Macedonian Stock Exchange, but this time the stock exchange works well. We have had a situation when the board of directors of a company is closed and the shares are very high. Disinformation absolutely affects the stock market. These are solutions that are created based on supply, demand, and expectations. Now there are speculative transactions, as we call them, and they do happen, but people know the basic rules of stock exchange operations. So, people recognize the speculation, but some people believe in that disinformation. I get questions such as whether their bank deposits are safe, I tell them, and who told you this, there is even an alarm to raise deposits. We currently have too much liquidity of the banks; they have nothing to do with the money. This kind of speculation is circulating and I think that some institutions should be on duty in clarifying and explaining in a very serious way, to narrow the circle of fake news, because not all people are experts.
It is clear that the economy will not be the same after the invasion of Ukraine. But, would the negative consequences have been reduced if regular analyzes had been made in the country, alternative markets were sought, energy sources were negotiated for several years and with unchanged prices?
We did not pay attention to time even 10 years ago. If we had realized the project Chebren and Galishte and not spent money on nonsense, today we would not have a problem with electricity. But when politicians do well, they think bad times will not return. Because, if before, we were in a crisis in the long run, now, we experience crises more frequently. And here I agree that we did not take care. We are in a situation where we have resources for electricity production, and we are constantly importing electricity. I hear the authorities say that the reserves are full of oil and other derivatives and strategic products and energy, but I am not sure if that is the case.