War in Ukraine: what impact on the economy of the Occitania region?

Energy, aeronautics, space, agri-food, healthcare, balance of trade, how did the war in Ukraine affect the regional economy? The regional prefect and president of the Occitania region recently met with economic players to make an initial diagnosis and set up a working group to help the hardest hit regional companies. “La Dépêche du Midi” sums up.

Russia and Ukraine are not really the countries with which the Occitania region has the most trade relations. In 2021, Occitania exported 80 million euros to Ukraine (0.2% of Occitania’s exports), including 25.6 million euros of various chemical products, 19 million euros of products for aviation and space construction, 13.6 million euros of crop and livestock products . Occitania imported from Ukraine 13.8 million euros (0.04% of imports), including 6.2 million euros of vegetable and animal oils, fats and cakes, 2.6 million euros of fruits and vegetables, including juices, 1.1 million euros wood, wood products.

Russia, 9as well as destination country for our regional exports in 2021

Foreign trade with Russia is more significant, mainly due to the aviation industry. Occitania exported 1.4 billion euros to Russia in 2021,9as well as country for Occitania (i.e. 3.9% of total exports from Occitania) an exceptional year, as in previous years the volume of exports was close to 600 million euros (15as well as countries) Of the 1.4 billion euros of exports: 1.3 billion euros are products of aviation and space construction, i.e. 85% of exports, 39 million euros measuring, testing and navigation instruments, 29 million euros various chemical products (nitrogen and potassium, fertilizers). Occitania means little to Russia (0.18%): €60m in 2021 (€81m in 2020, €99m in 2019). Occitania does not import grains from Ukraine, but the increase in prices will affect the agricultural sector (livestock) and the agri-food sector. These figures do not take into account natural gas exchanges (calculated since 2005 for exchanges with the last crossed country. In total, imports from Russia and Ukraine are only 0.05% of GDP (gross domestic product) of Occitania and exports to Russia and Ukraine, only 1% of GDP Occitania.

Energy: tensions over steel, strategic metals and rare earths

Russian gas imports currently cover 21% of national supplies and 8% of oil. Gas and oil account for 62% of Occitania’s energy consumption. In the short term, price increases for these products or even shortages should be expected. Therefore, the policy of energy sobriety and the transition to local renewable energy sources is more relevant than ever. As for the impact of the crisis on energy companies, there are already tensions with regard to steel, and delays in deliveries are constantly increasing. Most and largest European steel mills are located in Ukraine. Tensions are to be expected with respect to strategic metals and rare earths.

Most affected by aeronautics and space

In connection with the conflict, the question arises of dependence on Russian supplies, in particular titanium, for which Russia is the world’s leading producer (the Russian giant VSMPOAvisma owns 25 to 30% of the world market). While most large industry groups have multi-year contracts, preventive measures have already been taken to strengthen stocks and secure/diversify supplies. An ad hoc working group under the leadership of GIFAS is currently being created, bringing together Airbus, Safran, Thales, as well as equipment manufacturers and government departments.

There will also be an impact on all space programs (Exomars program, Oneweb, etc.). If Occitanie has no launch vehicle manufacturers and is not affected by the suspension of Soyuz launches from Kourou, these delays will have organizational and therefore cost implications for our launch vehicle manufacturers (TAS and AD&S).

Little tourist impact

In 2021, Russian overnight stays accounted for 0.3% of overnight stays abroad, i.e. approximately 140,000 overnight stays out of 46 million overnight stays abroad, i.e. €12 million (compared to 2019: 0.6% of overnight stays abroad, i.e. approximately 445,000 overnight stays abroad). out of 74 million overnight stays abroad, i.e. 24 million euros). Russian oligarchs prefer Paris and the Cote d’Azur, even the Basque coast and the most fashionable resorts in the Alps. The Ukrainian clientele, which is too weak, does not appear in the statistics.

Agriculture and agri-food: towards higher food prices

French agricultural production has already been hit by speculation and rising prices for wheat and cereals globally. Russia and Ukraine represent 30% of the world’s wheat exports (a tonne of wheat set records this weekend, reaching over 400 euros) and barley, Ukraine also ranks 4th.as well as world exporter of corn, fifth placeas well as in wheat 3as well as for barley and occupies a dominant position in the world market for sunflower. There are fears of a supply chain disruption that could amplify price increases and therefore lead to higher prices for animal feed, and then for meat, as well as higher fertilizer prices, with consequences for not negligible raw material costs.

Fear of Russia’s response to wines and spirits

Regarding direct merchandise exports to Russia: mainly some dairy products and limited beef, which will only partially affect the export figure. In Occitania, trade with Russia is 155 million euros for agriculture. Russia is not an important market for French wines (40as well as square and 15as well as taking into account imports through re-export platforms of the Baltic States). For Occitanie wines, exports to Russia of AOC and IGP are 8,405 hl worth €2.186 million in 2021, representing 0.23% in volume and 0.21% in the total value of wine exports. However, Russia remains one of the important markets for Armagnac producers. In the event of a trade interruption, the risk of a Russian backlash against EU sanctions would hit professionals in the wine and spirits sectors.

Fishing and health too

Among other risks identified, fishing along the Mediterranean coast is affected by accelerating fuel prices (fuel accounts for 40% of the turnover of shipping companies in Occitania today compared to 25% there 6 or 7 years ago). In healthcare, Russia imports most of its medicines and medical equipment – Sanofi is in the top three but not in any of the top 15 drug buying countries. Companies producing high-end or luxury goods will also face difficulties: Russians have a big appetite for all French high-value-added products with a positioning of superiority. From the point of view of the attractiveness of our regional economy, not a single influx of Russian investment has been recorded in recent years.

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