Ukraine Unrest Worrying Israeli Exporters

Israeli producers of chemicals and petroleum products and real estate investors may be at risk.

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The present revolution in Ukraine is not the first time Israeli business people have had to worry about their investments there. Nine years ago, after the Orange Revolution, many Israeli exporters downplayed their exposure and involvement in projects in the country. Since then, potential investments in Ukraine have been examined very cautiously, since it is considered a highly risky place to conduct business.

Nevertheless, Israeli exports of goods to Ukraine had been on the rise until fairly recently – particularly chemicals and refined petroleum products, although agricultural goods, food and drinks, and communications equipment were also being sold to that country.

The leading Israeli exporters to Ukraine are Nilit, Sano, Oil Refineries, Makhteshim, Netafim, ECI and various defense suppliers.

Imports and exports between Israel and Ukraine totaled $523 million in 2013, a rise of some 3% over 2012, according to the Israel Export Institute. Exports of goods to Ukraine were $351 million last year, a 20% increase, while imports fell 19% to $172 million; 72% of the exports were chemicals and refined petroleum products.

Exports did drop off sharply in the past few years, however, as the risks have increased; up to about three years ago there were still significant exports of high-tech and communications products.

Corruption was also a factor that affected Israeli business with Ukraine, says Alex Aberbuch, marketing manager of Ashra – The Israel Foreign Trade Risks Insurance Corporation. However, at this point Ashra has still not announced a halt to exports to Ukraine. The company will be choosy and conservative in the next few weeks and is waiting to see what develops, added Aberbuch. There are fears of civil war or a major division of the country.

Aberbuch says Ashra has been involved in business transactions to the tune of tens of millions of dollars in Ukraine, and it is quite possible that some of the debts incurred will never be paid if the companies there go bankrupt. Up until a few years ago, Ashra insured tens of millions of dollars' worth of business per year in Ukraine, but that has since dropped to only a few specific projects with much lower values.

The Israeli Credit Insurance Company also says it is carefully watching developments in Ukraine, but has not officially stopped coverage of business transacted there. The advent of a revolution is sufficient grounds for paying off insurance in the case of nonpayment or damage to exporters, explains David Milgrom, CEO of ICIC, but so far nothing has happened to any of his firm's clients.

A number of large Israeli real estate firms have investments in Ukraine in land and projects, and they may be affected by the rising unrest. A number of them have already calculated the value of their holdings there and for most firms the damage is not expected to be too serious.

People visit and mourn on Kiev's Independence Square on February 25, 2014. Credit: AFP

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