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Sanctions will cost money, FinMin warns

02.03.2022 - 12:15
Mynd: Þór Ægisson / Þór Ægisson
The finance minister says Iceland must accept that sanctions against Russia are going to come with a price tag. The sanctions in 2014 were too toothless, but the ones now are much more significant. Their impact on the economy overall will be limited, but they will affect some individual fisheries technology and service companies severely.

Sanctions worthwhile 

During the full year before counter sanctions were imposed by Russia against Iceland in 2015, Icelandic goods and services to Russia were worth 37.6 billion krónur; mostly in the form of seafood exports. The impact of the Russian counter sanctions, imposed in retaliation for sanctions against Russia for its annexation of Crimea in 2014, are very clear: by 2020, the total value of Icelandic exports to Russia was 6.6 billion krónur; somewhat lower than the years before the pandemic. The impacts of the new sanctions are not yet known, but a lot of fisheries companies moved their operations from Russia to Ukraine over the older sanctions, and there is currently next-to-no-trade with Ukraine due to the war. 

After the 2015 counter sanctions, Iceland’s primary trade with Russia has been the sale, design, installation, and maintenance of technology for the Russian fisheries industry. That, too, has now stopped.  

One reason the impact of the war on Icelandic fishing companies is so unclear, is because it is not only sales to Russia and Ukraine that are affected, but also sales to third countries who then sell products on to Russia and Ukraine. The effect will run into billions of krónur, but finance minister Bjarni Benediktsson says he is certain the harsh sanctions are justified. “I have no doubts whatsoever and am very happy at the very wide ranging and close unity to do much more than we have done before; because it has often been criticised that some of what was done in response to the annexation of Crimea was too toothless.” 

Vodka vanishing 

In different economic news, the state alcohol monopoly, Vínbúðin, has taken Russian Standard vodka off its shelves. 

“Following the Russian invasion in Ukraine, there have been calls to remove Russian products from sale. Among others, the state alcohol monopolies in the Nordic countries have taken the route of stopping the sale of Russian alcohol. In Iceland, the law does not allow for such unilateral decisions and the consent of [private sector wholesalers] is needed for such,” a Vínbúðin statement says. 

Agreement was reached with Vínnes to take four Russian Standard products off the shelves, but not with the importer of Beluga Noble vodka, which is therefore still on sale at Vínbúðin. 

Nýja Vínbúðin, the online-only alcohol store, pulled all Russian products from sale on Monday. 

Ready for refugees 

Preparations continue for the reception of Ukrainian refugees in Iceland. It is impossible to guess how many of the hundreds of thousands of people who have already fled the war will request international protection in Iceland. The total number of Ukranian refugees could reach as many as five million, according to the bleakest forecasts. 

The initial response is focused on reception facilities and humanitarian assistance for Ukrainians crossing into neighbouring countries, but is quickly expanding to ensure such facilities exist in all the countries further afield that will welcome refugees for as long as they need safe harbour. Iceland is preparing to be one such country.  

Several dozen Ukrainians with friends and family in Iceland reportedly arrived in the country this weekend. 20 people have so far formally applied for international protection in Iceland—something that was not possible before the invasion began, as Ukraine was listed as a safe country of origin. Its removal from the list of safe countries was among the first responses made in Iceland. 

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