Russian sales could bring backlash

NIKO KLOETEN
Last updated 05:00 09/08/2014

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New Zealand may have escaped Russia's trade crackdown but companies need to be careful doing business there, a trade expert says.

New Zealand has been warned that continuing to trade with Russia could damage its international reputation.

Russia yesterday announced a ban on food imports from most Western countries, including the United States, Australia and the 29 member countries of the European Union, in retaliation for trade sanctions over Russia's actions in Ukraine.

New Zealand was not included in the ban and Russia has signalled it will increase cheese imports from New Zealand to make up some of the shortfall.

New Zealand is already a significant supplier of dairy products to Russia.

According to New Zealand Trade and Enterprise, New Zealand exported $193 million worth of dairy products to Russia in 2010 and supplied more than half of Russia's imported butter.

While the ban offers an opportunity to increase dairy exports to Russia, businesses have been warned of potential pitfalls in trading with countries that are under trade restrictions from other nations.

Sarah Salmond, head of international trade at law firm Russell McVeagh, said that under current law, New Zealand could impose trade sanctions against another country only on the recommendation of the United Nations.

However, the UN could not recommend sanctions against Russia because this required the unanimous support of the five permanent members of the UN Security Council, which included Russia, she said.

Legislation has been put before Parliament to allow New Zealand to unilaterally impose sanctions but it is in limbo.

"While it was completely legal in New Zealand to export to such countries . . . if it was illegal to do business with them in another country, you could have difficulty getting paid," Salmond said.

"For instance, you can't use US dollars to do business in Iran because you wouldn't get paid."

Waikato University agribusiness professor Jacqueline Rowarth questioned whether New Zealand should be doing business with Russia.

"We need to be looking carefully at the reasons others have stopped trading with Russia," she said. "We stood up against the Springboks in 1981 because we didn't like the way people were being treated."

Rowarth said New Zealand could experience "short-term gain, long-term pain" from continuing to send dairy products and other food to Russia.

"There could be repercussions for other trade if we just say we'll keep selling you our products."

Prime Minister John Key said he had received advice that New Zealand was not on Russia's banned list. "But whether that ultimately means we do sell more, we'll have to work through the fine print of that," he said.

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"I'd hate to think that New Zealand was doing something other countries weren't, but you've got to remember this is being driven by the Russians and not by us."

Key said refusing to sell products to a country out of protest was not a stance the Government had ever taken.

"We can have a look at that, and we can take some advice on that, but at this stage I suspect we would sell if demand was there."

New Zealand law did not allow for unilateral sanctions to be applied to Russia.

"And these are private sector companies, so we couldn't actually stop them from selling [their products] there if they want to."

- BusinessDay

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