Russia-Idaho trading in limbo due to unrest

Sanctions, political turmoil undermine progress made during last year's mission

zkyle@idahostatesman.comMarch 28, 2014 

Representatives from 17 Idaho businesses joined Gov. Butch Otter on a trade mission to Russia last November for the same reason: to drum up new business.

Jos Zamzow is chief operations officer at Dynamite Marketing, a Nampa company that makes and sells fertilizers, pet food and stock feed. The governor had previously used his influence to help Zamzow meet with eventual trading partners on missions to Taiwan and China, where Zamzow said his company exported $1 million worth of goods last year. Zamzow figured similar opportunities would develop with Russian companies after he met with pet company representatives and attended a pet product expo.

But that was before Russian President Vladimir Putin ordered troops into Ukraine and annexed Crimea, prompting the U.S. and European Union to place sanctions on Russia and leading President Barack Obama to declare, "Russia stands alone."

"We were in the process and getting very close (to start exporting to Russia), but I've put brakes on it given the situation with Putin and all of the uncertainty there," Zamzow said.

Russia was a promising destination for the trade mission. The U.S. exported nearly $11.8 billion in goods and services to the country in 2013. That made Russia only the 28th-leading destination for American exports, but the total was up 20 percent from 2012, when Russia joined the World Trade Organization.

Idaho exports to Russia remained flat at $20.5 million in 2013.

Russia appeared particularly ripe for the nine agriculture companies, including Heyburn's Double L, which makes potato harvesting and handling equipment.

Dan Piquet, who oversees Double L's sales to the countries of the former Soviet Union, said Russia has seven times the potato acreage of the U.S. and a demand for American equipment that he said is a better match for its growing conditions than products made in Europe.

Double L tallied about $14 million in sales in 2013, including $4 million in exports elsewhere. Piquet came home from the trade mission with a $145,000 equipment sale and leads that could generate $1.8 million in sales to Russia.

IN THE WAY?

So far, U.S. sanctions have made travel more difficult for members of Putin's inner circle but haven't restricted trade. Piquet said the current sanctions won't hinder Double L's export plans.

"As long as our governments can communicate enough to have exports and imports somewhat free, (the current sanctions) won't get in the way of anything," he said. "If Putin or Obama slap an embargo on trade in this little contest they're having, then it will absolutely get in the way."

The trade mission paved the way for one of Double L's competitors, Sugar City's Logan Farm Equipment, to increase exports to Russia, which already amounted to about $500,000 a year, said Clinton Arnold, national sales director. The Russian market has the potential to boost exports for the 105-employee company by 75 percent and total sales by 25 percent, he said.

Logan's exports have not been affected so far, but Arnold said he's delayed a trip to Russia and Ukraine to negotiate deals for at least a month because of the uncertainty.

"This is significant for us," Arnold said. "I'm monitoring it daily because this could have a big impact on our potential growth in that market."

Otter said the political tensions aren't insurmountable for business. Some Idaho companies are preparing for return trips to Russia, and representatives from Russian companies were in Idaho last week trying to hammer out trade deals, the governor said.

"There's no doubt that the Ukraine and Crimea crisis is a setback for expanding trade relations, mostly due to the uncertainty of the situation," Otter said. "However, we still have high hopes for benefiting from our new trade contacts."

WHERE'S THE BEEF?

Another company affected is Boise's Agri Beef Co., which buys, markets and sells beef from around the region.

In February 2013, Russia banned imports of meat with traces of ractopamine, a growth promoter commonly used in cattle feed in the U.S. The additive has been deemed unsafe for humans in Russia and other countries, including China and European nations, but remains legal in the U.S., Mexico, Canada and other places.

As a result, Agri Beef lost one of its top five export destinations, said Jay Theiler, Agri Beef's executive director of marketing. The company sold $10 million in beef to Russia in 2012.

Theiler went on the trade mission to talk with Russian officials about ranching practices that would satisfy the Russian concerns and allow sales to resume. He said those negotiations now depend on better political relations.

"Because of the current tensions, it would appear that nothing will occur in the immediate future in regards to reopening the market," Theiler said.

Theiler said the loss of the Russian market has been offset by the reopening of sales to Agri Beef's top foreign buyer, Japan, which recently approved ractopamine-fed beef.

Zamzow, meanwhile, said Dynamite Marketing will focus its resources on expanding trade in Taiwan and China.

Breaking into new export markets takes a lot of hours to set up and negotiate, he said. He and his people will stick to places they know.

"It doesn't make any sense to take a risk," Zamzow said. "The people already doing business there may continue. But there's just a very uneasy feeling about how they do business and how things get done there."

Zach Kyle: 377-6464@IDS_zachkyle

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