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Sanctions by Russia spark fear in whisky industry

THE Scotch whisky industry has expressed fears that sales in Russia will be affected by tit for tat sanctions between the European Union (EU) and the Kremlin, while highlighting the effects of the continuing crisis in Ukraine.

Concerns: Russia is a fast-growing market for some distillers and there are concerns across the Scotch whisky industry sanctions may hit them.
Concerns: Russia is a fast-growing market for some distillers and there are concerns across the Scotch whisky industry sanctions may hit them.

Russia responded to sanctions from the EU and the US over its role supporting pro-Moscow separatists in Ukraine by banning a range of food imports from both markets.

So far Scotch has not been included on the list of banned imports, but the possibility of sanctions being extended to alcoholic beverages remains open.

Billy Walker, co-owner of the BenRiach Distillery Company, said "we'd be very concerned" if a Scotch import ban is imposed.

He said: "Russia is not a big market for us at present, but it would be a worry were anything to impede the potential for growth in the future."

Russia is an increasingly important market for the Scotch whisky industry. The Scotch Whisky Association (SWA) said exports to the market grew by seven per cent on 2012 to reach £24.8 million last year, with distillers and blenders reporting increasing sales to Russia over the last decade.

Burn Stewart Distillers said Russia is its fastest-growing market for blended and single malt products in Europe, noting that the market has responded well to its recent launch of Black Bottle into the market. Managing director Fraser Thornton said: "It is a good market for us and it continues to be a growing market for us.

"We watch on with interest. It has not affected our business thus far, and our importer who is based in Moscow continues to be hopeful that it should not affect business.

"But it's a concern."

While the resolution passed by the Russian government leaves open the possibility for further import bans, Mr Thornton said banning Scotch imports might not prove to be popular with the "emerging consumer" in Russia.

Stewart Laing, co-owner of whisky blender and bottler Hunter Laing, expressed a similar view. He said it is business as usual so far in terms of exporting to Russia, a market "growing nicely" for the firm, with one consignment being dispatched today and another due to go out next week. But he said the situation was still a worry for the firm.

Mr Laing said: "The reality of it is I don't think even the British government can say what else the Russians may do. We are in the lap of the gods.

"We can only hope the economic situation makes the case for itself, that if people start doing big-time banning and sanctioning of goods then nobody is going to win.

"Perhaps the selectivity of what they are doing is just really a warning or a retaliatory [shot] across the bows."

A spokesman for the SWA said: "The list of products covered by Russian sanctions did not include imports of Scotch Whisky or other EU alcoholic drinks.

"Whilst that was welcome, the relevant Russian Government resolution does leave open the possibility of the list being extended to other products.

"We are closely monitoring developments and any potential expansion of the restrictions, in liaison with local importers and the UK Government."

Meanwhile, the ongoing crisis in Ukraine was described by one whisky-blending business as currently being a bigger concern to the industry than the prospect of Russian sanctions.

Fred Laing, managing director of Douglas Laing & Co, said: "We actually have bigger problems in Ukraine. We have actually got a couple of customers in the Ukraine and there is a fearfulness for us to ship there.

"To me it obviously smacks of a war zone scenario and that it could spin out of control.

"I'm very concerned about that; strangely enough [I am] less concerned about Russia."

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