How sanction-hit Latvia turned into a whiskey hookup for Russia

With a population of less than 2 million, Latvia is among the smallest members of the European Union and is now Russia’s top supplier of whiskey, despite the country being under heavy sanctions.

Russia imported the amber-colored alcohol for about €244 million ($266 million) in the first nine months of last year.

Roughly 75% of that total originated in Latvia, based on data released by the Russian news agency RIA Novosti.Lithuania, another Baltic nation, finished in second place, selling Russia whiskey valued at €27 million.
Even though Latvia doesn’t produce much wine compared to the world’s leading producers, it has surpassed Italy to become Russia’s top supplier despite its cold environment. Italy shipped €73 million of wine to Russia last year, while Latvia sold €68 million.

Over half of Latvia’s €1.1 billion worth of exports to Russia in 2017 were made up of beverages, spirits, and vinegar, according to the official statistics webpage run by the government.
Distinct paper trail but same supplier networks

Naturally, Latvia and Lithuania are not suddenly world-class producers of wine and whiskey. Actually, Western European enterprises registered in Latvia sell a significant portion of the alcoholic beverages that are delivered from Latvia to Russia.

According to Bank of Latvia economist Matiss Mirosnikovs, “there seem to be some larger companies from Western European countries that simply use Latvia as a kind of distribution center,” DW was informed. “So it’s not necessarily about production by Latvian industry, but about re-exports.”
In remarks to RIA Novosti, Veniamin Grabar, the CEO of the Russian spirits import business Ladoga Group, reaffirmed this. “While documents used to say that imports to Russia simply went through Latvia or Lithuania, now the Baltic states appear as the destination of the export,” he told Reuters. “Deliveries to Russia are then made from there.”

The two experts claim that not much has changed in terms of real supply networks. Russia purchases goods from the same manufacturers. The inclusion of Latvia as the destination country is the sole change. The exports to Russia are then handled by businesses in the Baltic state, together with the necessary customs documentation.

Western businesses fear harm to their reputations
These shipments do not, strictly speaking, contravene the sanctions that the EU placed on Russia after its full-scale invasion of Ukraine two years ago. However, Mirosnikovs contends that it is evident that a lot of Western European businesses are worried about their reputation since they feel the need to utilize Latvia as a type of distribution hub.

There are certain businesses that are in danger of dying. Some companies’ sole clients are in Belarus and Russia. Thus, they are unable and unwilling to just stop trade, the economist said.
The moral dilemma of doing business with Russia while it is at war with Ukraine still exists. For example, the Moral Rating Agency, located in London, was established in the wake of Russia’s invasion of Ukraine to monitor the compliance of firms with their exit commitments.

As to their statement, one of the major providers of alcoholic drinks to Russia is the French enterprise Pernod Ricard, which is recognized for its products like Absolut vodka and Jameson Irish whiskey.
Pernod Ricard is reportedly preparing to terminate its commercial relationship with Russia, according to Russian media reports. However, the French firm said in a news statement that it would take many months to complete, and that in the meanwhile, Russian staff would continue to get their salaries. DW requested a statement from Pernod Ricard, but they did not provide one. Other businesses who sold spirits to Russia also didn’t do so.

Moral concerns
Latvia and Lithuania have been among Kyiv’s strongest allies since the beginning of the conflict. That’s why the booming alcohol trade is so unexpected. It is a challenging square for some people to circle.
The chairman of the Latvian Alcohol Industry Association (LANA), Davis Vitols, presented a novel defense of sales: He claimed on Latvian television that “alcohol is perhaps really the one product that can still be sold because it is harmful to health if consumed in excess,” emphasizing that this was his personal opinion and not the association’s.

According to Mirosnikovs, there are two perspectives on the situation: Receiving funds from Russia allows them to reduce their military spending, which is a positive development. However, it permits the affluent to live as regular a life as possible, which makes them unwilling to advocate for change.

Is alcohol the Baltic line’s blind spot when it comes to Russia?
The Baltic nations’ overall policies are in sharp contrast to the growing spirits trade with Russia. Former Soviet Union members Latvia, Lithuania, and Estonia—all of which have sizable populations that speak Russian—have vigorously advocated for EU sanctions.
They were alerting other EU members to the possibility of Russian President Vladimir Putin being more belligerent well before the conflict.

The Russian language is also losing favor in Estonia and Latvia, where instruction is now limited to the official tongues. Even if a person has lived in Latvia their whole life, they still need to learn at least a basic level of Latvian in order to be allowed to stay there without having to be deported.

Is it rational to take harsh measures against Russia and Russian culture while continuing to market and profit from alcohol exports?

Citing time restrictions, the Latvian Ministry of Agriculture turned down DW’s request for an interview.
Ilze Indriksone, a former minister of economics in Latvia, told regional media that the government has long urged businesses to renounce their dealings with Belarus and Russia.
“We have also discussed physically closing the border and preventing land-based transportation,” she said. “But if we close the border and none of the other countries bordering Russia and Belarus do, it won’t achieve anything.”