Norway still nets Ukraine most fish, eyes nation’s grain for raising seafood

Ukraine's appetite for seafood should be higher than the 348,000 tons it imported last year, given its population of 43 million people.

Yet markets have shrunk as Russian forces occupy 7 percent of Ukraine’s territory, with importers selling less fish over the previous year amid the hryvnia’s declining value. As the nation’s top fish supplier, Norway’s seafood exports to Ukraine were worth only $120 million last year, falling by 33 percent compared to 2013.

Also not helping the situation are non-transparent customs import values, bribe-taking from state veterinary agencies that issue licenses and unpredictable import duties.

Seafood consultant Christen Mordal, who also serves as the vice president of the Norwegian-Ukrainian Chamber of Commerce, says corruption in Ukraine’s customs service drives up the price of Norwegian imports. Working in the Ukrainian seafood business since 1997, Mordal says “this is a huge problem for Norwegian exporters and not least the Ukrainian importers.”

Before last year’s downturn, trade between Ukraine and Norway had grown for much of the past two decades in seafood. Norway mainly exports pelagic fish such as herring, mackerel, and capelin, but more expensive salmon and trout are also in the mix. Norway exported 2,700 tons of salmon to Ukraine in January-May of this year, according to the Norwegian Seafood Council.

An additional 10-percent duty on all agricultural imports, including fish, imposed in February hit seafood companies as well.

The war also hurts business.

Trond Davidsen, deputy managing director of the Norwegian Seafood Federation, says that huge chunks of the Ukrainian market in Crimea and parts of Luhansk and Donbas oblasts are out of the picture now.

“Some parts of Ukraine just disappeared… some products were confiscated by the pro-Russian army forces,” Davidsen says.

The financial crisis makes it even more difficult for companies to receive credit insurance from the Norwegian Guarantee Institute for Export Credits, a government agency, when doing business with Ukrainian importers. The agency allows Norwegian companies to export to Ukraine with less risk while Ukrainian importers can “receive the fish and then either process or sell it and then pay back afterwards,” Mordal says.

The seafood industry in Ukraine is showing some signs of recovery, however.

One reason is that Russia banned Norwegian fish on Aug. 7, 2014, in retaliation for the Scandinavian nation’s support of sanctions against Russia for its war against Ukraine.

“Ukraine has become much more important,” Mordal says. For example, Ukraine is now Norway’s leading partner in frozen herring imports, replacing Russia.

Pavlo Solovyov, CEO of Egersund Ukraine, a seafood importing company, has been doing business with Norway since 2009.

“The beginning of the year was very tough but now it’s much better,” Solovyov says. “I think the end of the year will be a little better than 2014.”

Thirty percent of Egersund’s shares belongs to Solovyov whereas the rest belong to Norwegian Pelagia, a leading Norwegian producer of pelagic fish such as herring and mackerel. Egersund is mostly a wholesaler. Employing 70 workers, it sells about 10-20 tons per transaction, and operates two warehouses and a fish shop.

If Ukraine gets back on its feet, companies such as Egersund will have greater opportunities to prosper, since Norway’s fish industry is booming.

Despite losing its main customer, Russia, Norway had a 12 percent increase in seafood exports in 2014, compared to the previous year. During that year, the country exported 2.7 million tons of seafood, or $10 billion annually, to 170 markets.

In turn, Richard Scarborough, counselor of the Norwegian Embassy in Ukraine, says that Norway is interested in Ukraine’s grain. “Norway is not just importing for the needs of its population, but with the dramatic increase of fish farming there’s a large need for fish food,” he said.

To cut on transportation costs, some are thinking of raising fish domestically in Ukraine. “There are projects going on right now with the aim to start fish farming in Ukraine,” Mordal says.

One such project was about to be launched last year in Donetsk Oblast, but had to be canceled because of the war.

The Norway-Ukraine formula works well for both countries in the seafood industry. Norway exports the raw fish, and Ukraine’s cheap labor processes it and there’s even talk of having Ukrainians process seafood for the European Union, Mordal says.

Despite the challenges, Norwegian Seafood Federation’s Davidsen sees hope in the bilateral cooperation. “We shouldn’t be surprised if more (Norwegian) exporters are looking more deeply at the Ukrainian market,” he says.

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].