The potential debt restructuring in Ukraine or commercial sanctions on Russia could only affect Romania to a very limited extent, the main challenge being to find an alternative to the gas supply coming from Russia, according to a recent report issued by lender BCR.

“For the next period, we see a limited impact on Romania from a possible default by Ukraine, but a belligerent rhetoric from Russia will result in a prompt response from investors, as we have seen already,” reads the BCR report, quoted by local Mediafax.

“So far, we have witnessed a rather limited contagion in the region, especially last Monday, when Vladimir Putin issued an ultimatum to the Ukrainian forces to withdraw from Crimea. The RON and PLN reacted quickly, but then climbed back after the Russian President reconsidered his previous warlike statement,” according to the report.

In terms of financial markets, the reports shows that the price of Romanian assets don’t present significant risks, in the absence of belligerent statements or a conflict escalation between Russia and Ukraine, which is less likely given the huge difference in the balance of military forces.

“The RON could suffer a slight setback, of 1-2 percent, if indeed things take a turn for the worse.  The exit of foreign investors from local bonds might put some pressure on the exhange rate, but the central bank should stand guard and make use of its managed floating regime in the case of volatilities running high”.

The report also analyzes the impact on Romania from eventual EU embargo on Russia, saying that, under a worst-case scenario, Romania might face several risks transmitted directly or indirectly via a number of channels, such as: shrinking exports, cutting natural gas supply, and impact on global commodity market.

The share of Romanian exports to Russia currently stays at 2.8 percent, while the share of imports is 4.1 percent. The trade deficit with the Russian Federation amounts to EUR 0.7 billion.

The main exporting industries are transport equipment (Dacia being seen as the main contributor), electric equipment, and chemical products, while in the case of imports, natural gas accounts for 88 percent of total imports from Russia, according to the BCR report.

The bank’s analysts concluded that the impact on Romania will be rather limited given the weak commercial relations between Romania on the one hand and Ukraine and Russia on the other hand.

“The automotive industry could be affected to a certain point (5 percent of exports go to Russia), as well as electric equipment (6 percent of exports to Russia), but not in a dramatic way. Romania’s energy security could be affected to a small extent in the short run,” shows the report.

However, according to BCR specialists, an open war between the two countries would dramatically change the entire picture.

Irina Popescu, irina.popescu@romania-insider.com