VietNamNet Bridge – The sharp ruble depreciation, plus the trade embargo imposed by the US and Europe, is expected to help Vietnam boost exports to Russia. However, there are still many barriers to enter the market.

Russia, in an effort to look for alternative supply sources, has decided to open its market doors more widely to Vietnamese farm and seafood produce.

It allowed seven Vietnamese seafood companies to resume exports to Russia, starting in August 2014. It has also urged Vietnam to increase exports to Russia.

However, analysts have warned that it will not be easy to make money with trade with Russia. The ruble depreciation is a major obstacle.

“The ruble depreciated by 60 percent before it bounced back recently. And it lost 20 percent of its value just within one week. How can Vietnamese make profits in such conditions?” said Dr. Dinh Cong Tuan, a senior researcher of the Europe Research Institute.

He went on to say that the payment mechanism is the biggest problem for Vietnamese businesses when doing trade with Russia. “The payment mechanism is loose. Therefore, exporters will suffer if they cannot protect themselves with strict provisions in the contracts,” he said.

An analyst, agreeing with Tuan, noted that the commercial contracts compiled by Russian partners are not standardized like the ones of western countries, because the Russian market is really “difficult to please” and “erratic”.

As a result, experienced Vietnamese exporters prefer goods bartering when doing business with Russians.

In theory, in order to minimize risks during ruble price fluctuation, Vietnamese exporters should  use a hard foreign currency instead of rubles for payment.

However, according to the analyst, it would be difficult to persuade Russian importers to accept this, if Vietnamese exports not internationally standardized do not have high technical content ratios.

Meanwhile, Tuan noted that Vietnamese tend to make light of the technical barriers used by Russia, saying that Russian customers are less choosy than western ones. However, in fact, it is very difficult to penetrate the Russian market.

Le Quoc Phuong, deputy director of the Vietnam Industry and Trade Information Center, also thinks that it would be difficult to overcome the technical barriers set up by Russia.

He also pointed out other problems which would hinder Vietnam-Russia trade.

“Russia mostly consumes wheat, while Vietnam mostly exports rice,” he said. “Vietnam is the second-largest coffee exporter in the world, but its products do not meet Russian standards. Russia sets higher requirements on seafood products than the US, EU and Japan, but it only imports products at low prices.”

Kim Chi