Ukraine Crisis: A Nordic Perspective

Ukrainian troops

The threat of economic sanctions imposed by Europe and the U.S. on Russia in response to the Ukrainian crisis is a cause of growing concern amongst risk managers in the Nordic region.

Russia is a key trading partner for Nordic-based multinational companies and wider economic sanctions could impact trade. Nordic companies are therefore bracing themselves for what could become an ongoing stand-off between Russia and Europe over the fate of Crimea and south-east Ukraine.

The European Union and the U.S. have begun imposing sanctions on Russian and Ukrainian individuals following the disputed referendum in Crimea. But as the diplomatic crisis intensifies, further economic action is possible.

Even though sanctions are currently limited, they could still affect multinationals with business in Ukraine. Tim Holt, Head of Intelligence for Willis’ risk and crisis management consultancy, Alert: 24, recently told Commercial Risk Europe: “Risk managers are advised to assess their business operations and relationships in Ukraine in light of increasing political sensitivity and the risk of enforcement action.”

“At the very least companies should be screening all third-parties to ensure they aren’t engaged in transactions with sanctioned individuals or companies owned or operated by them,” he added.

Political Risk Market Stable

Despite the political turmoil, exposures in Ukraine are unlikely to cause the political risk market any serious problems and the market is closed for any new transactions in Ukraine at the moment. Pricing remains stable in the political risk insurance market despite events currently unraveling in Ukraine.

Ramifications for Nordic Region

Nevertheless, Nordic corporates and financial institutions are increasingly expanding overseas, particularly in emerging markets and need to pay careful attention to global risk factors. Political and social instability—as we have seen in countries like Thailand and Brazil—and fiscal crises in key economies are among the biggest concerns.

The Arab Spring uprisings in 2010 and 2011, Argentina’s expropriation of Repsol’s stake in state energy company YPF and the current turmoil in Ukraine are some notable examples of this.

Despite an increasingly fraught risk landscape, the Nordics are well on their way to economic recovery—with the exception of Finland, which has a weaker economic outlook compared to its regional peers. In Sweden—the largest Nordic economy—GDP is expected to grow by 2.5% in 2014 and 3.33% in 2015 according to the European Commission’s Winter Forecast 2014. Denmark came out of recession last year after several years of stagnation.

The Nordic countries are all open, export-driven economies. A noticeable trend has been one of rising exports on the back of strengthening demand overseas, especially from emerging markets like China and Russia.

Nordic corporates and financial institutions understand that an increased presence in emerging markets are key to their growth prospects given emerging markets are expected to remain the key driver behind global economic growth in the years to come.

As a result of these developments we are witnessing growing interest for political risk, trade credit and terrorism insurance from our clients around the world, including in the Nordic region.


Azzizza stort BeskåretAzzizza Larsen joined Willis Financial Solutions in 2006 and specialises in providing emerging market political and credit risk insurance expertise for global financial institutions and corporations. She currently heads Willis’ political risk, trade credit and terrorism specialist unit in the Nordic region. Prior to joining Willis, Azzizza held various positions with the Government of Canada, including a stint as a trade credit underwriter at Export Development Canada, the export credit agency of Canada. Azzizza holds a BA in Economics and International Trade from the University of Waterloo, Canada, and a M.Sc. in International Relations from the London School of Economics.

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