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Situated in the heart of Europe and connecting the eastern and western regions of the continent, Austria has been and continues to be a dynamic trading hub along the Danube.
Vienna, its capital, has long facilitated constructive dialogue within the international community on a wide range of global issues. Recently, Vienna hosted the European Bank for Reconstruction and Development (EBRD) Trade Facilitation Program (TFP) conference, focusing on the latest trends and advancements in trade finance in EBRD operational regions and beyond.
At the EBRD’s TFP Trade Finance Forum, TFG’s Deepesh Patel spoke with Aurel Bernat, Executive Director of Financial Institutions and Investor Relations at Banca Transilvania, Oleksandr Shchur, Board Member of JSC Ukreximbank Ukraine and Ženja Radanović, Head of Documentary, Business Department. at Eurobank Direktna ad Beograd, Serbia.
Together, they discussed the current dynamics of trade finance in Eastern Europe, the impact of geopolitical tensions and the central role of the EBRD TFP in supporting trade activities in the region.
Eastern European Trade Ecosystem: The Unique Advantages of Romania, Ukraine and Serbia in Trade Finance
Situated at the crossroads of the Balkans, Central Asia and the Middle East, Eastern Europe has strategic trade corridors connecting Europe and Central Asia to the Black, Caspian and Aegean Seas.
This geographic positioning has long attracted interest from businesses, policy makers and financial institutions, recognizing the region’s potential for commercial growth. Each country in the region capitalizes on its unique strengths, developing tailored trade finance strategies and initiatives.
Romania, the largest of the Balkan countries, occupies a central position in Eastern Europe, with its Black Sea coast serving as a gateway for trade with the world. Bernat added: “The final course of the Danube is in Romania and then flows directly into the Black Sea. From this, we can be extremely optimistic about trade financing in Eastern Europe.”
Furthermore, he reinforced Romania’s exceptional position in terms of trade finance, especially in light of emerging opportunities, saying: “Romania has increased its GDP over the last two decades alongside a daily increase in commercial exchanges. We now have a GDP of around 300 billion euros and more than 200 billion euros in trade.
On the other hand, Shchur provided a comprehensive comparison of Ukraine’s trade position before and after the Russo-Ukrainian War. Traditionally, Ukraine held a leading position as a major trading nation, focusing mainly on exports.
The country’s extensive infrastructure, including ports, airports and roads, has been meticulously developed to position Ukraine as a vital transit hub connecting Europe and the East.
However, the war between Russia and Ukraine has caused seismic changes in the country’s business landscape. Despite the disruptions caused by the war, Shchur drew attention to the enduring relevance of trade finance, saying: “Currently the situation is different in terms of volumes, geography and products, but in terms of trade finance , it continues to be a problem. important instrument to support trade.
Furthermore, Radanović illustrated Serbia’s strategic advantage, located at the intersection of Central and Southeastern Europe. She highlighted the remarkable boom in the country’s exports, mainly to EU countries, coupled with the proliferation of European companies engaged in local production.
She said: “The number of European companies producing in Serbia has increased significantly, which has had an impact on the level of exports in total foreign trade. »
“The overall foreign trade of the Republic of Serbia, from January to July 2023, amounted to approximately 38.3 billion euros, of which 21.4 billion euros attributed to imports and 16.9 billion euros to exports.”
Radanović also highlighted the considerable presence of branches belonging to EU companies that have established production facilities in Serbia. These companies, she explained, operate with the aim of exporting their products to their parent or sister companies within the EU.
She added: “In Serbia, we have many branches of EU companies that produce in Serbia, with the aim of exporting these products to their parent or sister companies located in the EU, so in this regard, They do not need any financial instrument.
She further highlighted that the European Union is a key trading partner of Serbia, accounting for an impressive 60% share, noting: “Since most of the trade is with our partners and neighboring countries , there is a significant level of trust. This exists so local shipments are mainly arranged on either an open account or advance payment basis.
Geopolitical changes: impact of conflicts on trade
Following the war between Russia and Ukraine, Eastern European countries find themselves at a critical juncture. supply chains and financial strategies are closely linked to geopolitical events.
When examining the impact of the Russo-Ukrainian War on the region’s trade dynamics, it is evident that Romania occupies a distinct position. Bernat discussed the country’s trade partnerships and the distribution of exports, saying that “70% (of exports) are directed to the European Union.”
Recently, Romania strengthened its working partnership with Ukraine, allowing the export of grain through the port of Constanţa, which means an important change in trade routes.
Bernat emphasized: “Today, the port of Constanţa is extremely important for all exports that pass through Romania from Ukraine,” highlighting the central position that Romania currently plays in regional trade.
For Ukraine, Shchur highlighted the broader challenge of reducing risk and disrupting correspondent banking relationships.
He highlighted the initial obstacles caused by the war, as correspondent banks struggled to understand the situation, saying: “With the war, we had an initial period where our correspondent banks were trying to grasp the situation and understand what was happening. But we never actually stopped the payments. We have never stopped trading, whatever it costs us in terms of operational activity.
This strong commitment to maintaining financial flows even in times of crisis shows the resilience of not only the Ukrainian trade finance landscape, but also of Ukraine as a whole.
At the same time, Radanović detailed Serbia’s dependence on energy imports, particularly crude oil and gas, which makes the country very vulnerable to supply disruptions. Ongoing tensions have profoundly altered import preferences, leading to changes in sources of supply, with associated rising costs.
She added: “The war between Russia and Ukraine has changed oil and gas import preferences, for many countries and not just Serbia, forcing us to import oil and gas from other countries. suppliers, causing a significant increase in costs. »
Multilateral support: feeding communities
The importance of multilateral institutions in strengthening trade networks cannot be overstated. The European Bank for Reconstruction and Development’s (EBRD) Trade Facilitation Program has played a key role in improving trade finance operations for several financial institutions.
Bernat highlighted the role of the EBRD program in building strong communities within the banking sector, saying: “What the EBRD emphasizes is building a community of banks, customers and everyone to connect with each other and do business together. »
According to Bernat, this approach has proven instrumental in facilitating smooth exchanges, creating an environment in which all parties can collaborate effectively.
For his part, Shchur highlighted the invaluable support Ukraine received from multilateral institutions and international financial institutions (IFIs) during wartime.
He noted that despite the limits imposed by the IFIs, transactions were never interrupted and the country obtained access to various vital credit lines, once again highlighting the commitment of multilateral institutions to the trade facilitation.
He said: “We have access to the EBRD TFP line, we have access to the IFC TFP line, we run a credit line with the World Bank which provides access to long-term financing. financing for exporters it is therefore dedicated to the facilitation of trade as well as with the EIB.
Furthermore, Radanović highlighted Eurobank Direktna’s proactive approach to leveraging the EBRD’s PTF. As one of the leading financial institutions in Serbia’s local market, Eurobank Direktna’s focus on guarantees and letters of credit for exporters has been complemented by the EBRD programme, a partnership which has seen a consistent engagement in numerous transactions with high levels of limit utilization over the years. .
She said: “In terms of trade finance, we mainly focus on guarantees and letters of credit primarily for exporters, but we also provide import-export financing, and in this regard we benefit from significant support from the EBRD.
Furthermore, she noted the bank’s active involvement in various balancing instruments, particularly when clients seek to establish collaboration with new providers, often taking on the role of issuing bank to facilitate smooth transactions.
Furthermore, this collaborative approach extends to green initiatives and transactions, highlighting Eurobank Direktna’s commitment to supporting sustainable energy projects. According to Radanović: “Our bank supports green energy projects. We even won the Green Deal of the Year award from the EBRD.”
