Occitania. What are the consequences of the war in Ukraine for the economy and agriculture?

The war in Ukraine will have major consequences for the regional economy. (©Pexels)

According to the region’s 2022 AP03-04 deliberation Occitaniathe conflict started in Ukraine on February 24, 2022 and the sanctions against the Russia to have major impact on the economy† They cause a rise in inflationby delivery problems and are already weighing on the reorganization of certain value chains.

The study of Bank of France published on March 13, 2022 advances forecasts at the national level under different scenarios. The first scenario, called ‘conventional’, assumes a decline in GDP growth of -0.2%; the second scenario, termed “worsened” (prolonged conflict, continued high oil price around $125, etc.), estimates the impact at -0.8% in 2022, with growth reduced to 2.8%.

1.4 billion euros export from Occitania to Russia

Some regional economic activities are already affected by the conflict and its effects.

In 2021 Occitania exported 1.4 billion euros to Russia, the 9th country for Occitania with 3.9% of total exports from Occitania. Of which 1.3 billion euros are “aerospace and aerospace products”, or 85% of exports (Airbus and its subcontractors, but also aviation maintenance activities).

Regional Council of OccitaniaDeliberation No. 2022-AP03-04

On the other hand, Occitania exported in 2021 for 80 million euros to Ukraine (0.2% of the exports from Occitania), including €25.6 million for “Various chemical products”, €19 million for “Aerospace and aerospace products”, €13.6 million for “Products of cultivation and animal husbandry”.

Occitania imports about 14 million euros from Ukraine (0.04% of imports), including 6.2 million euros “vegetable and animal oils and fats, cakes”, 2.6 million euros fruit products and vegetables, including juices, 1.1 million euros from wood, wooden objects.

Finally, with the exception of gas (settled in exchanges with the last country crossed), Occitania matters little to Russia (0.18% of imports): €60 million in 2021 (€81 million in 2020, € 99 million in 2019).

Energy challenges for Occitania

Russian gas imports currently cover 17% of the national supply and 8% for oil. However, gas and oil account for 62% of the energy consumption in Occitania.

Regional Council of OccitaniaDeliberation No. 2022-AP03-04

The regional advisers indicate that in this difficult context, the policy of energy sobriety and transfer to local renewable energy sources is therefore more topical than ever† They argue for accelerating the transition to 100% renewable gas (REPOS and ADEME trajectory), accelerating the exit from fossil fuels, following the development trajectory of green hydrogen, accelerating the transition to “material” sovereignty (recycling, eco-design…).

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Impact on steel and aluminum and titanium supplies

Companies in the energy sector are experiencing tensions in the markets for steel, aluminum and other strategic commodities, affecting lead times and costs.

The consequences of the conflict affect key regional economic sectors in different ways. According to the Occitanie region, certain problems have been postponed and will arise in the coming months (for example, the possible shortage of certain components, which themselves require stocks of rare metals, etc.).

The crisis highlights the issue of dependence on Russian supplies, especially titanium, of which Russia is the world’s largest producer (Russian giant VSMPO-Avisma controls 25 to 30% of the world market). Titanium and alloys, lightweight construction materials, are now widely used in the production of aircraft bodies and chassis, which make up up to 15% of the total aircraft. To illustrate: Russian titanium production covers 50% of Airbus’s needs.

Regional Council of OccitaniaDeliberation No. 2022-AP03-04

Although most major industrial groups multi-year contracts and have significant stocks (6-8 months) preventive measures have already been taken to strengthen stocks and to safeguard/diversify stocks.

To build sustainable global strategies, a specific national mobilization is being launched under GIFAS, an initiative that associates Airbus, Safran, Thales, as well as equipment manufacturers and subcontractors.

Space also affected

As for the partnerships with mainly Russian players, the impact on the space sector will be significant:

-About launchers policy: met the cancellation of Russian Soyuz rocket launches from Kourou (postponement of orbiting satellites – Galileo constellation, French Defence, ESA, etc.), implications for regional satellite manufacturers, etc.

– several scientific programs conducted with the Russian Space Agency.

deployment of the Oneweb constellation (carried by Airbus Defense and Space) – launches were also halted from Baikonur.

– equipment deliveries (eg: Russian FAKEL electric bow thrusters equipping many communication satellites).

The luxury market is slowing down

The Russian market is an important outlet for the French luxury sectors – representing Russian consumers 5 to 7% of the world market luxury – Special attention is paid to regional companies that export products with a high added value, with a positioning of excellence (eg leather goods).

Price increase for grains

French agricultural production is already affected by speculation and rising wheat and grain prices worldwide. Russia and Ukraine represent 30% of world exports of wheat (one tonne of wheat registered records, reaching more than € 400) and barley; Ukraine is also the world’s 4th largest exporter of butthe 5th in maizethe 3rd in barleyand has dominant positions in the global market in sunflower

The regional advisers indicate that grain producers will also be affected by the increase in the cost of energy and fertilizers, but to a lesser extent by the increase in selling prices. Effects on spring sowing and sowing intentions are likely to be expected.

Direct exports of agricultural products to Russia mainly consist of dairy products and beef, at limited levels that will only partially affect the export figure. Moreover, Russia does not represent a significant sales area for French wines (40th place and 15th country with imports via the re-export platforms of the Baltic States).

Regional Council of OccitaniaDeliberation No. 2022-AP03-04

Extra costs for fishermen

Seafarers who are paid on the basis of fishing turnover net of fees will be severely affected. The increase in the fuel price has a direct impact on their wages. For example, the 300 fishermen who are part of the
Trawler crews are seeing their pay cut by about $1,200 per month.

Increased risk of cyber attacks

As has been the case in previous conflicts initiated by Russia, the region warns of the risk of cyber attacks on European companies. This risk is identified as: increased threat strong in the period. Preventive instructions are widely distributed to strengthen the cybersecurity of companies in particular.

The Resources Platform Cyber’Occ is in particular mobilized to provide information and explain the precautions to be taken.

A collective and joint mobilization to support regional companies

As in the context of the health crisis, the State and the Region are working together to deal with the consequences of this conflict. In particular, at the regional level, monitoring of national measures and joint monitoring of the difficulties faced by businesses will allow adapting measures to support the economy and employment.

Regional Council of OccitaniaDeliberation No. 2022-AP03-04

As part of his regional recovery planthe region has exceptional economic instruments and mechanisms that are still in force and can be used at any time for companies affected by the consequences of the war in Ukraine.

The Region, which intervenes in the prevention, detection and treatment of difficulties, has reinforced the envelopes of the two main regional systems:
Oh The “Company in Trouble Contract”: the envelope of which is €10 million with the aim of preserving at least 2,000 jobs.
Oh The “Covid Cash Crisis Contract”: the envelope was increased to €5 million with the aim of helping a hundred regional companies.

Financing instruments adapted to business situations (deferred amortization, guarantee, reduced rates, equity loans, quasi-equity, etc.) were also strengthened through:

Oh Participation loans with deferred amortization and guarantee from the Region (via Foster up to 80%) which can cover up to 200 million regional corporate loans.
Oh Restoration Occitanie managed by the Region and BPI (term 10 years; grace period 2 years; rate reduced by 0.05%) with a distribution target of €100 million in loans (ticket from the Region: €25 million).

New financial consolidation tools

In addition to the Regional Agency for Strategic Investments (€50 million), the Region has recently set up two financial consolidation tools for defensive and protection purposes as part of its sovereign fund:

The IRDI IMPULSE Fund endowed with €50 million. Its purpose is to fund companies that are occasionally in trouble when they have viable fundamentals.
Recovery Bond Fund with M CAPITAL and insurers also endowed with €50 million. For example, the regional ETI ACTIA, which was hit by the crises, recently benefited from a €18 million recovery bond intervention.

A sovereign wealth fund operational in September

In order to accelerate the challenges of the energy transition, which are becoming more acute with the war in Ukraine, a sovereign energy transition fund will be operational in September 2022, of which 200 million euros should be allocated. the
international and national investments in Occitanie to increase the number of projects around renewable energyby hydrogenby wind at seaby photovoltaic, and so forth…

At the same time, work will be done with the government services on the regional version of the national resilience plan in order to properly articulate the national aid and that, complementary, of the Region. This presupposes an accurate identification of the shortcomings or actions of the state that must be completed before specifying the regional mechanisms.

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