Wed. May 18th, 2022

Labdien, prieks visus redzēt Rīgā.

Many thanks for your words of introduction, and thank you to AmCham Latvia for inviting me today.

Ladies and gentlemen,

Let me begin with some words on Ukraine. Russia’s brutal invasion continues to send shockwaves around the world.

I am proud that the Latvian people, the wider European Union, and our allies in the U.S. have shown such outstanding solidarity towards Ukraine.

We are committed to maintaining a strong and decisive response to this outrageous war.

Our response has been, and must continue to be, on all levels: economic, financial, political, military and humanitarian.

But we must do even more to help Ukraine defend itself and to win this war.

Because Ukraine is fighting for all democracies. It is fighting for its own freedom, but also fighting for the security of us all against tyranny.

First: Ukraine needs more arms, including heavy weaponry. Although arms deliveries have increased, there is still room to do more in this area.

Second, on sanctions against Russia: the EU has moved fast, working closely with the United States and other like-minded partners.

So far, the EU has imposed five packages of sanctions.

EU Member States are working on the sixth package as we speak.

For this package, the European Commission proposed:

  • a ban on Russian oil;
  • listing of war criminals;
  • further disconnection of banks, including Sberbank, from SWIFT; and
  • a further ban on propaganda.

Third, Ukraine needs emergency financial support that is estimated at EUR 5 billion per month. This support is vital for Ukraine’s survival.

On the EU side, we are advancing the next installment of the emergency Macro Financial Assistance programme. We plan to disburse EUR 600 million in the next few weeks.

We are closely coordinating the work on providing financial support to Ukraine with international financial organisations like the IMF and World Bank, as well as with our international partners, such as the United States and Canada.

Ukraine’s long-term reconstruction needs will also be massive.

The Commission is currently working on establishing a Ukraine Solidarity Trust Fund, which will be dedicated to rebuilding Ukraine, together with Ukrainians.

Russia’s aggression against Ukraine is also causing a substantial setback to the global economic recovery from COVID-19 crisis.

Governments, international organisations and businesses must therefore adapt, and work together to make the right decisions.

As ever, the transatlantic dimension will be central to this work.

During my recent mission to Washington D.C., a number of clear themes emerged, including the need to adapt global trade arrangements to the new reality.

This war has highlighted the need for resilient and diversified supply chains, notably for products such as fossil fuels, fertilisers and feed.

The increasingly turbulent geopolitical landscape means we must work harder to ensure reliable access to important inputs and critical raw materials.

The EU should therefore invest in its bilateral trade relationships, making maximum use of existing agreements, while pursuing new deals with trusted partners.

For instance, the agreement with Chile would be important to access lithium supplies. Similarly, the agreements with Indonesia, Mercosur and Australia, will be important both in terms of offering export outlets and for securing the supply of raw materials.

I hope we can count on the support of AmCham for this approach.

It is also clear that companies on both sides of the Atlantic need to work on managing risks in their supply chains, for example, by diversifying their sourcing.

We have in this context been working intensively with EU Member States and our international partners.

We are also frequently engaging with industry. This allows us to explain measures taken, support sanction compliance, and work together to plan for the future.

I want to thank Latvian and American companies for their support and for their willingness to take action.

I especially thank those companies who left the Russian market, putting profits after values, and I suggest others follow this example.

Furthermore, I commend those companies who already resumed business activities in Ukraine. This economic support is crucial.

We started to publish guidance in March 2022 to address the most Frequently Asked Questions from exporters, and we remain in permanent contact with competent authorities to support consistent application of measures.

We will continue to work closely with Member States and industry, and we are ready to revise the public guidance as appropriate.

Of course, the war, our sanctions and Russian counter-sanctions come at a cost to us, but this is the price we must be willing to pay to stop the aggressor, and defend our values and freedoms.

I remind you that Russia bears the sole responsibility for the current surge in energy and food prices, and for putting the global recovery at risk.

The IMF cut its forecast for global growth to 3.6% for this year, a steep decline from the 4.4% growth predicted in January. This highlights how much the war is slowing the global economy.

In the EU, we expect economic activity will slow down, but it will not stall.

The Commission will present its Spring forecast on May 16th, offering a country by country analysis.

Of course, the impact on Ukraine is most pronounced.

The IMF expects the country’s economy could shrink by as much as 35%. According to the World Bank, it could be 45%.

Within the EU, the IMF predicts that the Baltics and other Member States bordering Russia, Belarus or Ukraine will be the worst affected. At the same time, forecasts suggest that the Baltic countries are more resilient than in the past, and the impact on Estonia, Latvia and Lithuania will be similar to the Eurozone average.

So what we see is that EU countries most affected by sanctions are also the most vigorous supporters of Ukraine and strong sanctions.

It is because they know, from their own historic experience, that freedom has a cost. And they are ready to pay that cost.

If we look specifically at the impact of sanctions, no country will suffer as much as Russia.

Our preliminary assessment shows that the fall in GDP is estimated to be 46 times higher for Russia than for the EU in the medium term. Here, I am talking particularly on the impact of sanctions.

But one thing is for sure – we will continue to operate in high uncertainty and geopolitical volatility.

Decisions-makers will have to learn how to adapt.

Closer transatlantic ties and a renewed commitment to providing shared global leadership are critically important.

We succeeded in removing a number of trade irritants, notably grounding the Airbus-Boeing dispute and finding an interim solution on EU steel and aluminium exports to the U.S.

We agreed on a new global corporate tax architecture.

And we created new, forward-looking ways to cooperate, most notably by setting up the new Trade and Technology Council. The next TTC meeting takes place in France on May 16th.

Our cooperation under the TTC has already delivered concrete results, and paved the way for more efficient cooperation with the U.S. overall.

For example, the coordinated transatlantic response to Russia’s unprovoked military invasion of Ukraine would not have been as fast and smooth without the trust and good working relations built by the TTC.

We want to use the upcoming meeting to send clear signals, namely that:

We are determined to defend human rights and democratic values;

We are committed to increasing the resilience of our supply chains; and

We intend to facilitate bilateral trade and investment through deeper transatlantic cooperation, both bilaterally and through joint leadership at multilateral level.

Of course, I cannot disclose the outcomes of the TTC at this stage, but I can say that a lot of work has been done on supply chains, also focusing on specific sensitive sectors.

Second, as I said before, the war has influenced the TTC’s work, notably by making it a bigger priority to fight against Russia disinformation, and building a reliable and safe digital infrastructure.

Third, on the trade side, we are exploring tools that would avoid further trade irritants and barriers.

We are notably aiming for better cooperation on export controls to deal with sensitive and dual use technologies.

Let me turn next to the question of global supply chains. The last two years showed how sensitive global markets are to supply and demand imbalances in the pandemic recovery phase.

We have seen significant challenges in relation to meeting EU demand at competitive prices in sectors such as semiconductors, raw and construction materials, to start with steel and wood.

I see two main sources of pressure: as discussed, the war in Ukraine, but also China’s strict COVID-19 response, following numerous outbreaks of the Omicron variant in early 2022.

This has led to full or partial lock-downs in 45 cities – accounting for 40% of China’s GDP. This is disruption on a major scale.

In 2021, Russia remained the second largest gas and third largest oil producer globally. Correspondingly, the war leads to increases in energy and food prices.

To address these emergencies, the Commission is currently working on the RepowerEU proposal, to speed up making Europe independent from Russian fossil fuels.

We also published an important communication on global food security. Access to grains, especially wheat, has become a vital issue in many countries.

Let me state it loudly and clearly: Russia bears the sole responsibility for the current surge in commodity prices.

We see it already now.

Russia’s ruthless behaviour in blocking Ukrainian wheat exports from ports, stealing wheat from Ukraine, preventing sowing or even bombing warehouses hosting grain is simply criminal.

Russia’s war has also shown that the EU relies on Russia for supplies of a number of critical inputs – such as steel products, critical raw materials or fertilisers.

Once these are affected by trade disruptions, an increase in global prices for these products is inevitable.

Nevertheless, international supply chains continue to be an essential tool to sustain our industrial output.

Integration into global networks has improved EU competitiveness due to various factors including a wider market access, as well as the possibility of accessing new suppliers.

The key to improved resilience is supply diversification. As I mentioned earlier, further development of trade relations with trusted partners will play a key role here.

Of course, much of the responsibility for improved resilience of supply chains lies with industry itself.

So, I call on you to redouble your efforts to improve resilience, notably through supply diversification.

We will in turn support industry in a smart and targeted manner to remain competitive and innovative.

We will develop trading relationships with key partners, and we will not hesitate to enforce rules to ensure fair trade.

I will conclude here, ladies and gentlemen. I look forward to your questions and to a good discussion. Thank you very much.

Source – EU Commission