NEWS ANALYSIS UKRAINE WINE AS A WEAPON OF WAR 5/14 MEININGER’S WBI 5/14 MEININGER’S When Ukraine moved closer to the EU, Russia annexed Crimea, where much Ukrainian wine was produced. This action may open doors to EU wine imports and improve local wine quality. Panos Kakaviatos explains a complex situation. as illegitimate. Shortly afterwards, Russian troops moved into Crimea. Nevertheless, the EU association agree- ment was finally agreed in September 2014. It promises to give Ukraine access to the 28-nation bloc’s 500m consumers, with binding provisions including a “gradual ap- proximation” with EU trade norms, such as standards, intellectual property rights, trade facilitation, public procurement, and competi- tion. But conflict rages on in the south-east- ern part of Ukraine. ‘For Paint’: citizens request money so they can paint the road railings in Ukraine’s national colours. Moscow is treating Crimea as a show- case region, determined to prove that the t was a surreal August evening, dining at appeal on its website to explain why it could Crimean incorporation will be beneficial for a restaurant in Kyiv just as rocket launch- no longer follow government rules requiring the region’s economy. A new Crimean com- Iers, tanks and troop transport trucks importers to send excise stamps directly to pany called the Crimean Buro of Grapes rumbled along Bohdana Khmelnytskoho producers. and Wine (Krymskoe buro vinograda i vina) street, near the national opera house. Some The law obliges importers to send stamps created by Boris Titov, the owner of the Russian vehicles were to be part of the country’s Inde- to producers who then send the stamps to sparkling wine company Abrau-Durso, and pendence Day parade on 24 August, complete logistical platforms. Bureau Wines sent their Yanina Pavlenko who runs Novy Svet, will with military bands and troops. Others were stamps directly to logistical platforms and the aim to grow and find growers for enough on their way to conflict zones in the south- authorities thought that the company was grapes to supply the Russian market. eastern part of the country. somehow cheating. “Often importers end up But Russia’s attempt to use wine as a weap- Although most people in the Ukrainian paying off the government to avoid trouble, on against EU wines could backfire. Scholars capital – which accounts for about half of the but since Maidan, there is a feeling that we like Ewa Fischer and Jadwiga Rogoża of the country’s wine sales – cheerfully went about can protest corruption more openly,” said Ro- Centre for Eastern Studies, an independent their summer business, enjoying sunny dionova. public research institution based in Poland, strolls, dining out and buying wine, the con- claim that “the decision to annex Crimea was flict was on everyone’s minds. An agreement brings war taken off the cuff, with no calculation of the Citizens painted highway dividers, street costs of integrating it with the Russian legal, railings and sidewalk grates in the blue and At the end of 2013, hundreds of thousands political and socio-economic space.” They ex- yellow colours of the national flag. At the of Ukrainians protested in Kyiv in what be- plain that the expenses triggered by Crimea’s cashiers of the city’s large wine emporium, came known as the Euromaidan movement. integration will coincide with the deteriorat- Good Wine/Good Food, customers dropped They began after former President Viktor ing economic situation in Russia, aggravated money into a donation box for Ukrainian sol- Yanukovych postponed the signing of the by US and EU sanctions, and that this may diers fighting in the Donetsk and Luhansk Ukraine-European Union Association Agree- force Russia to postpone or even give up some regions. ment under intense economic pressure from of its ambitious investments in the peninsula. Wine journalist Ievgeniia Rodionova said Russia, even though he had considered this Indeed, a report in early October by Oil that the Maidan protest movement had in- agreement one of his key objectives. Price.com states that “oil prices are inflicting spired a grass roots campaign to fight cor- When Yanukovych fled Kyiv in February, deeper economic pain on Russia’s economy, ruption, which analysts claim is one of the the Ukrainian parliament deposed him the which is already reeling from EU and U.S. leading impediments to importing wine. Just next day, and the next week appointed an sanctions” and “the Kremlin is planning for in front of the donation box, Rodionova ex- interim government. Although recognised by leaner times. With oil revenue accounting for plained how Bureau Wines, the store’s parent the US and the EU, Russia and a few other around half of the country’s budget, any dip importing company, recently posted a public countries condemned the new government in prices has a ripple effect.” 6 UKRAINE Unexpected win Ukraine, Russia and Kazakhstan. Ten years ago, (Premier Grand Cru Classé B) in Saint-Émilion, one euro equalled 6.8 UAH or hryvnia. In 2009, as well as less expensive cru bourgeois-level But Ukraine’s loss of Crimea, according the rate grew to about 11 per euro. In August wines. 5/14 MEININGER’S WBI 5/14 MEININGER’S to importers, may be their gain. About 35% of 2014, the exchange rate was nearly 18 per euro. Pfeiffer is nonetheless optimistic about pros- Ukrainian wine was produced in Crimea and “That is really hurting us,” Zorya said. pects for the Ukrainian market because “the importers want to plug that gap, provided ex- Despite this, and the war, Ukrainians have people I have met in Kyiv are very westward- change rates settle. been buying more wine – with imports grow- oriented and they appreciate wine more and Donning a ‘F**k Putin’ bracelet this past ing steadily through 2013, if only remaining a more.” August, Christina Xinias, owner of Dolmart very small part of the pie. In 1993, for example, Wine – Ukraine’s oldest fine wine importer, Ukrainians drank about half a litre per capita Export possibilities founded in 1993 – sees a potentially brighter per annum, with vodka about 40 litres per an- future now that Crimea is no longer part of num. By 2012, wine consumption rose to 7.5 L But while the conflict may have cleared the Ukraine and calls that “bigger news than the per capita, according to Jenia Nikolaichuk, an market of Crimean wines, it’s also meant that EU Agreement”. independent wine consultant who used to work Ukrainian producers have lost access to their “If you look at total wine consumed in with Xinias. Russian market, and will need to export to Ukraine, 95% is home grown and this is the Market observers point to the success of the West to make up the shortfall. This means figure that is going to drop this year – and it Italian wines in recent years. Brussels-based Ukrainian wine producers will have to raise is mostly Ukrainian s**t that we have to put market researcher Andriy Boytsun echoes other standards considerably. up with,” she said. “Thankfully we are not get- market analysts in saying that Italian wines are Many of Ukraine’s 52 wine producers are ting any more because it comes from Crimea, the “most popular dry wines” from the EU, after outside of Crimea and these need to improve so this is the interesting point for us, because he studied the Ukrainian wine market recently. quality to sell in the EU, said Igor Nykolyn, we can make more volumes and take more of He stresses that travel by younger Ukrainians president of the association of Ukrainian wine the market share.” has led to an interest in EU wines, and credits producers. “If you look at our vineyards, most Statistics indicate that the share of imported Italian wines for being both competitively priced are huge and date from the Soviet era, each with wines is still a distinct minority, but numbers and engendering an appeal for Italy as a travel more than 1,000 hectares per producer making are growing, according to International Wine destination. what I would call industrial wines that would & Spirit Research (IWSR). In 2004, Ukrainians Several Kyiv department stores feature a not meet European standards,” he said. consumed nearly 1.85m 12-bottle cases of im- wide range of price points and increasingly in- Needed improvements include a better sys- ported wines, mainly from Moldova and Geor- ternational wine selections, from Israel and Ar- tem of quality control that includes “match- gia. By 2009, total imported wine consumed gentina to Italy and Germany. Take Fourchette ing proper grape varieties to terroirs, creat- amounted to just under 2.47m cases. Further- Gourmande, an upscale food shopping centre ing and respecting origins of wine production more, the percentages of EU imports are ris- with a wine section that included humble Chil- such as geographical names and using mod- ing, while those from Moldova and Georgia are ean Cabernets for 50 UAH ($3.85) a bottle to ern technologies so that we can meet Europe- decreasing. Mouton Rothschild 1998 for 14,000 ($1,080.00). an standards to export our wines,” explained And while overall wine consumption fell Nikolaichuk – who holds a WSET level 3 and Nykolyn. He also said that current Ukrainian from its 2010 peak of over 34.6m cases to just has invented a Ukrainian wine game similar to legislation allows hybrid varieties that are under 21m in 2013, consumption of imported Trivial Pursuit – says that the average price of prohibited in the EU. wine increased even in the wine purchased is about 60 The EU agreement will take time to take ef- troubled year of 2013, reach- UAH and includes wines like fect, experts say.