These are particularly busy days in Glyvrar. It looks like all 400 inhabitants of this little town are on the move. One truck after another is driven up to the simple factory building beside Skalafjørður, the largest fjord in the Faroe Islands. Behind the factory, a small cargo ship is being loaded.
Although the autumn weather in the isolated North-Atlantic archipelago is anything but comfortable, the men at work are beaming with contentment.
They have good reason to be.
Their factory is the largest salmon farm in the Faroe Islands, and ever since the European Union imposed sanctions on Russia for annexing Crimea – and Russia replied with restrictions on E.U. imports – business on the island has been booming.
The reason is simple. Although the Faroe Islands belong to Denmark, they enjoy a substantial degree of autonomy and are not part of the European Union. This means that the 50,000 people who live there are not subject to the sanctions imposed by Moscow. On an island where harsh weather and hard work are givens, this is good news.
“I don’t believe in boycotts,” says Kaj Leo Holm Johannesen, the Faroese prime minister.
The Faroese are among those profiting most from the sanctions. Russians love salmon, especially fresh salmon, and until now have been getting it primarily from large Norwegian salmon farms such as Marine Harvest, the world’s largest supplier. But while Norway is not an E.U. member, it joined in the sanctions against Russia and so was also hit with the import ban.
“I don’t believe in boycotts.”
In the past twelve months, Russia imported around 140,000 tons of salmon, with 100,000 tons shipped from Norway. When Norway halted exports, it presented a huge opportunity to the Faroese, who are responsible for about four percent of global salmon breeding.
Suppliers on the island had previously been unable to compete with Norway’s prices because of their geographical location, but they’ve now emerged as the only alternative for Russian customers.
Exports from the Faroe Islands to Russia have risen seven percent in the third quarter, but the value of those exports has soared 92 percent. The islands are now Russia’s only supplier of fresh, refrigerated salmon. The other major salmon supplier to Russia is Chile, but its fish must be frozen to make the long journey north, and this is much less popular with consumers.
Freshness has its price. While the Russians were paying about $5 per kilo for Norwegian salmon in July, salmon from the Faroe Islands is costing them $9 per kilo. Bakkafrost, the largest producer on the island, is cashing in. The company raises fish up to 1.5-meters long in the many fjords around its headquarters in Glyvrar, but until recently, exports went mainly to the European Union. Exports to Russia were only four percent last year.
“Now, it is 24 percent,” said Regin Jacobsen, Bakkafrost’s chief executive officer. He is well aware of the dangers raised by dependency on one major customer, particularly since sanctions against Russia are limited to one year, for now. So the firm is not ramping up production, despite the high prices salmon fetches in Russia.
“We don’t want to be dependent on a single market. That is why we won’t be further increasing our volume of exports to Russia in the fourth quarter,” he explains.
Regardless of how long the salmon boom lasts, it’s been very profitable for the company’s stockholders. Bakkafrost shares have soared by almost 94 percent since the start of the year.
Shares in Marine Harvest have also surged. Their increase of 51 percent is a result of the company compensating for the losses from the Russian market with additional exports to Europe and North America. Additionally, its subsidiary on the Faroe Islands continues to deliver to Russia.
Muscovites are very pleased with their new Faroese suppliers. The Lotte Hotel, one of the city’s most luxurious where a night in the five-star royal suite goes for almost $15,000, is well-known for its French and Japanese cuisine. Until August, guests were served French cheese and Norwegian salmon. Today, the cheese and fresh fish come from the Faroe Islands, though prices have risen by about 30 percent.
“This little country has proven to be a good alternative to France for us,” says Morten Andersen, general manager of the luxury hotel. The quality is right, he adds, and customers haven’t noticed any difference in flavor.
Fish processing Faroe-style.