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Guess who gets hurt with Russia's foreign food ban

Putin’s new restrictions on imported agricultural products may finally do what US sanctions haven't: make Russians mad.

Russia still life 2014 08 08Enlarge
Ah, the produce of France. Russia will be having none of it. (Philippe Huguen/AFP/Getty Images)

Leading Russian opposition figure Alexei Navalny said it best:

“In general, there’s a nice symmetry to it,” he tweeted. “Europe’s sanctions were directed against [our] high officials and oligarchs. Russia’s sanctions are directed against the citizens of Russia.”

Navalny’s remark caused a squall of patriotic objection, but even the experts agree he’s right.

A decree issued Wednesday by President Vladimir Putin banning almost all agricultural imports from countries that have sanctioned Moscow — including the United States, Canada, Australia and European nations — may generate a bit of dyspepsia in Russia’s trading partners. But it could produce a full-blown ulcer in Russia’s domestic markets, where shortages and price hikes will be the order of the day.

The Russian Twitterati were outraged:

That says: “So, Russia introduces sanctions against the entire civilized world.”

The ban will ultimately cause immense hardship for Russian consumers, said Konstantin Sonin, the rector of Moscow’s Higher School of Economics.

“The price hike in some categories will be steep — 5-10-20 percent,” he told the Ekho Mosvky radio station. “This is a big blow for the population, especially for those with lower incomes, because a larger share of their budget goes for food.”

This will have a knock-on effect that could depress the rest of the economy, he added, since people would have to cut down not only on food, but also on everything else.

“It means people will work more, relax less, take their children to the doctor less often,” Sonin said. “A rise in prices does not mean a less consumption [just] of that product, but less consumption of everything you consume.”

Nearly one-third of Russia’s food is imported

Russia imports about 30 percent of its food, according to Maksim Klyagin, an analyst on consumer markets with the Finnam Management, in an interview with the Ekho Moskvy station.

“We are pretty dependent on imports, especially in agriculture,” he said.

Russia has come a long way since the early 1990s, when stores were largely empty except for mammoth jars of pickled tomatoes and a few soil-spotted potatoes. That and the cases of frozen chicken quarters known as “nozhki Busha,” or “Bush legs,” because they were President George H.W. Bush’s aid package.

Now there are sushi bars and supermarkets stocked with everything from Australian lamb to French cheese and Polish apples. Even pet food is largely imported.

The ban specifically omits baby food, alcohol and any products Russians personally buy abroad.

That could bring a return to the hungry days following the Soviet collapse, when people came back from trips to Europe with brimming shopping bags filled with produce.

Russian authorities have been at pains to say they will make sure Russians don't suffer by importing food from friendlier countries.

“China has it all,” said Alexander Lukin, rector of the Russian Foreign Ministry’s Diplomatic Academy, according to Ekho Moskvy. “We can get everything from them, from apples to space technology.”

Argentina can supply meat, he added, replacing imports from Australia.

“Australia has shot itself in the foot,” he said.

Australia supplied more than $400 million worth of agricultural produce to Russia last year, including more than $300 million in meat, the Australian newspaper reported. Aussie producers are worried about the effects on their industry, and also fear that New Zealand will “get a leg in” the Russian market.

More from GlobalPost: Putin is much more cynical than you think

The European Union may also feel the pinch. Russia is the EU’s second largest market for food and beverages, importing close to $16 billion in 2013.

By contrast, US exporters shipped just $1.3 billion worth of food and agricultural products to Russia last year.

Switching to other exporters will be a problem, experts say.

“To replace the EU with Brazil or China will take time,” Pavel Grudinin, director of the Lenin Sovkhoz agricultural association, told Ekho Moskvy. “If we don’t have that time, you’ll see a huge jump in prices in the stores. And when prices rise here, they usually do not come down.”

The European Union expressed dismay at the ban, defending the EU’s own sanctions against Russia while deploring Russia’s retaliation.

“The European Union regrets the announcement by the Russian Federation of measures which will target imports of food and agricultural products. This announcement is clearly politically motivated… We underline that the European Union’s restrictive measures are directly linked with the illegal annexation of Crimea and destabilization of Ukraine… Following full assessment by the Commission of the Russian Federation's measures, we reserve the right to take action as appropriate.”

The tit-for-tat sanctions have come as Ukraine spirals deeper into chaos. Separatist rebels in the eastern part of the country are engaged in a fierce battle for territory with government forces from Kyiv. The US and its allies are convinced that Russia is supplying the rebels with weapons and military personnel, and have instituted sanctions to persuade Moscow to desist.

So far they don't seem to be working. Instead of backing down, Russia has sent 20,000 troops to its border with Ukraine, citing military exercises. On Wednesday, it instituted the agricultural sanctions.

Matthew Rojansky, director of the Kennan Institute at the Woodrow Wilson International Center for Scholars, said the West may be underestimating just how far Russia will go.

“Putin is prepared to bring the house down over Ukraine,” he said in an earlier interview with GlobalPost.

Putin’s popularity ratings have soared in response to his strong position over Ukraine — they now top 80 percent.

But if Russians object to higher prices at the grocery store, the house he topples may be his own.

Jean MacKenzie worked as a journalist in Russia and other parts of the former Soviet Union for more than a decade.

http://www.globalpost.com/dispatch/news/regions/europe/russia/140808/putin-russian-import-food-ban