Moscow retaliates with import ban on EU, US food

  
[Photo: Shutterstock]
[Photo: Shutterstock]

Russia has escalated an economic battle set off by the crisis in Ukraine with a ban on all food imports from the United States and on fruit and vegetables from the European Union, dropping any pretence these might be for food safety reasons.

The import ban, reported by state news agency Ria Novosti on Wednesday (6 August), comes after Russia President Vladimir Putin ordered retaliation for Western sanctions against Moscow.

Russia is a major buyer of European fruit and vegetables but ranks 23rd among buyers of food from the United States, accounting for less than 1% of America's farm exports.

Putin signed a decree on Wednesday halting or limiting imports of agricultural products from countries that have imposed sanctions on Russia, ordering his government to come up with a list of imports to be banned for a year.

"[All food products] that are being produced in the US and being supplied to Russia will be banned," Ria Novosti quoted Alexei Alekseenko, spokesman for the VPSS food standards agency, as saying. "Fruit and vegetables from EU will be covered by the total ban," he added.

No one was available for comment at the VPSS (Phytosanitary Surveillance Service), but earlier Alekseenko told Reuters that retaliatory action would be "quite substantial" and would include US poultry. Russians have a strong appetite for US chicken, buying 276,100 tonnes of it last year, or 8% of US exports.

White House says ban will backfire

The White House said the ban would backfire, hurting Russian citizens by pushing up inflation.

"Retaliating against Western companies or countries will deepen Russia's international isolation, causing further damage to its own economy," said Laura Lucas Magnuson, a spokeswoman for the White House National Security Council.

A spokesman for the European Commission in Brussels said he had no immediate comment.

Russians bought 21.5% of EU vegetable exports and 28% of the bloc's fruit exports in 2011.

The US National Chicken Council and Poultry & Egg Export Council said it did not expect a great impact on the industry from the ban, while farmers said ordinary Russians could suffer.

"This is clearly a political move. It is unfortunate that the biggest losers in this will be Russian consumers, who will pay more for their food now as well as in the long run," said Bob Stallman, president of the American Farm Bureau Federation.

In the past, Russia has banned a variety of US foods, citing health and safety concerns, but Wednesday's action makes its language on terms similar to that of the United States and European Union, which have imposed sanctions on Moscow.

Explicitly banning a country's products for political reasons would violate the rules of the World Trade Organisation, which Russia joined in 2012.

After Putin issued his decree, the VPSS said it would discuss an option to increase food imports from Ecuador, Brazil, Chile and Argentina with the countries' ambassadors on Thursday.

Brazilian producers could send an additional 150,000 tonnes of chicken per year to Russia to make up the shortfall, Francisco Turra, president of the country's animal protein association, ABPA, said in Sao Paulo.

Washington and the EU first imposed sanctions after Russia annexed Crimea from Ukraine in March and tightened them after a Malaysian airliner was shot down last month over territory in eastern Ukraine held by pro-Moscow rebels. Moscow rejects Western allegations that the rebels used a missile it supplied to bring down the airliner, killing all 298 people on board.

East-West relations soured further on Wednesday as NATO said Russia might use the pretext of a humanitarian mission to invade eastern Ukraine.

Until now, smaller or poorer countries have featured prominently among those targeted by the Russian response. Moscow has already suspended beef and cattle imports from Romania, citing an outbreak of mad cow disease, and banned Ukrainian juice and dairy produce, Polish vegetables and Australian beef.

Russia's central bank warned that such bans on importing cheap products could make it harder to control inflation, which fell to an annual 7.5% in July, but remains well above the 6.5% rate in 2013.

Sanctions to be felt on both sides

Apart from boosting local production and expanding cooperation from sanction-resilient countries, Putin's decision may well become a self-made sanction on the population, Dmitry Polevoy, ING chief economist in Russia & CIS, said in a note.

"Even though from political point of view the move may look appropriate, and it will indeed hit countries supplying food to Russia, the move will likely only amplify the effects of financial/sectoral sanctions imposed on Russia," Polevoy said.

"This will likely add to overall sanction costs via higher food inflation and, so, will have a widespread effect on households," he added.

"Going after western business will backfire on Russia causing more isolation and crippling growth, a spokesman for the US Trade Representative said in a statement.

"The sanctions that the United States has imposed comply with our international obligations. By contrast, Russia's move to ban agriculture goods from the United States and the EU appears to have no grounding in the WTO rules governing international trade. We will monitor the situation and take actions as appropriate," Deputy Assistant US Trade Representative Trevor Kincaid said.

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Comments

an european's picture

"ban on all food imports from the United States and on fruit and vegetables from the European Union"

Nothing new ! If continuing the will even turn of the gas tap!
the former KFB agent is doing all the necessary to Europeans to give up sanctions and to bend on their knees !

Iwantout's picture

I entirely agree with you. What will the EU do if Russia turns off the gas and sells it to China instead? They do not even have to do that, ‘technical difficulties which temporarily halt supplies’ when the temperatures are sub-zero would concentrate the minds of us all. I can’t see what can be put into place by October 2014 to offset this issue, can anyone else ?

All this because the EU had to have Ukraine within its orbit and help in the overthrow of a democratic (if corrupt and often unpleasant) government; argue by all means, but clearly a sizeable proportion of people in various parts of the Ukraine would rather face towards Russia than the EU. Exactly what right did the EU have to decide that the (pro EU) demonstrators in Kiev were more representative of the entire population than the pro Russia groupings further east. Certainly I don’t know where the balance was / is and I have not seen much hard evidence that anyone else does either.

an european's picture

Norway has it's own reserve if such an as you said "technical issues " occurs !
Europe can however suck shale gas at least 10% for the beginning! I mean It's never too late !
If the E.U. Council is waiting and gas reserves comes to an end then who again is to blame for not acting independently !
People in Russia are rising their proudness quotas on their "President" about his willingness of conqueror !

"but clearly a sizeable proportion of people in various parts of the Ukraine would rather face towards Russia than the EU"
Only the Eastern part near Russian border Yes !
However split Ukraine like north and south Korea ? Would that that be an option? Then Putin get what he wants and maybe later more grabbing ?
What would happen to Ukraine if the E.U. or the U.S. would completely halt it's interference it and strongering borders without Ukraine?

What are the options. i really don't know but what I know is that Putin's behavior is not an option!

A very difficult plague!

Southron's picture

You cant make an omollete without breaking some eggs.
Short term this crisis will wreak havok on European economy, since we will have to import much more expensive energy from somewhere else (anyone that thinks that "there wont be power for heating" is deluded).

Longer term however, this will be a big boost for efforts to unify the European energy grid, turn it into a more efficient "smart grid", and thus increase European energetic independency.

Iwantout's picture

The only way heating can be guaranteed is if the power is turned off for industry and other large scale users so yes that will definitely wreak havoc with our economies. The idea that you can just switch 30% of your gas imports at such short notice is the one that is deluded. LNG which is the replacement fuel is roughly twice as expensive as the gas we buy from Russia, and that does not even address the fact that we do not have the infrastructure in place to handle such a massive increase in gas tanker traffic.

With regards to the idea of the ‘longer term’, in this context how long is the longer term ? It is just that I am interested given that we have only just got over the last recession. If we are contemplating entering another one voluntarily it would be good to know when I can look forward to an easing of the economic pressure I am under having had no pay increase for 5 years.

Starbuck's picture

The Kremlin turning off the gas tap is an overblown scare story

1) because they do not control how the gas is delivered. Therefore, they would have to stop all exports through Nordstream and Ukraine, irrespective of whether foes (Baltics, Poland, Romania) or allies (Hungary, Bulgaria, Italy, Balkans) are affected. In addition, European countries can redirect gas within their theater.
2) Western Europe is quantitatively a big consumer of russian gas, but russian gas is only one of several sources. at less than 30% of the energy mix. On the other hand, Central and Eastern Europe is much more exposed (80% to 100%) ... but also much more resilient (rustic and coalish some would say).
3) In addition to 2), European countries have built gas reserves amounting to around 3 months of consumption. Which means that any stop in the exports would not force a "winter of freezing".
Coupled with official exhortations to energy savings and resilience, would mean that the "only" real impact to individual and companies is a temporary (a few months) increase in the gas bill. How much more ? in the 10%-30% range rather than 100%+
4) European economies are strong and diversified enough to resist. On the other hand, the Kremlin derives 50% to 60% of its income from the export of mineral ressources. Europe making close to 70% of its export markets. Talk of China replacing European consumers is just that ... talk.
Not only does China represent less than 10% of Russian energy exports, but they would extract tough pricing concessions, probably locked-in for years or decades if the recent declarations of past months are any guide ... and the transport infrastructures is simply not available for several years (the main gas pipelines are meant to supply Japan, not China).

The only way for the Kremlin to use the "gas war" would be temporary and with massive currency inflation (to keep the government funded and subsidies flowing).
It would hurt Europeans, temporary but barely more than a wound.
For the Kremlin, it'd be a stab to the heart.

for believers of scare stories, just take a look at the sanctions from east and west : Russia only talked of time-limited (1 year) agricultural products being banned, hoping to ressurrect the soviet myth of autarcy.
Europe is gradually implementing wide-ranging sanctions, from individuals to state companies, without time-limit.
In quantity, European economies lose marginally more, but that's because they are 7x the size of Russia. Qualitatively, the "Clay Colossus" is being quagmired by its own weaknesses ...

Best regards,

an european's picture

Nice explanation ! Thank you ! You're right concerning the propagated scare stories !
Hope the stab to the heart will come quick ....

Jay's picture

The larger concern for Europe is the mountain of debt piling up that will only increase in the sanctions game. Russia isn't some little burg in the middle of no where with limited resources, the nation is a powerhouse in energy and metals, and a resilience to resist US, London, Brussels, NATO aspirations. The Russian propaganda machine works because the Europeans and their allies thumbed their noses at the Russian people after the demise of the Soviet Union. I think there will be plenty of hardship to go around for everyone the longer Kiev, Ukraine refuses to negotiate. Even if Kiev wins they will need billions more in aid and that will further exasperate Europe's debt woes.

Starbuck's picture

well, you don't "negotiate" with those who wants to annex parts or all of your country.
you fight or you surrender. Ukrainians choose the former.
The Kremlin needs now to decide whether it has more to gain or lose by continuing its aggressions.

since the boyars in charge of Russia are more interested by their well-being, they'll be the one to ultimately "influence" Vladimir Putin and his rag of revisionist nationalists

Gerry's picture

And there lies the conflict between different approaches. Sure we can have free trade agreements with the rest of the world, and import whatever we need from all over the globe, and neglect local industry and produce, only to run into this kind of trouble again and again. Europe should strive to supply it's own needs as a matter of principle. Supplying your own energy must be a priority by now, and needs a comprehensive plan to achieve. Free trade will only work when there is no conflict but there will be a lot more of that happening yet before there is world peace.

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