What is happening with the EU’s Russia sanctions policy?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Russian counter-sanctions have been disastrous for the EU's dairy farmers. [Karoly Lorentey/Flickr]

The EU has recently experienced several digressions from its official line on sanctions against Russia. The growing frustration of European farmers with the sanction regime has prompted national politicians to undermine the EU’s position on Russia, writes Julius Lorenzen.

Julius Lorenzen is a correspondent with ARC2020. He is writing here in a personal capacity.

When the EU’s economic sanctions against Russia were prolonged for a further six months on 21 December 2015, it was not without the objections of several member states. In the end, the sanctions were prolonged on the grounds of evident failure from all parties to complete the Minsk agreement. Reaching an agreement for the extension of sanctions in the next round, due at the end of July of this year, is likely to be even more complicated.

Governments of several member states are increasingly under pressure from farmers, and as a result are openly criticising the EU’s sanction regime against Russia. While there is no consensus on a single figure for the damage incurred by the European agricultural sector, the organisation Copa Cogeca has assessed that Russian countersanctions are costing farmers €5.5 billion  in export value every year.

Diminishing credibility of the EU’s Russia sanctions

The pressure on member states’ governments is mounting noticeably, and has been reflected in a large number of digressions from the common line on Russian sanctions in the past month.

France’s Minister of Agriculture Stéphane Le Foll stated that if it were only up to him, he would lift the sanctions imposed by the EU on Russia. The Italian Minister of Agriculture Maurizio Martina was seen at the Prodexpo in Moscow last month, showing his support for Italian producers with activities in Russia. And Bavarian Minister President Horst Seehofer  – German Food, Agriculture and Consumer Protection minister from 2005-2008 – undermined his own government’s position on Russia, claiming that key international geostrategic challenges can only be solved with Russia’s involvement.

The appeals for an end to the sanctions are no longer a few isolated voices. Austrian Vice Chancellor Reinhold Mitterlehner, Bulgaria’s Minister of Agriculture Desislava Taneva, Slovakia’s Prime Minister Robert Fico, and Hungarian Prime Minister Viktor Orban all made similar comments in the course of the last month, all in favour of putting an end to the sanctions against Russia.

Russia’s high hopes for an EU concession

In the Russian media, the growing cracks in the EU’s tough line on Russia are observed with a certain Schadenfreude. With Turkey being the latest international actor to have been on the wrong end of Russian sanctions, Russia appears to be increasingly isolated in the international community.

As a result, sanctions have become an important topic of discussion in the media. Vesti, a high profile state news channel, has dedicated an entire section of its website to the topic of sanctions, where users are able to track new developments. Overall, the EU’s internal rows on sanctions are received with a mixed tone of hope and confirmation in the Russian media. Hope because Russia is in desperate need of positive economic news. And confirmation because every appeal made by a member state government for the removal of sanctions is immediately interpreted as a form of political concession.

The Russian government’s stance on sanctions is very clear: the EU needs to remove all of its sanctions before Russia will lift its counter-sanctions. Although the Russian media is inclined to portray the sanctions primarily as a burden on EU countries, the reality is that Russia is also affected by the food embargo. Higher prices, a noticeable reduction in the range and quality of products available to consumers, and scandals of phytosanitary nature are a few examples of challenges that Russia’s food industry is currently facing.

A consistent and cohesive European line on sanctions

Removing the sanctions against Russia to obtain relief from Russian counter-sanctions would be a show of dismal failure of the EU’s cohesion and foreign policy consistency. Political commentators in Russia are hopelessly optimistic that the EU is on the brink of lifting, or at least reducing its sanctions, as European farmers are allegedly no longer able to cope with their economic hardship. And certainly resistance amongst farmers is growing.

Yet reducing or eliminating the sanctions would expose the lack of consistency in the EU’s foreign policy. Sanctions were imposed to reprimand Russia for its unlawful annexation of the Crimean peninsula. As of today, Crimea has not returned to mainland Ukraine, nor has the Russian military involvement in the Eastern Ukrainian territories ceased. The facts on the ground have hardly changed, so why should the sanctions?

A real solution for farmers

If the sanctions are not removed, this leaves the question of what can be done for EU farmers. Keeping farmers in business, on a drip of multi-million euro rescue packages is not a sustainable solution. A real solution could start with the admission that sanctions will likely remain in place in the medium or long term.

As considered by many observers of the field, the EU has become a victim of its own unsustainable drive for production incentives, subsidies and its own export-oriented economic model. Europe’s drive to produce more, cheaper, and to flood foreign markets with its agricultural products has not only price-ruined its own farmers, but has made it vulnerable to external shocks.

The Russian food embargo has demonstrated just how exposed the EU has become not only to restrictive political measures, but also to an overall decline in demand for agricultural products. Simultaneously the Russian government has identified the sanction crisis as an opportunity for Russians to regain sovereignty over their own food production, and encourages this through various subsidy schemes.

As a result the EU should reconsider its own approach, and elaborate a more sustainable, long-term economic plan to substitute Russia’s share of its agricultural exports. In order to achieve this the EU should:

  • Move away from incentivising farmers to increase production without reliable market outlets, by removing direct and indirect export subsidies such as temporary liquidity support for farmers. These encourage overproduction and lead European farmers to flood foreign markets with cheap agricultural products, particularly with dairy goods and pork products.
  • Create a mechanism ensuring EU farmers are paid a fair price for their products. Profits are increasingly made downstream in the food industry: the EU should enforce its own antitrust laws more effectively. European retailers often collude on setting prices, increasing their share of the price for agricultural products at the expense of farmers.
  • Formulate a plan for upcoming reforms, which adapt common policies so as to improve cohesion between farms, consumers, and heath and trade policies. Improving internal policies, particularly with respect to market regulation and food quality standards would be more beneficial to EU farmers than to further pursue aggressive export strategies. Additionally, this plan would present a new impulse for the currently stalled integration prospects of the EU’s Eastern neighbours. For example, the EU should support initiatives such as the Danube Soya Association, encouraging Balkan states to produce GM-free soya in Europe, along the river Danube.

With these long-term adjustments the EU could actually solve its significant export dependency on foreign countries like the Russian Federation. To wait until Russia has been sufficiently shamed in order to lift sanctions is most likely not an effective EU policy for its farmers, nor is it a sound foreign policy.

This is an amended version of the article which first appeared on the ARC2020 website. ARC2020 is a platform for agri-food and rural actors working together for good food, good farming and better rural policies in the EU. This article reflects the opinion of its author, not necessarily that of ARC2020.

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