Russia has imposed a one-year ban on food imports from a number of countries in retaliation for sanctions. The West appeared to be caught off guard by Russia’s response, although some Western experts cautioned that counter-sanctions were possible.
Russia has imposed a one-year ban on food imports from a number of countries in retaliation for sanctions. The West appeared to be caught off guard by Russia’s response, although some Western experts cautioned that counter-sanctions were possible. Regrettably, European politicians did not heed their warnings. While these tit-for-tat sanctions will not seriously harm the world economy, some EU economies have already sustained losses, especially those that were already teetering on the brink, such as Greece with its substantial agricultural exports and Finland which has traditionally been orientated toward the Russian market.
The political fallout has been greater. EU countries quarreled as they jockeyed to spare themselves the pain of sanctions, and their politically active and influential agricultural producers started pressuring political coalitions to change EU policy. The Russian food ban is unlikely to produce a revolution. Although undoubtedly a hassle for Europe, the problems caused by the sanctions are tactical and temporary.
As for Russia, I hope that in a year to 18 months these measures plus additional investments in transportation and agriculture will allow Russian entrepreneurs to occupy a bigger portion of the domestic market.
Prices will rise for some foods. The Russian Government has never been able to control food prices, and inflation and growing food prices have been with Russia always. The Government will try to push back against this trend and punish the culprits. But the price hikes will not be substantial and will not affect all products.
That being said, Russia is unlikely to miraculously replace all beef and dairy imports in a year or two. This process will take decades, as will restoring what we destroyed in the 1990s.
We must also try to change the ratio of imports to domestically produced goods in some areas. For example, we are importing more than half of our beef. We should produce more at home than we buy abroad. An economic breakthrough of this magnitude would save us hard currency, promote the recovery of Russian agriculture, and create opportunities in the country’s rural areas.
The goal of the food ban is not to prevent Western companies from making money in Russia but to localize food production at home. The more products made by Russian hands and from Russian raw materials, the more tax revenue will flow to Russia’s coffers.
The sanctions will be lifted sooner or later. I am not sure if this will happen in September, and I doubt Europe will make a unilateral decision. Most likely, the sanctions will be scaled back or rescinded as a result of a deal between Europe, Russia and America. But this deal will have less to do with the situation in Ukraine than the need for cooperation in today’s world.
