Russia’s import ban on a list of Western foods may be peanuts on the scale of Europe’s economy, but it is a blow for some producers—and a sign of deteriorating economic ties as Moscow and the West face off over Ukraine.
Russia gave details Thursday of its response to Western sanctions, banning the import of meat, fish, dairy products and some other agricultural goods from countries that have targeted Russia with their own economic boycotts.
Retaliation for Western sanctions imposed last week, which targeted Russia’s banks, military and oil industry, was widely expected, European Union officials said. Policy makers in key EU capitals said the move won’t deter the 28-country bloc from its policy of combining sanctions and diplomacy, in the hope of making Russian President Vladimir Putin scale back his support for pro-Russian rebels in Ukraine.
The Russian measures, combined with other import bans imposed earlier this year, cover Western imports that were worth $8.7 billion in 2013, according to Russian customs data. Among the main victims are Dutch cheese, Norwegian salmon, and Spanish fruit and vegetables.
Besides Europe, the Russian ban also covers produce from the U.S., Canada and Australia, which have all imposed sanctions on Moscow. Switzerland was spared, having indicated this week that it won’t follow other Western nations in imposing economic sanctions.
Russia already banned the main agricultural import from the U.S., poultry, early this year. But the U.S. also sold $231 million of fruit to Russia last year, which will now be embargoed along with Canadian seafood and Australian beef.
«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,» Bob Stallman, president of the American Farm Bureau Federation, said in a statement.
Russia represents only a small part of the food exports of most of the targeted countries, and a smaller part of exports overall. Total EU goods exports to Russia were €120 billion last year, while the EU’s global goods exports were €1.7 trillion. The banned categories of export to Russia aren’t significant on the scale of the EU’s $18 trillion economy, economists say.
But European food-industry associations said the loss of Russian business comes at a difficult time for parts of the sector anyway thanks to falling prices and Europe’s anemic economic growth.
And the main fallout could be indirect and psychological. A growing freeze in trade and investment between the West and Russia, evident since early this year, could harm sentiment in Europe at a fragile moment. Data for gross domestic product in second quarter for the 18-country euro zone, due Aug. 14, are expected to show that large swaths of the Continent are still struggling to recover from the yearslong financial crisis.
French farmers, Greek fruit growers and some other groups have called for the EU to compensate producers or support prices affected by the Russian embargo. EU officials declined to comment on whether the bloc would do that.
«This is serious business,» said Pieter Verhelst, European and international affairs adviser at the Belgian farmers’ association. «We show solidarity to the Ukrainian people. Now we ask for solidarity from European taxpayers and consumers to cover the losses that we suffer from this ban.»
Meat, vegetables and milk are products that Russian domestic producers can replace more easily than imported industrial goods, which make up a far bigger share of EU business dealings with Russia. Foodstuffs were thus an obvious target for Moscow. Russia has previously banned some Western food imports, including EU pork and U.S. poultry early this year.
The trade war between the EU and Russia has so far stayed clear of their main piece of business: the sale of Russian natural gas. Those deliveries are so important to Russia’s coffers and Europe’s energy supply that neither side is likely to touch them, unless the war in Ukraine escalates dramatically.
The EU said Russia’s food boycott is «clearly politically motivated» and that the bloc could «take further action» if appropriate after studying the Russian measures.
EU spokesman Sebastien Brabant said the EU is also concerned about the buildup of Russian troops near Russia’s border with Ukraine, where Ukrainian government forces have made recent inroads against the separatist rebels. A number of Western officials have said this week that those troop movements signal Russia might invade eastern Ukraine if the rebels lose the fight against the Ukrainian army.
«We’ve noted with concern continuing reports of the flow of significant new quality and quantity of arms and equipment across the border from Russia into Ukraine, reports of shelling across the border,» Mr. Brabant said.
Russia’s import ban on selected foods met with displeasure in Berlin, but German officials said they had expected a reaction by Moscow. Chancellor Angela Merkel called Mr. Putin late Wednesday, after 17 days of radio silence between the two leaders, in a sign that Germany is still hopeful of making progress through diplomacy.
The new trade measures stunned some in Europe’s food business who had seen Russia as a market ripe for growth.
Klaus Dubenkrop, an apple salesman from southern Germany, was preparing to load several tons of apples onto trucks headed for St. Petersburg on Thursday when he got a Skype message from the buyer, canceling the contract. Now the best Mr. Dubenkrop can do is to send them to a juice maker.
«We are a little shocked and baffled,» the salesman said. «Instead of getting the full price, we’re only going to get cents, if anything.»
Among products most affected: Belgian pears, of which Russians normally buy about €100 million’s worth annually, making up half of the pear growers’ total exports. The September-October selling season is fast approaching, forcing growers to scramble for other customers, said Matty Veulemans, spokeswoman for the Belgian farmers’ association.
Belgian fruit farmer Luck Bels said he and his peers have only three weeks to find entirely new customers for a large part of their pear harvest. «We can only hope that European consumers eat more pears,» or that buyers can be found in new markets such as China or Canada, Mr. Bels said.
By nation, Poland and Norway stand to lose the most money: Exports to Russia of the now-banned products were worth over $1 billion to each country last year.
Poland’s deputy Premier Janusz Piechocinski said the trade war with Russia could shave around half a percentage point of Polish economic growth in 2014. The government previously expected growth of 3.3% this year.
For Poland, food and beverages are only 11% of total exports, which are dominated by manufactured goods. Russia is an important market for Poland, but only represents 4.4% of total Polish exports. Poland sells six times as much to Germany.
In Norway, a non-EU member that also imposed sanctions against Russia, shares in salmon exporters fell sharply Thursday. Russia was Norway’s top export market for seafood, with sales worth $1.04 billion in 2013, until Poland overtook it this year. Norwegian producers will probably sell their salmon and other fish to other markets in Europe and North America, but prices will fall, said Kolbjorn Giskeodegard, analyst at Nordea Markets.
Source: WSJ
