Are the counter-sanctions working?

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April 19, 2016 by AK

You bet. Not quite the way there were officially supposed to, but very much the way they were predicted to work.

I’m talking about the import bans that Russia imposed in August 2014 on food produced in the EU? As Putin put it,

To a certain degree, the growth of prices for food is, to be honest, a “man-made” result as well. Why? Because we restricted, as reciprocal measures to the Western sanctions, the import of alimentary produce from abroad. We made this step consciously, bearing in mind that it would create conditions for our agriculture to develop, that it would free the market. That is what actually happened.

Against the backdrop of the GDP falling by 3.7% and industry, by 3.4%, agriculture grew by 3%. This is a major component of our economy and of the people’s life because, let me remind you, 40 million citizens of the Russian Federation live in the country.

The last number sounds high but turns out close: about 38 million Russians, 26% of total, live in rural settlements, although not all of them are employed in agriculture. But this whole passage is a radical retroactive reinterpretation of what was a call to pitchforks broadcast westward – an attempt to incite EU farmers to riot, rather than a lifebelt to Russian farmers.

I expected food prices to rise, which of course they did, but I thought the higher prices would be so disruptive that the government would roll back the import bans, which it has not done yet.

Cheese is the product where the hurt is the most obvious. Very few Russian and Belarusian dairy companies have the technologies to match the quality of affordable Dutch and Polish cheese. Russian households are buying cheese of inferior quality at a higher price.

However, the ruble’s retreat against the dollar, caused by the decline in the dollar value of oil and gas exports, drove up prices of imports across the board and obscured the specific impact of the import ban. In the people’s imagination, the food embargo got subsumed under the general, oil-generated crisis, to the Kremlin’s relief.


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