Russia Prohibits U.S. And European Food Imports

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Russia announced on Thursday, August 7th that it was banning nearly all food imports from the West in a tit for tat dispute over Western economic sanctions relating to Ukraine. This somewhat surprising move is likely to cost Western farmers billions of dollars in lost sales, but could also lead to food shortages, especially produce, in many Russian cities.

The announcement also makes it clear that Russian President Vladimir Putin does not plan to give in to Western pressure over Ukraine and is apparently willing to continue to spar with the West.

Both the U.S. and the EU have claimed that Russia, which invaded and occupied Ukraine’s Crimean Peninsula in March, of creating tensions in eastern Ukraine by supplying arms and mercenaries to a pro-Moscow insurgency. The Western nations have already imposed asset freezes and loan bans on a number of individual Russians and businesses.

Prime Minister Dmitry Medvedev announced the Western food bans in a televised Cabinet meeting. He noted the retaliatory ban covers all imports of meat, fish, milk and milk products and fruit and vegetables from the United States, the EU, Australia, Canada and Norway. The ban will be in effect for one year.

“There is nothing good in sanctions and it wasn’t an easy decision to take, but we had to do it,” Medvedev said.

Russia dependent on Western food

Analysts say that Russia is heavily dependent on imported food, particularly in the largest cities such as Moscow. The EU’s agricultural exports to Russia added up tp 11.8 billion euros ($15.8 billion) in 2013, and the U.S. Department of Agriculture reports the U.S. exported around $1.3 billion worth of food and agricultural products to Russia last year.

Moreover, given crop planting lags, local farmers will almost certainly not be able to replace the lost food, and Russia’s agricultural sector is generally inefficient and poorly capitalized (although that may change, at least in the short run).

Some political pundits were surprised that Russia decided to strike back at the West via an imported food ban, given it will almost certainly create shortages in major cities like Moscow, where imported food represents between 60% and 70% of the total food sold.

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May also ban flights over Russian territory

Russian authorities had also said they were considering banning flights by airlines from the European Union and the United States across its territory. This would force Western-based airlines to take much longer and more expensive routes to reach Asia-Pacific destinations.

However, Medvedev said a decision on whether to ban the flights by EU and U.S. airlines was still under consideration, but that Russia had decided to prohibit transit flights for Ukrainian airlines.

Of note, smaller Russian airline Dobrolyot halted operations last week after a second round of EU sanctions dried up financing.

via: CNBC

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