Sunday, August 10, 2014

Global Impact: Russia Slaps 1-Year Ban on Food Producers in West, Putin Seeks Markets in Amerícas

According to EFE, Russia on Thursday (August 7) slapped a one-year ban on food imports from countries that imposed sanctions on Moscow over its role in the Ukrainian Crisis, and looked for new markets in Latin America.

Prime Minister Dmitri Medvedev announced the embargo, which opens a new chapter in trade relations with the West and will affect fruit, vegetables, milk, meat, fish and dairy imports from the European Union, US, Australia, Canada and Norway.

Food exports from the EU to Russia in 2013 were worth $16.2 billion, while US food exports amounted to only $1.3 billion.

The PM said the measure was taken in response to sanctions passed against Russia over the Ukrainian Crisis, which targeted state-owned banks, oil companies and the defense sector.

“Until the last moment, we were confident that our Western colleagues would understand that sanctions are a dead end. But they have not understood. We had no choice but to adopt retaliatory measures in response,” said Medvedev.

Meanwhile, the head of Russia’s Livestock and Agriculture Inspection service, Sergei Dankvert, met on Thursday with the ambassadors of Ecuador, Chile and Uruguay in a bid to find new suppliers, and was also expected to receive representatives of Brazil and Argentina.

Dankvert said the current situation offered great possibilities for Latin American countries to increase their food exports to the Russian market.

Ecuador’s ambassador to Moscow, Patricio Chávez Zabala, told EFE his country was the second or third Latin American food exporter to Russia, with $1.5 billion in 2013, and was interested in selling more tuna, coffee, broccoli, dairy products and tropical fruit.

Chile’s ambassador, Juan Eduardo Eguiguren, also expressed his country’s willingness to export more meat, fish, vegetables and fruit, although the Uruguayan representative, Anibal Cabral Segalerba, reminded that Montevideo had never backed the sanctions against Moscow.

COMMENT: My biggest concerns with the  collective embargo holding is threefold: (1) The EU slowly recognizing that their collateral losses are much, much greater; (2) some members of the EU getting cold feet on the effectiveness of the sanctions; and as time progresses, some of the 28 members discovering that Russia is more prepared to weather the storm than the EU.

The embargo followed a decree signed by President Vladimir Putin on Wednesday (August 6).

Medvedev said Russia was also considering to ban US and European airlines from using its airspace for flights to and from Asia, describing the move as one of a number of possible responses to Western sanctions that crippled his country’s first low-cost air carrier.

A closing of Russian airspace to Western carriers would result in a “drastic” increase in fuel costs for the airlines, Medvedev said.

The EU and the US last month stepped up economic and individual sanctions on Russia, following a first round of measures that came after Moscow annexed the Ukrainian region of Crimea in March.