Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Why is Russia Destroying Its Food?

Politics / Russia Aug 13, 2015 - 06:38 PM GMT

By: STRATFOR

Politics

Forecast

  • A Kremlin crackdown on food imports that violate Russian sanctions will continue to draw criticism throughout Russia.
  • If the Kremlin continues with its crackdown, protests will expand.
  • To limit the backlash, Moscow may opt for sporadic crackdowns rather than systematic enforcement of food sanctions.

Analysis

Russia's recent show of strength toward the West may come at the price of its own internal stability. On Aug. 7, Russian President Vladimir Putin ordered a crackdown on violations of the Kremlin's food sanctions against the European Union and the United States, during which some illegally imported food was destroyed. The move was very unpopular among Russian officials and the public. Since food imports to Russia fell by more than half within a single day of Putin's order, many criticized the Kremlin for destroying food at a time when Russians are under increased financial and economic pressure. If the Kremlin continues to crack down on those who violate the order, protests will only grow louder.

Flouting Countersanctions

Russia enacted sanctions on many high-end Western food products on Aug. 5, 2014, in response to sanctions placed on Russia by most Western states because of Russian actions in Ukraine. Even though only certain foods were banned, the sanctions — not to mention currency fluctuations — contributed to an average increase in food costs of 20 percent over the past year. The price of some staple goods, such as cabbage, rose more than 60 percent in early 2015.

The Kremlin initially pledged to stem price hikes, increase domestic production and import food from new sources. Fruit and vegetable imports from European countries outside the European Union, such as Serbia and Macedonia, indeed grew by between 35 and 200 percent over the past year. 

It was the black market, however, that really cushioned the sanctions blow. To bypass the ban, countries barred from exporting to Russia began shipping through Belarus and Kazakhstan. The European Fresh Produce Association reported that EU produce exports to Belarus increased by 141 percent and to Kazakhstan by 108 percent within the first six months of the sanctions' passage; both countries then turned around and re-exported much of that produce to Russia.

In early 2015, when Russia finally closed this loophole, re-exporters simply started falsifying countries of origin on their illegal shipments. The Russian government is aware of the false documentation, and the country's agricultural import watchdog, Rosselkhoznadzor, has been particularly adamant in opposing it. The organization recently confiscated 73 tons of peaches with false Turkish certificates that were actually from the European Union. On Aug. 6, the same group in St. Petersburg burned 20 tons of German cheese mislabeled as a product of Russia. Since Putin ordered the crackdown, Rosselkhoznadzor has destroyed thousands of kilograms of food imported in violation of Russian sanctions.

Yet that is only a fraction of what has been illegally imported. According to the head of Rosselkhoznadzor, Sergei Dankvert, his organization has only been able to intercept an estimated 10 percent of illegal imports over the past year. In an effort to make a bigger impact, Rosselkhoznadzor has over the past two days whittled down daily food imports across Russia's western border by more than half, subjecting each shipment to more intense scrutiny. The Smolensk border post, for example, processed only 70 shipments on Aug. 7, compared with its usual 170. However, to fully carry out Putin's Aug. 7 order, Rosselkhoznadzor will have to expand its personnel.

Backlash 

Perhaps because of these successes, the public crackdown on illicit food imports has generated — and will continue to generate — opposition across the Russian political spectrum. More than 285,000 people have signed an online petition urging the Kremlin to give the food to the poor instead of destroying it, while Russian lawmaker Andrei Krutov proposed to donate all the confiscated food to the war-torn separatist regions in eastern Ukraine. Meanwhile, opposition heavyweight and former Prime Minister Mikhail Kasyanov sarcastically called the food policy "some real triumph of humanism," pointing out the sheer wastefulness of the order as 20 million Russian citizens remain below the poverty line.

The criticism is not limited to those among the opposition. Even pro-Kremlin TV anchor Vladimir Solovyov has publicly criticized Rosselkhoznadzor's actions. "I don't understand how food can be destroyed, " Solovyov said, "in a country that lived through the horrible hunger during the war and tough years that followed." One Russian Orthodox priest and Putin backer expressed similar frustrations when he posted his own critique of the food policy on a religious website: "My grandmother always told me that throwing away food is a sin. This idea is insane, stupid and vile," he wrote.

These strong reactions seem to have taken the Kremlin somewhat by surprise. Until now, the government has come under little criticism for its countersanctions over the past year. In fact, when the food ban was first put in place, nationalist Russian citizens went so far as to publicly destroy food themselves in support of the government's decision. (Of course, Russia's economy was much healthier then than it is now.) 

A History of Food Insecurity

In Russia, millions perished between the 1920 and 1940s from hunger. In 1921, 6 million died when drought and food confiscations during World War I and the Russian Revolution led to a famine across the Volga and Ural regions. Then, as many as 7 million more died between 1932 and 1933, when the Soviet Union's forced collectivization policies saddled Kazakhstan, Ukraine and the Northern Caucasus, the Volga region, the southern Urals and western Siberia with major food shortages. And the country's final major famine of 1947 and 1948, brought about by more droughts and the devastation of World War II, killed an estimated 1.5 million more Russians.

The relative prosperity that followed the collapse of the Soviet Union saw Western foods flood the Russian market. When Putin first took power, he gained legitimacy among his people in part by ensuring reliable food sources and by upgrading and expanding the types of food available.

But now, Russia's standard of living is being tested by Moscow's attempt to prove a point to the West. Despite the rampant criticism, the Russian government is standing behind its move to limit illegal food imports. Putin spokesman Dmitri Peskov repeated Aug. 10 that the situation should not be blown out of proportion. But the controversy may aggravate existing social unrest over economic malaise, and the Kremlin is worried that that unrest could lead to more protests. For that reason, Moscow may moderate its response to countersanctions violations by opting for forceful but sporadic crackdowns rather than systematic crackdowns.

"Russia Is Destroying Its Food is republished with permission of Stratfor."

This analysis was just a fraction of what our Members enjoy, Click Here to start your Free Membership Trial Today! "This report is republished with permission of STRATFOR"

© Copyright 2015 Stratfor. All rights reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

STRATFOR Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules