“In a highly publicized move, Russia is destroying tons of food that was illegally imported from Western countries. […] As The Guardian reports, the order from President Vladimir Putin includes a requirement that the food “must be destroyed in front of witnesses, and the act should be captured on video, to preclude corruption.” NPR
The destruction of illicit food imports in Russia has been all over the news last week. I’m sure you’ve heard all about it. It pains me to even write about this utter waste and disrespect, especially considering all our discussions on food waste, so I will leave others to it.
This move raises not only ethical questions, but also institutional concerns: granting authority to border guards, customs officials and other government agents to incinerate foodstuffs will inevitably lead to a black market in confiscated goods as well as an increase in organized crime and corruption.
If you need recommendations, this New Yorker article adds an interesting perspective on Russia’s relationship with hunger in the past and present; while this piece delves into possible implications on good governance and corruption.
Instead, let’s talk about the bigger picture: how have the import bans affected Russia’s food supply and food prices? Are they any closer to the food independence they so long for? And who is paying the price for this inter-state maneuvering?
First of, let me set the scene. On August 7th 2014, in response to Western sanctions after its Ukrainian aggression, Russia imposed an import ban on a number of food products originating in the EU, Canada, the USA, Norway and Australia. This hit Europe, the closest geographical region, particularly hard. Some of the affected producers were selling half of their supply to Russia. This infographic shows which foods were most affected:
This is particularly astounding since Russia has traditionally relied on food imports of many products that it is not particularly good at manufacturing. In particular the meat and dairy industry has been lagging behind European and US standards since Soviet times. Inefficient production systems – the Communist-imposed collectives and later half-hearted attempts at privatization -, outdated machinery and limited know-how had made the industry uncompetitive and cheap imports attractive. Import dependency was estimated at 60% of total consumption for beef and about 50% for fish, cheese and other dairy products.
However, this situation had long irked Russian leaders. A dependency on imports from previous and potential future enemies did not square with their vision of a strong, powerful new Russian empire. Thus, in 2010 then-President Medvedev signed the Russian Food Security Doctrine. Amongst others, the doctrine proclaims that food security is
“a condition of the national economy that ensures the country’s food independence, guarantees to each citizen the physical and economic availability of foodstuffs matching legal requirements and in amounts no smaller than rational consumption norms necessary for an active and healthy lifestyle.”
Wait – did you catch the hick-up? Allow me to geek out for a second, because this is what I wrote my Bachelor’s thesis on – but the Russian term продовольственное безопасность, widely translated as food security, in Russia carries the meaning of ‘food independence’ – as in, Russia can only be food secure when the vast majority of Russian food consumed is also produced within its borders. The Food Security Doctrine even establishes minimum self-sufficiency targets: 95 percent in grain and potatoes, 90 percent in milk and dairy products, 85 percent in meat and meat products and 80 percent in sugar, vegetable oil, and fish products. However, until 2014, the Doctrine didn’t have much effect, with 35 – 45% of 2013 Russian consumption coming from outside its borders.
An import ban in theory thus presented the perfect opportunity to kickstart Russian production with a cornered market and nice profit incentives through higher prices.
According to the Russian Statistical Agency, at least the second prediction was spot-on. Looking back to prices in December 2013, before the ban came into place, many products rose in price by one third to one half. The average food price inflation was 20%, the first time of double-digit inflation since 2011. When taken together, this does impact the average Russian’s pocketbook considerably. In June 2015, sales in grocery stores were down 9% compared to the previous year – possibly people are starting to grow their own food in their datcha, their weekend home, again. According to reports, consumers slashed their budgets for food and basic goods by as much as 24%. The rising prices and lower real incomes have pushed 3 million additional Russians into poverty in the last year.
But at least Russian producers benefit from better prices, right?
Hmmm…. Not so much. The wonders of a globalized food system is that the next alternative is always present, if a little bit more expensive. In 2014, total imports were only 8% lower than the previous year, and products from Brazil, Argentina, China and Turkey have replaced those from Poland, France and Canada.
“At the beginning a lot of people took it as a challenge: ‘let’s cook stuff from what we have, and we’ll see what happens!’” explained Alexei Zimin. “But then it turned out that the range was very narrow.”
Plus, as Putin’s campaign shows, there has been a lot of contraband Western food smuggled in under wrong labels. For instance, Belarus has suddenly become a prime source for fish and sea food – despite being a landlocked country. On the border of Poland, customs officers stopped a man trying to smuggle in a carload of 460kg of cheese. Even restaurateurs have started to smuggle in the European food products that they dearly miss. As the FT reports, “If we go on a trip, sometimes we’ll bring a little bit of cheese back in our suitcase,” one Moscow restaurant manager confessed, noting that it was still legal to bring back food for personal consumption.” In response, now there are food vigilante groups (one, called ‘Eat Russia!’, even gets grants from the Kremlin) starting up in the streets of Moscow which go from grocery store to grocery store trying to find illicit products.
Re-reading my first comments on the import ban almost a year ago, it’s striking to see how many predictions of analysts have become true – yes, there has been backdoor smuggling, yes, alternative trade alliances have been wrought, and yes, Russian substitutes are slow to take the place of imports.
That this development was so predictable is partially due to experience, partially to the hard facts about agriculture: production cycles are long, rekindling supply is a complex task, and even earmarking investment of more than 1.5 trillion rubles ($42 billion) in state funds between 2013 and 2020 to support farmers won’t allow Putin to magically turn around a moribund economic sector. These things take time.
Mind you, there have been first advances – the chicken and pork sector are booming again, according to the Moscow Times, where government support since 2006 has paved the way toward satisfying most (90% of chicken, 70% of pork) of domestic demand. But again, we are talking about cycles of 3 to 5 years at least. In addition, the Russian cattle industry has a whole set of issues to deal with, including high interest rates on loans, low productivity of cattle that would have to be improved by selective breeding, and the direly needed renovation of many production facilities.
While those challenges are being addressed bit by bit, Russia shows no sign of relenting its food diplomacy. Last year’s ban was already extended for another 12 months in June of this year. On Tuesday, Deputy Prime Minister Arkady Dvorkovich announced that new countries would be added to the list of banned importers; Interfax speaks of 7 so far unnamed countries. Yet, despite the ban, the EU even managed to increase its agri-food exports in 2014 by diversifying its destinations.
So far, the only losers seem to be the Russian consumers who are paying more and more for products from further and further away. This seems one time where Smith and Ricardo’s ideas of a free market economy and competitive advantage really make sense to me.