Food

In Russia, Sanctions Change the Food Pantry

Story image for Food from U.S. News & World Report

During the past three years, something Russians were used to doing in the 1990s has made a triumphant comeback: the habit of bringing food home from trips abroad.

Shopping for food on vacation outside Russia has become a routine pastime for them since August 2014, when the Kremlin banned import of dairy, produce, fruit, meat, poultry, fish and seafood from the U.S., European Union and several other countries. The ban came in response to sanctions those countries imposed on Russia, which was accused of supporting pro-Russia rebels in eastern Ukraine after Moscow annexed the Ukrainian territory of Crimea.

Authorities at the time maintained that the move would punish the West and boost the country’s agricultural sector, spurring it to thrive in the absence of competitors offering less-expensive products.

Three years later, officials insist it did. A closer look, however, presents a more uneven picture. Food production in Russia has increased, but so have prices. Higher prices have led to changed and lowered consumption, and in turn, reduced sales. Inflation has eaten into the promised government support to help food production. And, say consumers and people in the food industry, the overall quality of available food isn’t as high as it was prior to the food import ban.

 



The food embargo came at a bad time for Russia. Oil prices were at a record low, the ruble had plummeted and the country’s relationships with Western nations was worsening. The term “isolation” dominated the news here.

In an attempt at positive spin, the Kremlin announced that the food import embargo would boost “import substitution” and help Russians overcome what many politicians labeled their “addiction” to imported goods and become self-sustainable. Companies in the agricultural sector were promised financial and infrastructure support from the state. Many companies immediately jumped at the chance to conquer the market.

The agricultural sector has indeed increased production of some food items in the past three years, according to data provided by Rosstat, Russia’s state statistics service. Russian companies produced 17.5 percent more beef in 2016 than in 2014. Pork production increased 30.6 over the same period, poultry production 11.9 percent, frozen vegetables 31.6 percent, milk 5.8 percent and cheese 20.2 percent.

“The embargo was quite an incentive for us because it meant we’d be able to produce more,” says Andrei Danilenko, chairman of the Soyuzmoloko, Russia’a association of dairy producers.

“Over these years, we filled the niche completely – together with Belarus that supplies the rest.”

Spokespeople at the Agriculture Ministry are even more positive. “For the first time in many years, Russian food items started to dominate on the shelves,” officials said in a written statement.

Food imports during the past three years dropped almost in half, the ministry said, from $43 billion to $25 billion, whereas overall Russian agricultural production has increased by 11 percent.

“Achievements of the agricultural sector in recent years allowed us to edge even closer to full self-sufficiency when it comes to food,” ministry spokespeople said.


Pyrrhic Victory

However, there was a downside. Rising prices, spiked by the embargo and fueled by inflation, changed consumer behavior. People started buying less and sales started to drop.

“People in general are saving money on food, and we end up selling less,” says Pavel Grudinin, head of the Sovkhoz Imeni Lenina agricultural holding that produces vegetables, berries and fruit in the Moscow region.

With some products, consumers started choosing cheaper options, and that kind of behavior significantly affected the country’s fish market, says Timur Mitupov, head of the Fishery Information Agency.

“Russia used to import 600,000 tons of fish from countries under the embargo every year,” he says. “Then people saw that fish is disappearing from the shelves and becomes more expensive. So they started replacing fish with something more affordable – like chicken.”

Yearly consumption of fish dropped from 22 kilograms (48 pounds) per capita to 16-17 kilograms, Mitupov says.

Adding insult to injury, the promised state support turned out to be not much of a help, Grudinin says.

“Financial support from the government on paper increased this year, but if you convert it into hard currency, you’ll see that in reality it actually decreased, because hard currency is more expensive now.”

At the same time, he adds, various taxes and levies have increased during the past three years, and so have crediting rates: “So there is simply no money to invest into growing.”

Quality Issues



For the restaurant industry, the food import ban is a double-edged sword. Many restaurants had based their cuisine on imported food items and shut down after the embargo, unable to adjust to the new reality quickly enough. Those that survived are experiencing a gastronomic renaissance, says Alexandra Sutormina, restaurant consultant and food critic for GQ Russia.

“Restaurateurs discovered Russian meat, Russian seafood, Russian vegetables. Russian food has become a thing,” she says. “They started experimenting with it, setting up their own small farms, selecting products more carefully.”

The quality of Russian food products, however, is far from the best, argues Victoria Lavrushkevich, manager of Saxon&Parole, an upscale restaurant in Moscow.

“We offer quality seafood and quality meat,” she says. “But Russian (food) products or products we now have to buy in other countries are worse in quality and the same in price compared to what we used to get from Western suppliers.”

Some food has turned out to be flat-out irreplaceable – like cheeses from Italy and France. It takes decades to produce a good mature cheese, notes Lavrushkevich.

Sutormina agrees: “Even though many small cheese farms appeared across Russia over these three years, wonderful cheeses from Europe is the one thing we all miss.”

The embargo has hurt the ordinary consumer in more basic ways, says Vasily Uzun, economy professor at the Russian Presidential Academy of National Economy and Public Administration.

“The embargo took the cheapest products off the shelves: Polish apples, American poultry and European cheeses. Products that replaced them turned out to be more expensive and of lower quality,” he says.

“That’s why food is a bad weapon in a sanction war: It hits your own people in the first place.”

[Source”cnbc”]