Russia hits back at West with huge food imports ban

GMT 20:38 2014 Thursday ,07 August

Arab Today, arab today Russia hits back at West with huge food imports ban

Russia's Prime Minister Dmitry Medvedev
Moscow - AFP

Russia retaliated against tough new Western sanctions on Thursday, banning most food imports from the United States and the European Union and threatening to block flights over its airspace.
The 28-member European Union swiftly denounced the measures, which also target Canada and Australia, and said it was ready to take action in response.
The tit-for-tat moves further heighten tensions between Russia and the West over the conflict in Ukraine, where heavy shelling was reported in the rebel-held eastern city of Donetsk on Thursday.
At a government meeting Russian Prime Minister Dmitry Medvedev announced the embargo will affect "imports of beef, pork, fruit and vegetable produce, poultry, fish, cheese, milk and dairy products from the European Union, the United States, Australia, Canada and Norway".
The ban exempts only baby food and will last one year unless "our partners demonstrate a constructive approach" with regards to sanctioning Russia, he said.
"I hope that the economic pragmatism of our partners will win over lousy political motives," he said.
With Russia importing 35 percent of its food, consumers are likely to feel the impact unless other suppliers can quickly be found.
Analysts at London-based Capital Economics said Russia imported last year $9.5 billion (7.1 billion euros) worth of the goods on the list from the sanctioned countries, out of $25 billion spent on those goods.
- EU exporters most affected -
The European Union will be worst hit as sales of those products accounted for $7 billion of the $16 billion in food it exported to Russia last year. However this is just 0.05 percent of the EU economy, they noted.
The European Commission said the measures were "clearly politically motivated".
"We reserve the right to take action as appropriate," it said in a statement.
The EU's envoy to Russia, Vygaudas Usackas, told AFP the European Union may take Russia's ban to the World Trade Organization.
The United States largely dismissed the impact of Russia's decision on US exports.
"The steps that Russia announced are likely insignificant as an impact on the US economy but they are also in some respects a cruel irony," said David Cohen, US undersecretary for terrorism and financial intelligence.
"What the Russians have done here is essentially impose sanctions on their own people. And they have imposed a type of sanctions -- limiting access to food -- that the United States and our allies would never do," he said in a conference call.
The measures against Canada are most likely to affect pork producers, whose product accounts for 87 percent of the country's agricultural exports to Russia, according to the latest government figures.  
A Canadian industry representative said Thursday that producers were hoping to redirect ships carrying frozen meat already en route to Russia -- which could be worth up to C$50 million ($45 million).
In another potential strike against the West, Moscow is considering banning the use of Russian airspace for European airlines, the so-called overflight rights needed to take the shortest route to Asia.
US airlines have not been allowed to use Siberian airspace for years and have been pushing the Russian government to review its policy.
The overflight measure is being mulled in response to EU sanctions effectively grounding Dobrolet, a low-cost subsidiary of Russia's flagship Aeroflot over its flights to Russia's annexed Crimean peninsula on US-made Boeing craft, which EU companies service and lease.
The ban could hurt not only European long-haul carriers but also Aeroflot, which receives the overflight fees.
Bank of America Merrill Lynch estimates that using longer routes bypassing Siberia could add around $30,000 (22,400 euro) per flight to fuel and operating costs.
- 'Biggest loser Russia' -
Moscow has billed the sanctions, as well as import restrictions, as good news for Russian producers.
Medvedev said the government will work to "prevent price increases" and use the embargo to "clear the store shelves for our producers".
However, economists have warned that the embargo will hurt the poorest Russians, who spend a large percentage of their income on food.
"We could see a minimum of 20 to 30 percent rise in prices, especially for produce," said Igor Nikolayev, who heads Moscow-based FBK Strategic Analysis Institute.
"Substituting imports with Russian food is nothing but tall tales," he said, citing government policies of the last decade which have wiped out farmers with exorbitant taxes.
"To support farmers you need money, but there is no money," he said. Existing money has already been allotted to other needs and Russian state banks can no longer borrow long-term loans on Western financial markets, the economist added.
Analysts have warned that protectionist measures will send inflation soaring because of the higher price for food.
"The upshot of all this is that the biggest loser from the ban looks set to be Russia," said Neil Shearing and William Jackson at Capital Economics.
Independent analyst Maria Lipman said the food ban was a political necessity for Moscow, but not the worst response that could have been expected.
"Russia is sending a message saying that you hurt, and we hurt too, so perhaps we should start talking," she told AFP.

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