Article / 08 August 2014 at 10:13 GMT

Winter is coming...and there'll be less on the menu in Russia

Russia oil and gas expert
United Kingdom
  • Russia's USD 9 bn ban on foreign food imports hits Norway and Poland hardest
  • Russian consumer faces barren winter with a number of foodstuffs off the menu
  • European pariah state Belarus could seize opportunity to bridge EU-Russia gap

By Nadia Kazakova

Either the Russian Minister of Agriculture is very thoughtful or the sanctions have been written and approved by a bachelor with an intense dislike for meat products and milk. 

He's got a nut allergy too. At least he's not a vegetarian.

It's not all bad. The Russian consumer can still enjoy a diet full of unsanctioned imported goodies. You can have a lovely pasta with a dash of olive oil, enjoyed with a glass of good wine. For desert, a selection of pastry and ice-creams can be followed by a coffee or a tea. It would be a bit more difficult if you're on a five-a-day fruit and veg routine, but a bit of dark chocolate might dilute any regret here. 

On a slightly more serious note, the import ban will affect both the Western producer and the Russian consumer. Around billion of revenue will be lost among EU, US, Canadian and Norwegian food producers. There will also be an indirect impact filtering through to other industries: manufacturing, freight, finance, to name few. 

Russian consumers might not feel too much pain immediately, but fresh fruit and veg might be less available in winter. The import substitution in agriculture requires time and investment, neither might be forthcoming willingly given the risks. The bottom line? It does not look good all around. There is a possible exception: neighbour Belarus, so long a pariah geopolitically, might seize the opportunity to bridge the gap between Europe and Russia.


The tit-for-tat retaliation on sanctions is bad news for 
Russian meat lovers. Photo: Oli Scarff \ Thinkstock

Domino dancing in Europe

The ban on imports of some agricultural products would be a serious blow for many European, US and Australian producers. The potential loss of revenues is in the region of USD 9.5 billion, according to Reuters. The Russian customs statistics suggest a smaller 8.6 billion USD. The number might cover only the value of imports, without taking into account the whole value chain. The year-long sanctions would affect thousands of jobs, from manufacturers of agricultural machinery, to suppliers of the food processing equipment, to freight companies.

At the individual countries' level, Norway and Poland have the most to lose, based on Russian customs statistics for 2013. Each country exported over billion worth of now banned produce last year. They are followed closely by the US, Germany, Spain and Denmark. Surprisingly, Bulgaria and Romania, for example, have very low exposure to the Russian import ban. 

Products most affected by the Russian import ban, USD million
Table 1

Source: Note: numbers are estimates, mainly based on top-ten country exposure in each category.

At the industry level, fish production in Norway would be most hit, as well as poultry and pork farming in the US, Denmark, Germany and Canada. The Polish apple business as well as Spanish apricot growers might need to figure out what to do with their surplus produce. The main challenge for many would be not just the search for new markets, but whether to mothball capacity hoping for the Russian market to re-open.   

Value of food imports from EU, US, Canada, Australia and Norway in 2013, million USD
Table 2

Source: Note: numbers are estimates, mainly based on top ten country exposure in each category.

Winter is coming...for Russia

In Russia, the media is full of news of local producers eager to grab the opportunity to increase their market share. There is already a number of what import substitution can bring in ruble 281 billion to the Russian agriculture sector over 18 months, reported. 

The questions is whether the Russian agricultural sector can invest, produce, sell and make a profit – all in a single year of the import ban. The same applies to countries which are looking to expand their business in Russia: would they be prepared to invest into a one-year project? Unless everyone assumes that the ban is here to stay for a long time.  

There is little sign that the import ban bothers affected Russian businesses too much, at least publicly. Supermarket chains seem happy to source more of their frozen beef from Latin America. They do admit, however, that sorting out the logistics would take a bit of time. 

There is the watchful eye of the government over the proceedings. The government will be monitoring prices on a daily basis to prevent speculation post sanctions. Clearly, the harvest season might help to smooth prices for some fresh produce, but it would be hard to replace apricots from Spain or frozen fish from Norway. 

The impact would be felt much more acutely during the winter season, when some of the fruit and veg might simply run out. A squeeze in supplies usually leads to price hikes.  A weaker ruble and additional transportation costs might make the substitutes – even if they are available – so much more expensive. 

If the government tries to control prices, the goods will most likely simply disappear from the shelves. 

Going bananas for Belarus

Looking at import statistics for banned goods, it is interesting to see how often Belarus crops up as one of the top ten suppliers of some food items. It seems that the country is punching above its weight in certain industries, not just in the Winter Olympics.

But then, most cash is still spent on buying Russian gas. It would be amusing if Belarus gets an unexpected economic boost as a result of the Russia's import ban. Belarus could probably expand its proceeding/packaging capacities, using European feedstock/semi-finished products and selling finished goods into Russia. Belarus is already among the top ten importers of bananas to Russia. It sold some worth of the fruit in 2013 (0.01% of banana imports), a miniscule amount of course. But it is the idea that counts.

Getting down and dirty in Crimea

Western sanctions, the Russian import ban and other burning issues might be some of the subjects to chew on for Russian Duma deputies. They will be travelling to Crimea to meet with President Putin and PM Medvedev on August 14. One hopes that the meeting will be a welcome break for policy makers who seem to be constantly in the state of a high alert. 


Will this Irkutsk food market be as well-supplied this winter? Photo: Oleg Nikishin \ Thinkstock

-- Edited by Martin O'Rourke

Nadia Kazakova is a specialist on Russia, particularly the oil and gas sector
Mickette Mickette
One solution: steaks from South America
fxtime fxtime
Agree Mickette....Brazil currently supply $4.0bn beef and beef products to Russia and Uruguay and Argentina can ramp up their current exports of beef so Russians are unlikely to suffer. I note that Ukraine exported $2.0bn to Russia in beef stock and here is where the ban will really hurt. Currently Russia is self sufficient in Wheat, Rye, Buckwheat, Sunflower Oil, Eggs and potatoes and 90% self sufficient in dairy products and crush spread products. Data via Rosstat, Rosbusinessconsulting, WTO and FT
Nadia correctly points out that we are in the harvest season so the ban will not have an immediacy to Russian consumers.
fxtime fxtime
Forgot to post the EU export a consolidated $13.8bn in food (processed/unprocessed) per annum to Russia. Data source from the same posted above.
Mickette Mickette
Hi fxtime :-) and poultry from Asia...
fxtime fxtime
Thx for the link/data Mickette.
Nadia Kazakova Nadia Kazakova
The slight problem with switching to a different supplier might be the price. For example, the Brazilian poultry is more than 2x more expensive than the US one. The Russian border prices were $1.3 per kilo for US poultry and $2.7 for the Brazilian in 2013 (
fxtime fxtime
My guess is that Russia has enough reserves to suppress any price inflation to consumers and that Russians will in the most part be ignorant of any price manipulation/suppression.
Artie Artie
(a) For russians level to suffer much more higher than for western (for example, when snowfall in USA or Europe - everybody screaming and crying, for russians its usual; (b) deficit its not extraordinary - russians saw worst time much more times; (c) there are so many sources except western countries in the world to supply. Its opportunity for local suppliers and relabeling traders
Tcas Tcas
At present time I don't see any problem for us. There are another contries where we can buy meat, fruits, vegetables and so on. And Artie is right, I remember time when we had nothing.
fxtime fxtime
Artie and Tcas I think Nadia, Mickette and I were agreeing with the same idea as your comments. Russia is self sufficient and there are countries outside of the USA and Europe who can easilly supply you.
Mickette Mickette
You will have less problems in Russia as we in Europe in the future. We depend on people with bad intentions.


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