Monday, 25 May 2015

Will Russia continue to dig for victory?

Russia’s self-imposed food embargo doesn't look like it will be lifted any time soon.

The embargo imposed last August in response to EU, US and some other countries sanctions over Russia’s role in Crimea and eastern Ukraine was initially set for twelve months.

Following comments last week by Russia's new Minister of Agriculture it doesn't sound like they're going to lift it at all.

Initially western media suggested supermarket shelves emptied as retailers struggled to find alternative supply's hinting that the embargo was hitting hard.

That may have been the case towards the end of last year although I doubt it but because I wasn't here so I can't say for certain.  It’s definitely not the situation now as supermarkets are full of food and shoppers.

Furthermore no one I meet mentions sanctions or embargo's or a lack of their favourite food item so it doesn't appear to be harming Putin's popularity ratings.

They do mention that the price of food and just about everything else has gone up but seem resigned to that in the same way we all are by giving a shrug of the shoulders and saying “what can I do about it?”

I am reading reports that production in Russia has increased in response to the embargo but I'm not entirely convinced that is the case as yet.

For example one recent report said pig output was up 8% on the same period last year in response to the embargo.

The thing is, if Yuri the pig farmer had dutifully followed the call to up production and immediately inseminated every available sow he could find, the resulting off spring would only be reaching slaughter weight now.

Likewise beef animals produced to fill the gap would only be a month old by now and you can forget about more milk for at least another couple of years.

It’s a similar situation in fruit and veg; increasing apple production requires planting new orchards which I assume take several years to come on line.

Vegetables are a more likely candidate but I doubt much was done when the embargo's were first imposed last summer because there wouldn't have been time to grow much before winter.

I guess more vegetables may have been planted this spring but I doubt much extra investment in infrastructure has been made over what was already in the pipeline.

Which is why I believe Putin will be unlikely to lift the embargo any time soon.

He has asked the nation to do its patriotic duty, grow more food and become self-sufficient which is not a bad idea but investors will have been seeking assurances over this last year that if they do step up to the plate he won’t go changing the goalposts again.

At this time every indication is Russia will retain the embargo come August and use it as an opportunity to talk up food production, whether they actually do increase production is another matter.

I expect we will see some relaxation on items that they will struggle supply such as dairy and also as a political tool to create discord amongst the sanction nations. but the basic embargo looks like it's here to stay.

I wonder what the WTO have to say about it all?