Saturday, 28 May 2016

Has the Russian food embargo just turned a corner?

EU US sanctions and Russia’s food embargo have been in the news this week when France granted Russia’s Agriculture Minister, who is banned from visiting the EU, a visa so he could meet up with his counterpart in Paris.

To recap the story so far, pay attention now; the EU impose sanctions on Russia for Russia’s violations in Ukraine; Russia respond by saying they are not in Ukraine and retaliate with an embargo on EU and US food; Russia tries to turn the problem of food supply in to an opportunity for domestic farmers while EU and US farmers hurting from the sudden closure of the Russian market lobby to get the embargo lifted; nothing seems to happen for two years then this week France open the door to the Russian Minster of Agriculture while the Greek PM stands shoulder to shoulder with the Russian President and proclaims sanctions imposed on Russia are not productive in a week when the EU is expected to renew sanctions and Russia plans to extend the food embargo until the end of 2017.

Got all that?

What I think we might be seeing is, if not the beginning of the end of sanctions then the beginning of the beginning to talk about ending sanctions and lifting the food embargo.

This week the Russian Agriculture Ministry announced plans to extend the food embargo until the end of 2017 although they will not expand the list of the products prohibited for import to Russia. 

Planning is not the same as doing and in my mind sounds like part of a negotiation process; why announce you’re planning to do something unless you’re giving room for negotiation.  Furthermore the comment that they will not expand the list could also be seen as a sign of good faith.

The Minister went on to say the food embargo is “good news for domestic agricultural producers”.

Maybe so but the EU, who have avoided lodging a formal complaint to the World Trade Organization (WTO) thus far might have their hand forced as Poland, who have been hit hard by the embargo have sent a request to European Trade Commissioner who represent EU members in WTO cases.

The Commission has said they will respond by September 12th which kind of puts a meaningful time frame for finding a solution to the current situation which despite rhetoric and strong words must be hurting everyone.

Something else that might further put a damper on the Russian Ag Ministers good news story is the report that Russia could face an oversupply of meat, in particular pork and poultry if it continues to increase production at the current rates.

Russia has increased meat production by 13.5% in the period from January to April 2016 compared to the same period last year and some Russian meat producers are concerned enough to have petitioned the government to stop subsidising the meat industry as it was affecting the price. 

That’s the problem with centrally planned agriculture, it’s virtually impossible to find the right balance but you’d think we would all know that by now.

So France granting Russia’s Agriculture Minister a visa could be construed that behind the scenes negotiations might just have moved to in front of the scenes which could be counted as progress of sorts.