Russia banned imports of foodstuffs such as meat, fish, fruit, vegetables, nuts and dairy products from the European Union, the United States, Australia, Canada and Norway as a response to Western sanctions.
The embargo entered into force in early August and affected consumer prices immediately. Analysts do not expect the annual inflation rate to exceed 7.8% by the end of the current year, up from 6.5% in 2013, but warned that, if the price soaring continues, Russia’s annual inflation rate might hit the five-year maximum of 8% by the end of 2015. The ban and, therefore, the price increase, especially affected foodstuffs like chicken (1.4%), pork (0.9%), fish (0.5%), apples, (0.5%) and cheese (0.4%), according to the State Statistics Service. Due to the embargo, the food prices in some of Russia’s regions skyrocketed. Kommersant, a Russian daily newspaper, reported in mid-August that wholesale prices for chicken legs on Sakhalin Island rose by 60%. In addition, the cost of meat in the Primorsky region rose by 26%, while fish prices suffered an even higher impact, rising by 40%. The most affected regions were remote ones, like Sakhalin and Primorsky, because, due to the lack of local suppliers and harsh weather conditions, they are completely dependent on imports.
Unlike the Russian population, the authorities see this ban as a chance for local suppliers to develop. Prime Minister Dmitry Medvedev said, back in August, that the ban should “clear the store shelves for the goods of domestic producers”. However, Capital Economics analysts doubt this will be the immediate effect of the ban, saying that “instead, prices tend to rise, as supply is squeezed”.
Russia remains heavily dependent on agriculture and food imported from the West, the third-largest import sector, accounting for 14.5% of all Russian imports, based on reports from Citi Russia and CIS. In 2013 alone, Russia imported goods worth $43 billion (€33 billion), according to the Federal Customs Service. Imports of the banned products were worth over half of that, rising to $25 billion, Capital Economics estimated.
Therefore, the only viable option that Russia has now is to try to find suppliers in countries whose goods were not placed under embargo. However, the new suppliers, even if they are found immediately, are likely to offer the same goods that Russia imported from the West, but at higher prices.
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