Russia Imposes Sanctions Others Could Gain

Russia

Sanctions imposed against Russia are having a ripple effect that may cause gain for other countries. Counter sanctions by Russia to cut food imports of poultry meat, beef, pork, cheeses, milk and fish from Norway and Australia, in addition to the U.S., Canada and European Union opened up opportunities for Brazil and other Latin American countries.  Brazil and Argentina could see exports of chicken, beef, oils and grain increase as they move to fill the void left by Russian import bans elsewhere.

Russia currently imports about one-third of its food.  One option is to replace banned foods with local food items, which would benefit local farmers who are a large support base for Russian President Vladimir Putin and make up 30 percent of the population.  One obstacle to this, however, is that recently many farmers were wiped out by high taxes, according to Igor Nikolayev, who heads the FBK Strategic Analysis Institute.

Other countries stand to gain from sanctions imposed on Russia. The head of Chile’s Direcon trade body, the Free Trade Agreement between Chile and Mexico, said Thursday that Russia’s government met with various Latin American embassies on Wednesday to discuss the possibility of looking for more food providers to fill the gaps resulting from the food embargo. Chile, while looking to replace fruits now banned from Poland, faces the hurdle of seasonal variations, being in the southern hemisphere. Russia banned apples and some other fruit from Poland on grounds of sanitary concerns, but many speculate that the move was in retaliation for Polish support of Ukrainian authorities.  Chilean salmon producers have stated an intention to be the supplier for an increased demand in Russia’s fish market.

Brazil is a clear winner from the embargo, as the world’s top exporter of beef, chicken and soybeans.  Brazil also has the land available to ramp up agricultural production, according to Reuters. Brazil, as a part of the association Brazil, Russia, India, China (BRICS), is likely to be one of the first countries that Russia turns to. Relations between the United States and Brazil have been strained since last year’s revelations that the U.S. spied on Brazilian President Dilma Rousseff’s personal e-mails.

Belarus, part of the Customs Union with Russia and Kazakhstan, also stated that it is able to ramp up increased agrarian production to supply Russia. On August 12 Russian will negotiate with Belarus to prevent a re-export of banned western food products from the Belarusian territory, prompted by concern about expected smuggling of banned western food products. Possible expansion of dairy product supplies will also be discussed.

Over the past 50 years, sanctions have been used 100 times against countries such as North Korea, South Africa and Cuba.  In South Africa, sanctions probably encouraged the government to take the opposition’s demands more seriously.  In North Korea and Cuba, U.S. sanctions have not had a significant impact on the communist governments and may have contributed to keeping the general populations poor.  Generally sanctions are more effective when the country imposing sanctions has more economic power and the government is other than communist.  With a combined total of $33 trillion, the gross domestic product of the United States and Europe dwarfs Russian’s GDP of $2 trillion.  While Cuba and North Korea are fairly isolated, Russia has close ties to the EU, suggesting that the sweeping nature of the sanctions could have a positive impact, despite the communist policies.

While other countries stand to gain from imposed Russian sanctions, the U.S. National Chicken Council, stated that the biggest losers will be the Russian people, who will  invariably face  higher food prices, especially for poultry and meat. Additionally, the embargo could create a glut of food produce in some European countries, pushing down prices, further endangering a fragile  EU economic recovery.

By Dawn Lustig

Sources:
New York Times
Bloomberg
ITAR-TASS (Brazil poultry)
ITAR-TASS (Russia to Negotiate)
Yahoo
Time

One Response to "Russia Imposes Sanctions Others Could Gain"

  1. Apotheoun   August 12, 2014 at 6:09 pm

    The countries of Latin America should take advantage of the stupidity of the EU and increase their exports to the Russian market.

    Reply

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