July 25, 2016                                                                 


Russian agri-food embargo gets mixed results


Russia has for the second time extended its ban on agri-food imports from selected Western countries, this time for 17 months, or until the end of 2017, but is its intention to "punish" them for being overly "intrusive" into Russia's role inthe Ukrainian affairs creating the intended effect in terms of trade?

This second extension until Dec. 31 next year is contained in a decree signed by Russian President Vladimir Putin last June 29. The ban stays unchanged for certain imported foods-including beef, poultry meat, pork, and dairy products-from the US, Canada, the EU, Australia, Norway, Ukraine, Albania, Montenegro, Iceland and Lichtenstein. The ban originally started on Aug. 7, 2014, and was supposed to last until July 31, 2015. However, in late July last year, Russia announced an extension of the ban until August 6, 2015.


The EU has made an assessment of the Russian import embargo, looking at its agri-food export development from August 2014, when the ban started, to July 2015, or a year after the ban.


Accordingly, total EU agri-food exports to third countries increased in value by 5.7% compared with one year before. "After a very positive performance during the first half of the year 2015, with a record month in March (at almost €12 billion), also the second half has started off with a positive trend: July 2015 exports recorded +8% compared to July 2014", the assessment report stated.


Major gains


Major gains in export values were achieved in the US (+16%), China (+33%), Switzerland (+5%) and some key Asian markets including Hong Kong (19%) and South Korea (+29%). European exporters have increased their exports also to certain Arab countries: Saudi Arabia (+10%), United Arab Emirates (+14%) and Egypt (+26%).


Compared with the previous year, overall EU agri-food exports to Russia between August 2014 and July 2015 decreased from € 11 billion to € 6.3 billion (-43%).


The analysis of the EU exports to third countries of the sectors affected by the embargo during the period August 2014-July 2015 showed that:


-- Export values of bovine and poultry products increased by 23% and 5% respectively while the value of pig meat exports was in line with the previous year.


-- The value of butter exports fully recovered from the initial difficulties and achieved +3% (compared with the 12-month period the year before) due to an increase on Middle East markets.


-- Export values of cheese and milk powders still lagged behind: -14%, -10%, and -24% respectively. 


Losses compensated


In conclusion, the report said, the EU's agri-food sector has managed to compensate the losses in export sales to Russia by increasing exports to other main destinations and alternative markets over the entire period since the embargo started.


The Russian ban, however, did not go well with other affected countries and companies, such as the Alaskan Great Pacific Seafoods, which was reported to have gone bankrupt. ""There was a significant drop in the price of roe due to the Russian embargo and the combination of the Japanese yen's valuation and Japanese demand," the company said in a statement in early June. "This reduction in roe price was a serious blow to our ability to generate sufficient cash to continue to operate."


Fishermen in Iceland have been greatly affected by the Russian embargo, according to a Reuters report.


Iceland's fish exports to Russia have fallen, from 118,000 tonnes in 2014 to 50,000 tonnes in the first 11 months of 2015, according to official statistics.


Another report from Iceland Monitor early this year said Iceland's fishing industry is putting pressure on its government to stop supporting embargo against Russia due to losses caused by Russia's retaliatory ban on Icelandic products.