3 years of embargo in Russia: The winners and losers

Thanks to governmental subsidies programs for agriculture, investments in the greenhouse business have become increasingly popular among leading Russian businessmen.

Thanks to governmental subsidies programs for agriculture, investments in the greenhouse business have become increasingly popular among leading Russian businessmen.

Reuters
Sanctions may have a negative connotation, but the bans imposed on Russia have actually forced the country to become more self-sufficient.

Three years ago, Russia imposed an embargo on the import of products from the EU, the U.S., Australia, and a number of other countries in response to Western sanctions. The supply of beef, pork, poultry, fish, cheese, milk, fruit, and vegetables was banned. A few years have passed, but who has won - and who has lost out - following the ongoing sanctions?

High prices

Sanctions have increased the price of food in Russia, and have even contributed to inflation. Obviously, the main reason for inflation was the devaluation of the ruble in December 2014, but the cost of domestic products has increased - as shown by the figures collected by the BBC’s Russian Bureau. So, in essense, shopping for the public has become costlier.

Customers unload items at a cash register at an Auchan supermarket. / Vladimir Astapkovich/RIA NovostiCustomers unload items at a cash register at an Auchan supermarket. / Vladimir Astapkovich/RIA Novosti

According to journalists, a typical food basket bought from a supermarket is now 69 percent more expensive, compared to August 2014. Although, according to the Ministry of Economic Development, average prices have increased by 32 percent since August 2014. 

“The negative effect of the embargo is a reduction in turnover in the Russian economy, as a bigger part of income is spent on food, respectively, the spending on other types of goods and services was greatly reduced,” said Daniil Kirikov, managing partner of the Kirikov Group agency.

Stark shelves

The ban predictably limited the choice of products on the domestic market. European fruits and vegetables were replaced by products from Turkey, Egypt, Morocco, and dozens of Middle Eastern countries. High quality European food - such a fine cheese - have been replaced by products made in Russia or Belarus, and don’t quite live up to the same standards (although produce made on Russian soil is improving).

A worker arranges a display of cheeses, at the Neglinnaya Plaza shopping center in Moscow, 2015. / Getty ImagesA worker arranges a display of cheeses, at the Neglinnaya Plaza shopping center in Moscow, 2015. / Getty Images

“At the moment, it can be stated that the food embargo contributed to the growth of the popularity of Russian products, but the decline in incomes of the population slowed down this process”, says Artem Deyev, leading analyst at Amarkets financial agency.

Renaissance of small farming

The Russian government used the embargo as a protectionist measure for domestic producers, which boosted small farming businesses in Russia along with the governmental program of cheap loans (up to $250,000, 15 million rubles) for first time farmers launched in 2012. According to Rosselkhozbank, which cooperates with the Russian Ministry of Agriculture, in 2016 small and mid-sized agricultural businesses were granted more than 9,200 loans totaling 191.5 billion rubles, which exceeds the amount lent in 2015 (183.7 billion rubles), said a bank press release.

The Kladovaya Solntsa farm, Krasnodar Territory. / Vitaliy Timkiv/TASSThe Kladovaya Solntsa farm, Krasnodar Territory. / Vitaliy Timkiv/TASS

“Now it’s necessary to take some time for agricultural producers to pay off the loans they took, make profit, and produce new volumes without risking losing their market share recently, but the timeframe for the embargo should be limited, based on pricing policy, financial data, and the economic situation”, says Peter Pushkarev, chief analyst of the TeleTrade Group of Companies.

Rise of greenhouses business

Thanks to sanctions and governmental subsidies programs for agriculture, investments in the greenhouse business have become increasingly popular among leading Russian businessmen, agricultural corporations, and even the political elite.

Farming tomatoes at a greenhouse. / Donat Sorokin/TASSFarming tomatoes at a greenhouse. / Donat Sorokin/TASS

The son of oligarch Roman Abramovich (net worth $7.6 billion, No 13 on Forbes' Russia list), Arkady, decided to grow tomatoes and cucumbers in the Belgorod Region, on the border with Ukraine (450 miles south of Moscow). In late 2015 he set up a company called Greenhouse, which specializes in vegetable farming. Russian Prosecutor-General Yury Chaika's youngest son Igor also decided to invest in the agricultural sector. In March 2016 he set up a company called Agro-Region, which also specializes in vegetable farming.

According to Russia’s Ministry of Agriculture, the yield of tomatoes and cucumbers grown in Russian greenhouses in July 2017 increased by 19.8 percent (totaling more than 570 tonnes) compared with figures from July 2016.

If using any of Russia Beyond's content, partly or in full, always provide an active hyperlink to the original material.

Read more