The Kremlin may restrict more food exports to protect it from high prices

The country’s economy minister said Russia has warned that it is ready to expand export restrictions on staple foods after the recent price increases prompted the Kremlin to limit domestic costs for commodities such as sugar and flour.

Economic Development Minister Maxim Reshetnikov told the Financial Times that Russia is one of the world’s largest food exporters and is considering how to best support its food exports while protecting domestic consumers from prices. The impact of rising.

The United Nations Global Food Price Index touches The highest level in the past ten years In May, it increased by nearly 40% year-on-year. Food prices are a key political issue for the Kremlin, because 20 million people, or one in seven Russians, live below the poverty line, and rationing and hyperinflation are in people’s memory.

In December, Vladimir Putin ordered officials to impose Temporary price control of major foods Such as sunflower oil and pasta. Earlier this year, wheat export quotas were announced, and export tariffs were increased this month. Moscow stated that these measures need to be taken to compensate for the problem that many people cannot afford essential goods due to the decline in income over the years.

Reshetnikov said that if prices continue to rise, Russia may expand export measures, including direct export restrictions and floating tariffs that impose “flexible export tariffs” on additional goods. As for domestic consumption, Russia is ending most price caps, but will continue to subsidize certain staple foods, such as bread and flour.

“There is no guarantee that global food prices have stabilized and peaked,” Reshetnikov said. “Any news about crop forecasts may trigger another rebound in some foods, so we have been watching them closely and taking some measures when needed.”

The export restrictions that Reshetnikov calls price “shock absorbers” also aim to encourage domestic producers to invest more. “This is one of the sources of growth for us to add new value chains-food drives the development of animal husbandry, animal husbandry drives the development of milk, and so on,” he said.

Russia only started exporting key foods such as wheat after 2014, when it banned most Western food imports due to sanctions by the United States and the European Union, and then began to vigorously develop domestic agriculture. In 2019, wheat and other agricultural products accounted for nearly 8% of Russia’s US$419 billion export value. According to data from the World Trade Organization.

However, the country still lacks the same level of food store infrastructure as the US or Europe. This will allow it to resist price spikes by increasing supply, storing additional products, and releasing it as needed.

Nonetheless, the proposed export restrictions have won support from the food retail industry, with executives in the industry claiming that recent price increases are due to increased demand from Chinese importers who are willing to pay more. Last year, the price of sugar in Russia rose by 65%.

In contrast, officials blamed the rise in Russian food prices on what Prime Minister Mikhail Mishustin called “greed of certain producers and retail networks”. This has raised concerns about the blow to the entire industry.

According to the President’s Security Service survey last month, more than three-quarters of Russian businessmen said they felt unsafe against the state’s baseless criminal prosecution; in addition, 18% of prosecutors agreed with them.

This concern is so common that at the Russia Showcase Economy Conference in St. Petersburg last week, a lawmaker joked: “We have already taken the first step. [to an investment climate] ——Three days have passed since the forum started, and no one has been arrested.”

Reshetnikov said that any future commercial measures may take the form of higher taxes.

“If you invest all your profits, even if they are very high, in new production, development, research, etc., that’s one thing. If you pay dividends, it’s also good [ . . .] It is likely that another tax level is suitable for stimulating business investment,” he said.

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About the Author: Agnes Zang