Russia reveals huge cost of Western food ban
Photo Jasper Greek Golangco
(MOSCOW) - Russia warned Wednesday that Moscow must spend billions of dollars in the coming years subsidising farmers in order to avoid a shortage caused by its ban on most Western food.
Agriculture Minister Nikolai Fyodorov's stark comments represented Moscow's first admission that its decision to strike back at US and EU sanctions with sweeping meat and produce bans may have long-term costs for both its budget and consumers.
The trade war is part of a broader crisis in East-West relations sparked by Russia's perceived attempts to split strife-torn Ukraine in response to Kiev's new political and economic alliance with Europe.
Russia relies heavily on foreign fruits and vegetables because its long winters and inhospitable climate keep farmers from growing a wide range of produce desired by the country's booming middle class.
It also imports huge volumes of Australian and European meat along with US poultry and Norwegian salmon -- all banned under Russian President Vladimir Putin's orders earlier this month.
The agriculture minister suggested that the 50-billion-ruble ($1.4-billion, 1.0-billion-euro) figure cited as sufficient to keep Russian stores stocked with the same range of goods until the end of the year was far too small.
"We are trying to prove (to the government) that it needs to be somewhat higher," the minister told the Rossiya 24 rolling state news channel.
But Fyodorov quickly warned that the costs would not end there.
"There are also medium-term measures. Next year and in the subsequent years, you could say that this sum will be measured in the hundreds of billions of rubles," Fyodorov said.
His estimates imply that Russia may have to spend at least $10 billion on subsidies over the next few years.
That level of support has not been provided for in the federal budget and may require other popular social programmes to be cut.
Russia's economic slowdown has shrunk tax revenues while jitters over Ukraine's future and possible additional Western sanctions have kept investors from filling the void left by cautious levels of state spending.
- Patriotic fervour -
Natalia Shagaida of the Russian Presidential Academy of National Economy and Public Administration said the government's current agricultural subsidies see just eight kopeks spent for every ruble of goods produced.
"In order to enjoy greater production, you need money spent on agricultural modernisation, especially in the dairy farming industry," Shagaida said in a telephone interview.
"You need cheap loans and enormous state support," the economist said.
"You may then see some results in vegetable farming, for example, as early as next year. Even with dairy, you might see progress within two years. But the rest will take at least five years," Shagaida added.
The food restrictions have been sold by the Kremlin and Russia's dominant state media as a patriotic effort to revive domestic production and reduce dependence on unfriendly Western states.
Moscow's powerful consumer protection agency Wednesday also shuttered four wildly popular restaurants of the US fast food giant McDonald's over "numerous" safety violations that it failed to spell out.
But Russia's bravado in the face of Western outrage over its alleged attempt to redraw the map of Europe was deflated by the government's admission that it must lift some of the bans because consumers would suffer too much.
Prime Minister Dmitry Medvedev allowed baby salmon to be imported so that fish farmers could grow new stock and make up for a terrible season that has seen the catch come in at just a third of last year's level.
Medvedev also eased restrictions on some sports drinks and foods as well as lactose-free dairy consumed by diabetes patients.