Who Will Gain Most from Russia’s Food Import Sanctions?

Headlines abound about Russian agricultural sanctions against the EU, Norway, USA, Canada and Australia. Russia’s biggest food imports include meat and poultry, vegetables, fruits and tree nuts and dairy products all of which contain some food products covered by the sanctions. So just who will fill the gap left by the banned countries?

Russia’s Imports of Food Stuffs by 2 Digit HS Code: 2013

Source: UN COMTRADE

Key: 01 Live animals; 02 Meat and edible meat offal; 03 Fish and crustaceans, molluscs and other aquatic invertebrates; 04 Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere specified or included; 05 Products of animal origin, not elsewhere specified or included; 06 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage; 07 Edible vegetables and certain roots and tubers; 08 Edible fruit and nuts; peel of citrus fruit or melons; 09 Coffee, tea, mate and spices;  10 Cereals; 11 Products of the milling industry; malt; starches; inulin; wheat gluten;  12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder; 13 Lac; gums, resins and other vegetable saps and extracts;  14 Vegetable plaiting materials; vegetable products not elsewhere specified or included; 15 Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes; 16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates; 17 Sugars and sugar confectionery; 18 Cocoa and cocoa preparations; 19 Preparations of cereals, flour, starch or milk; pastry cooks’ products; 20 Preparations of vegetables, fruit, nuts or other parts of plants; 21 Miscellaneous edible preparations

Home Advantage

Domestic producers of these categories can expect to benefit from sanctions as Russia works to increase its food security. Russia is already a major producer globally of many food products including fresh cows’ milk, poultry and potatoes.

Russian Production of Selected Food Stuffs: 2013

Source: Euromonitor International from UN Food and Agriculture Organisation, FAOSTAT

Note: Figures in brackets refer to Russia’s position in the global rankings of production.

However, this is no small challenge. The Russian agricultural sector is beset by low productivity and yields are low. Only a small proportion of the land area is farmed – 7.5% is comprised of arable farmland and just 5.6% is permanent pasture land. Agriculture contributed 3.6% to the economy in 2013 and has been declining in real terms since 2012.

Friends and Foes

As well as investing in its own agricultural sector, Russia is also likely to look for alternative trade partners. Globally, major exporters of agricultural products include friends and foes of Russia. The world’s top 20 exporters, who between them account for 70% of global food exports, include 12 countries from the banned list.

The World’s 20 Largest Agricultural Exporters: 2013

Source: Euromonitor International from United Nations (UN), International Merchandise Trade Statistics

In terms of simple numbers, China, Brazil, Argentina and India look to be in a good position to capitalise on the sanctions. Yet other factors come into play – China has its own concerns about food security, Argentina is reeling from its debt default and India faces infrastructure challenges. Distance is also an issue for Brazil and Argentina.

The Near-Abroad

Russia’s immediate neighbours, and European countries outside of the EU such as Serbia, are perhaps more favourably positioned to benefit from the ban, with Turkey, Belarus, Serbia and Kazakhstan the largest agricultural exporters. Belarus has a strong dairy and meat export sector and Serbia and Turkey strong vegetable and fruit export sectors. Whereas Kazakhstan’s exports are concentrated in cereals – currently excluded from the ban. So Turkey, Belarus and Serbia may turn out to be the chief beneficiaries of Russia’s one-year ban.

Food Exports by Type: 2013

Source: United Nations (UN), International Merchandise Trade Statistics