Neither Consumers nor Producers Benefit from Putin’s Ban on Food Imports or Will by Its Extension

Paul Goble

            Staunton, November 24 – Vladimir Putin says he wants to extend his ban on the Western food imports “as long as possible” in order to help domestic producers and at least ultimately to help domestic consumers.  But in fact, neither is being helped by this Kremlin policy now, and both are likely to suffer more in the future.

            Speaking to the All-Russian People’s Front, Putin said that he wants to extend his counter-sanctions ban “in order to help local producers” because Moscow must “’create viable conditions for Russian producers as well as consumers’” (themoscowtimes.com/news/putin-wants-to-prolong-western-food-ban-as-long-as-possible-56267).

                Opposition leader Grigory Yavlinsky says in a blog post today that “it would be good to think not only about the domestic producer but also about the domestic consumer.” And if one does that, one sees that this Kremlin policy has been a disaster both directly and indirectly for the Russian people (echo.msk.ru/blog/yavlinsky_g/1879960-echo/).

            Among the negative consequences for the consumer have been a 32 percent rise in food prices over the last two years, the public spectacle of the destruction of food when 57 percent of Russians now as opposed to 37 percent two years ago say they must economize on food purchases, and a reduction in quality foodstuffs and an increase in unhealthy ones.

            Such things might appear to be justified if in fact the Russian agricultural sector was really benefitting from this ban, but in fact, the reverse is true. As “Nezavisimaya gazeta” points out today, “the rate of growth in agricultural industry this year is below the average of the last 17” (ng.ru/economics/2016-11-24/1_6867_myth.html).

            That gives the lie, Anatoly Komrakov says, to claims by the Russian authorities that agriculture is becoming “’a locomotive’ for the entire economy.” (That expression belongs to Deputy Prime Minister Arkady Dvorkovich.)  That simply isn’t true, as government statistics themselves show.

            But Dvorkovich is hardly alone in making false claims. Putin says that the great success of Russian agriculture has been responsible for holding down inflation, and Prime Minister Dmitry Medvedev has said that Russian farms are increasing production at rates “not seen either in Soviet or post-Soviet times.”

            In a normal market economy, if production is increasing, then prices should fall; but because of increasing poverty, Russians lack the money to spend even on food and farmers are boosting prices in the absence of competition from better foreign imports, to the detriment of all Russians.

            What the country needs, experts say, is a program to boost the purchasing power of impoverished Russians, perhaps one that would resemble the food stamp program in the United States. Until something like that happens, the trends in agriculture and the Russian food supply are likely to remain negative.

            But instead of moving in the direction of providing more support to agriculture and consumers, the Russian government is cutting back. The Russian authorities say they are being forced to cut back on spending on agriculture next year by approximately 50 billion rubles (800 million US dollars) (ronsslav.com/vlasti-rf-sokrashhayut-rashody-na-selskoe-hozyaystvo/).

            As always, Moscow is trying to shift the blame to the regions by demanding that they come up with the money to pay for programs the center no longer will.  But because of the absence of genuine fiscal federalism in Russia, the regions don’t have the money to do so – and consequently, both producers and consumers are likely to suffer even more in 2017.