October 26, 2014
Moscow sets total ban on Western food imports in sanctions retaliation
Moscow imposed a total ban on imports of many Western foods today in retaliation against sanctions over Ukraine.
In eastern Ukraine, a Dutch recovery team called off its work at the site where Malaysian airliner MH 17 was shot down over rebel held territory last month, saying the frontline location had become too dangerous.
Ukraine said the halt to the recovery meant it would stop observing a ceasefire at the site, where it is battling rebels that the West says are armed and funded by Moscow.
Russian share prices fell after the announcement of Moscow's one year ban on all meat, fish, dairy, fruit and vegetables from the United States, the 28 European Union countries, Canada, Australia and non-EU member Norway.
Russia bought $43 billion worth of food last year. It has become by far the biggest consumer of EU fruit and vegetables, the second biggest buyer of US poultry and a major global consumer of fish, meat and dairy.
President Vladimir Putin ordered his government to adopt the measures to retaliate against Western countries who imposed sanctions on Russia's defense, oil and financial sectors over its support for rebels waging an insurrection in east Ukraine.
He had promised to ensure that the measures would not hurt Russian consumers, which suggested he might exclude some popular products. But in the end, the bans announced by his prime minister, Dmitry Medvedev, mentioned no exceptions.
The announcement saw Russian bond yields rise to their highest levels in years and Moscow's already reeling share prices extend a sell-off.
Agriculture Minister Nikolai Fyodorov acknowledged that the measures would cause a short-term spike in inflation, but said he did not see a danger in the medium or long term. He said Russia would compensate with more imports of products from other suppliers such as Brazilian meat and New Zealand cheese.
The EU's executive Commission said it reserved the right to take action to retaliate against the Russian ban.
Farmers in specific sectors in Western producing countries are likely to suffer, but much of the pain will be borne by Russians, who will face higher prices and shortages of some goods, with inflation already rising, the rouble falling and the economy hurt by capital flight.
Russians have relished imported food since the fall of the Soviet Union, when year-round supplies of fresh fruit and vegetables arrived and ubiquitous cheap American frozen chicken quarters became known as "Bush's legs" after the then president.
The nascent middle class in Moscow, which buys Italian cheese and American beef at supermarkets, will take a hit, but so will ordinary people who buy Polish apples and Greek cucumbers in street markets. Russia bought 28 percent of EU fruit exports and 21.5 percent of its vegetables in 2011. It bought 8 percent of U.S. chicken meat exports last year.
Moscow may also ban Western airlines from flying transit routes over its air space, a measure that would cost European airlines money burning extra fuel to avoid Russia on flights to Asia, but would also deprive Moscow of hundreds of millions of dollars in overflight fees.
Western countries imposed initially mild sanctions on Russia after it annexed Ukraine's Crimea peninsula in March, but tightened them after a Malaysian airliner was shot down over pro-Russian rebel-held territory in east Ukraine on July 17.
The latest Western measures limit access by Russian state banks to global capital markets and also block imports of defense and oil industry equipment.