A ‘total embargo’ on the import of various food categories brought in to force by Russia will have serious impacts on the European food export and agricultural sector, warn industry and experts.
Russian Prime Minister Dmitry Medvedev yesterday announced a ‘full embargo’ on a number of categories of food from the EU member states, the US, Australia, Canada and Norway. The one year ban on imports in retaliation to Western sanctions brought against Russia in recent months is expected to have a serious impact on the European food and agricultural industry.
According to FoodDrinkEurope, the trade body representing Europe’s food and drink industry, Russia remains the EU's second most important food export market after the US. Exports of food and raw materials to Russia were worth €12.2 billion in 2013, following several years of double-digit growth.
“The structure of EU exports to Russia is quite diversified, with meat, dairy and beverages appearing as the most important categories; a large part of the EU food and drink exports to Russia come from Germany, the Netherlands, France and Poland, which means these countries are likely to be more affected,” said the European industry body, noting that EU food and drink products make up almost half of the total Russian food and drink imports, “which means that this ban will also have an impact on the Russian people.”
European farming and agri-cooperative association Copa-Cogeca urged the European Commission to take action over the export restrictions, warning that is unacceptable that the agriculture sector is bearing the consequences of the Crimean/Ukraine/Russian crisis.
"I am saddened that the EU farm sector has been targeted once more in this dispute with Russia,” said Copa-Cogeca secretary-general Pekka Pesonen.
Pesonen added that Russian authorities have already imposed ‘an illegal ban’ on EU pork products which is being investigated by the World Trade Organisation (WTO).
The British government said Russia had no grounds to impose sanctions, and that it would be working closely with trade associations and industry to help monitor the impact of the ban.
The spokesperson added: "We are still considering the impacts of the ban but we do not expect it to have a significant overall effect on our agricultural industry – the affected agricultural exports to Russia account for some 0.2% of our food, feed and drink total agricultural exports."
Norway's foreign minister, Børge Brende, said the Russian ban is "completely unreasonable".
"We are taking the news of the Russian trade restrictions seriously, but it is too early to say what the consequences will be for Norwegian companies. We are now examining the measures together with the EU and other affected parties, and we will jointly consider how we can best deal with the situation," he said in a statement.
Meanwhile, Ireland’s Minister for Agriculture Simon Coveney said the impact of the ban on the Irish food industry, and particularly the cheese sector, was a 'real worry'.
“I think the big worry in Ireland will probably be cheese – last year we exported about €4.5m worth of cheese to Russia. That would be a real worry for us,” he told RTÉ Radio.
The Australian government said it was disappointed by the Russia's decision to ban certain imports and said it is currently working to assess the full impact of the mesures.
Legal worries and business implications
Zia Ullah, partner at corporate law firm Eversheds noted that while companies that trade goods or have a presence in Russia are not immediately impacted by the import ban, those involved in the consumer sector, who trade fast moving consumer goods with Russian companies or have a retail presence in the country “may soon find themselves at risk.”
“In particular those who deal in the prohibited products will now need to carefully assess their position.”
“There is also the potential for additional products to be prohibited by Russia in the coming months,” he warned.
The corporate law expert noted that firms who rely on emerging markets for their business may experience lower sales in Russia as the economy slows, while companies dealing with counterparties in Russia or its vicinity will need to be prepared to answer questions regarding their business partners from both governmental bodies and those who provide finance to them.