More food export may be restricted to protect Russians from price growth

The Russian government is facing the difficult task: how to protect domestic consumers from rising prices without hindering food exports, the share of which has been growing since 2014.

The Kremlin may restrict more food exports to shield it from high prices, says The Financial Times. According to Russia’s Minister of Economic Development Maxim Reshetnikov, the government continues to monitor and adopt export measures, including a floating tariff of “flexible export duties” on additional goods, as prices continue to rise. “There’s no guarantee that global food prices have stabilised and peaked,” he said. “Any news about crop forecasts can provoke [...] yet another rally for some foodstuffs, so we are constantly paying close attention to them and taking some measures when need be.” The United Nations global food price index surged nearly 40% year on year in May and hit its highest level in almost a decade.

Russia, which is currently one of the world’s largest grain exporters, has relatively recently started exporting key foodstuffs such as wheat. In 2014, the country banned most Western food imports as tit-for-tat sanctions and then began to actively develop domestic agriculture. According to the World Trade Organization, agricultural goods accounted for almost 8% of Russia’s $419-billion exports in 2019. However, insufficient food storage infrastructure hinders the country from weathering price spikes by increasing supplies, warehousing the extra production and releasing it as needed.

Meanwhile, sugar prices rose 65% in Russia in 2020. Prime Minister Mikhail Mishustin attributed high Russian food prices to “the greed of certain producers and retail networks” prompting fears of a crackdown throughout the sector. Executives in the food retail sector, for their part, claim that recent price rises are due to increased demand from Chinese importers willing to pay more.

Reshetnikov stated that potential business measures were likely to take the form of higher taxes. “If you invest all your profits, even if they’re very high, in new production, development, research and so on, that’s one thing. If you pay dividends, which is also fine [...], it may well be that another tax level is appropriate to stimulate investment in business,” he said.

As for domestic consumption, the minister said that Russia would end most of the price caps but continue to subsidise certain basic foodstuffs, such as bread and flour. Food prices remain a key political issue for the Kremlin, as years of falling incomes have made essential goods unaffordable for a considerable part of the country’s population. In December, temporary price controls were imposed on several key foodstuffs, while in 2021, the government resorted to wheat export quotas combined with additional export duties.

By Anna Litvina