If before the “war of sanctions” between Russia and the West has been seen almost as the eternal, now the US authorities, whose position in this case is fundamental, they say that certain decisions can be taken in the coming months. Energy and the bankers are happy, the farmers, on the contrary, in sorrow. But whether the lifting of sanctions could nullify Russia’s achievements in agriculture?
Contrary to popular belief, mitigating or even a complete lifting of mutual sanctions regime between Russia and the Western countries will not become a serious negative factor for domestic agriculture, the interests of which in 2014 the counter was actually introduced. They have had a positive effect only in some segments of the food industry, without affecting the main obstacle for rapid growth in these sectors is falling demand.
Torg becomes subject
“Now Russia does not consume as much fats as before the imposition of sanctions, and during this period there was a significant improvement in the quality of meat products”
The previous year was for the Russian agriculture extremely successful. Was updated a series of previous records for yield of grain and oilseeds, sugar beet harvest, the export of plant products. According to Rosstat, the total increase last year was 4.8%, while a year earlier this figure stood at 2.6%. The food industry is tightly welded with APK added for the year of 2.4% (in 2015 – 2%). Especially rapidly grew in such sectors as meat production, greenhouse vegetables, sugar, sunflower oil, and several others.
Speaking about the nature of this growth, officials often emphasize the importance of food sanctions that Russia imposed in August 2014 in response to a series of restrictive measures by the US, EU and some other countries. So, the Minister of agriculture of the Russian Federation Alexander Tkachev repeatedly said that the exchange of sanctions was an effective incentive for domestic agriculture and the food industry, and in November of last year in interview to the newspaper “Izvestia” expressed in that spirit that farmers would be grateful if a response to Western sanctions has been “five years”.
The issue of the possible lifting of sanctions one way or another were discussed by politicians and experts during the whole period of their validity, and with the election of the President of the United States Donald trump she took a leading role in the information field not only in Russia but also in Western countries. And not without reason. In mid-January, trump has hinted that lifting of sanctions – a topic discussed. “There are sanctions against Russia – let’s see, won’t we have to conclude with Russia a good deal. For example, I think nuclear weapons should be a lot less, you need to reduce that,” said the 45th American President shortly before the inauguration. In turn, Vice-President Michael Penny, speaking about sanctions, said that “the answer to this question will give in the coming months”. Previously many had considered the restrictions almost as eternal, or at least very long, as happened with the amendment of Jackson-Vanik.
About the readiness to discuss terms of removing mutual restrictions stated by the Russian side. “We can hold out another year or two in this coordinate system. Of course, they [sanctions] are not infinite,” said on 1 February at the all-Russian agronomic meeting, all the same Alexander Tkachev. Shortly before this he made it clear that the question of full or partial withdrawal of the counter-sanctions Russia will be linked to open access for its agricultural products to foreign markets. And without that domestic agricultural exports last year rose 4% to $ 17 billion, and plans for its further development at the Ministry are very ambitious. So, at the end of November last year at the meeting of the Council for strategic development and priority projects in the Kremlin Tkachev called the target until 2020 is to increase the SEL to $ 25 billion.
Better, but less
However, agricultural market experts emphasize that sanctions are only one of many factors contributing to the growth of domestic agriculture, and not the most significant. In particular, the President of the Russian meat Union Mushegh Mamikonyan recalls that the strategy of development of meat industry in Russia was permanently established by 2003, and in the next ten years, investors who started projects in this area, wasn’t thinking about sanctions.
But some positive effect from restrictions on food imports still received, recognizes Mamikonyan. For example, until 2013, Russia imported more than a million tons of pork, while pork from the sanctions countries by 30% was a fat or fatty cuts, and not meat. Import restrictions imposed during the six months before the main package grocery counter-sanctions under the pretext of protection against African swine fever (ASF), led to the fact that Russia began to receive from abroad, less fat, who eventually got into meat products. “This, incidentally, directly contradicted the government regulations about the need to reduce the content of animal fats in meat products and led to the deterioration of the health of the population. Now Russia does not consume as much fats as before the imposition of sanctions, and during this period there was a significant improvement in the quality of meat products, the main criterion of which is the proportion of fat – says Mamikonian. – If sanctions are lifted, we can once again begin to import cheap meat with lots of fat, and this will lead to deterioration. This we do not need”.
Another segment of the food industry clearly has benefited from the counter – production of cheeses. However, if in 2014-2015, the Russian cheese industry has shown explosive growth, in the last year he has slowed sharply, says the head of the analytical company “Sovekon” Andrey Sizov. According to Rosstat, in 2016, the production of cheese increased by only 2.5%, the analyst believes, is an indication that the import substitution rested on the level of demand. “Incomes continue to fall, and this question is much more important than the abolition or the retention of sanctions”, – said Sizov. According to official data, the real disposable incomes of Russians decreased by 5.9% and retail trade turnover by 5.2%.
This position supports the head of the Center for economic research Institute of globalization and social movements Vasily Koltashov. According to him, three years of work in terms of sanctions is a negligible amount of time for such sectors as agriculture, especially in weakening domestic demand. “Of course, farmers tried to exploit new opportunities. But their adaptation took place in a falling business cycle, in difficult conditions in the economy. The domestic market is sufficiently monopolized for small and medium-sized representatives, and the consumer is poorer. This leads many manufacturers to operate on the verge of profitability, or the producers do not grow as they could. They control your growth, knowing that they will not sell their products,” says Koltashov.
But for those areas that have benefited from grocery sanctions, lifting them does carry some risks. “Many manufacturers of complex food products, e.g. cheese – very relaxed under the protection of the counter-sanctions, – says the managing partner of FLC (Financial and organizational consulting) Moses Furdik. In this segment declined markedly in quality and significantly increased prices. A significant number of companies heavily leveraged as expeditiously increase the amount of the production. This segment could significantly be affected by the return of imported products and the explosive growth of competition.”
Lottery state support
What are the plans for the replacement of imported goods rossiiskimi 2014 “sanctions war” was accompanied by statements from the Russian authorities about the receipt agriculture in unprecedented state support. In reality, however, according to “SovEcon”, the pace of investment in agriculture has not increased: in 2014, when sanctions were imposed, they declined to 5% in 2015 and by another 9%, and in 2016 we can expect a slight increase, which is not yet calculated.
The volume of budget funds to support agriculture is also decreasing: if in 2016 they amounted to 237 billion rubles, while this year only laid 216 billion Is also a problem of transparency and clarity of allocation of the agricultural budget, emphasizes Andrei Sizov. “A number of specific programs is reduced by the order at the expense of their enterprises, – explains the analyst. – The clerk issuing the money receipt by the tens of directions and controlling their proper use. Another is when an official receives is clearly unnecessary, in my opinion, the right to decide what specific areas will be allocated money. It’s interesting the officials, but very interesting business – he is deprived of long-term goals specified by the agro-industrial development programme until 2020, which was an important achievement of the national agricultural policy. Now this concept is destroyed, the business could not understand whether it will receive the required subsidies.”
A typical example of the agroindustrial sector, the situation in which failed to break even due to counter-sanctions and the promised extension of government support, the production of milk. Last year, its volume grew by only 1.2%, while at the same time there was another reduction in the number of cattle (cattle), 1.6%, to 18.7 million head. Such tendencies were typical for the period up to 2014. Moreover, the majority of cattle (about 43%) is in small private holdings, where to expect significant dynamics is not necessary.
“The situation in animal husbandry has nothing to do with sanctions, – says Andrey Sizov. – I suppose that right now the Russian milk producers is not a sanction and how the conflict will develop with Belarus is the largest supplier of dairy products to the Russian market. If there will be restrictions, of course, this will lead to higher prices in Russia, but also to increase profitability in the dairy industry and related sectors”.
In contrast, in beef cattle, which in Russia was essentially created from scratch over the last two or three years, achieved major successes. In connection with the low base effect, the growth is ten percent per year – in particular, Bryansk meat company included in the holding “Miratorg” in the past year to increase beef production by more than half. But in the structure of Russian consumption of beef meat varieties still occupy a minor place – the majority of consumption is in the meat of slaughtered dairy cows. It is not just declared by the Ministry of agriculture the idea of the full import beef market analysts perceived with skepticism.
“This strategy of the last century. The world tendency is that the ratio of factors generally inferior to beef, poultry and pork there is no sense of this tendency to resist”, – said Mushegh Mamikonyan, Recalling that all the world’s major meat producers are not only exporters but also importers. We have the same import of poultry meat and pork have declined almost to zero, and internal reserves for growth less and less. The level of meat consumption in Russia is already higher than in some European countries, so the meat industry is stagnating, the supply increases faster than demand, with the result that profitability falls. Lifting the sanctions will lead to the further decline of profitability, suggests Mushegh Mamikonyan, so now it is important to provide producers access to export markets. What, in fact, he said at the all-Russian agronomical meeting.
The same view is shared by Andrei Sizov: “Put an absolute target absolute replacement of imported food products is an unnecessary utopia. If we are competitive, we will achieve closure of their own needs and 100 and 150 percent. If not – then neither 50 nor 70 percent nothing. If we, of course, does not appeal to the path of North Korea. All developed countries have something to deliver and something taken out”.
The Ministry of agriculture is also aware. Also the already mentioned meeting of the Council for strategic development and priority projects Tkachev said that the export of Russian meat should increase from 150 thousand tons to one million tons by 2020. May, subject to the lifting of mutual sanctions this can be for domestic agriculture is much more important than the absolute import substitution.