Vladimir Putin’s decision to place Russians on a Soviet diet is bad news for the salmon roe industry in Washington, but it won’t have a huge impact on the state’s economy. On the other hand, the halting of imports as part of a spitting match with the West will provide a case study in macroeconomics.
Last week, Putin ordered a one-year ban on most food imports from North America, Europe and Australia. The move comes in retaliation for economic sanctions over Russian involvement in Ukraine, and it will prevent access to a market that brought in $15.8 billion in food and agricultural goods from the European Union in 2013 — and $1.3 billion from the United States. While that is not good news for U.S. food producers, it’s not crippling. And the decision gave rise to a new joke in Russian circles: “The president decided to show he’s a Western leader, too, and imposed sanctions on Russia.”
The decision to halt vast food imports in an import-heavy nation is expected to hurt Russian consumers most of all, leading to empty shelves, reduced selection and rising prices. As the Associated Press surmised, Putin “is prepared to inflict significant damage on his own nation in an economic war with the West.” And The Washington Post wrote, “The restrictions may drive up the price of ordinary foodstuffs by shrinking supply as demand remains constant. Even many domestically produced foods in Russia depend on foreign imports for some of their ingredients.”
In other words, the decree is reminiscent of the old Soviet Union days, when the collectivization of agriculture and policies of self-reliance in the nation’s food production led to the starvation deaths of millions across Russia. It is a stretch to think that banning Western imports could result in a similar outcome, but as David Cohen of the U.S. Treasury Department points out, limiting access to food is a move “that the U.S. and our allies would never do.”
In addition, the decision — derived with scant concern for his own people — demonstrates the extremism with which Putin is increasingly flirting. Economic sanctions against Russia have been ramped up as the country has played a growing role in Ukraine, seizing a portion of the country and providing weapons and support for rebels in the former Soviet republic. The situation came to a head with the shooting down of a civilian Malaysian airliner, apparently with a rocket supplied by the Russians, but Putin and other officials have denied involvement.
In announcing the ban on Western food products, Prime Minister Dmitry Medvedev said, “Until the last moment, we hoped that our foreign colleagues would understand that sanctions lead to a deadlock and no one needs them. But they didn’t, and the situation now requires us to take retaliatory measures.” In other words, sanctions against Russian energy and banking interests are working and serve to demonstrate the toll that diplomatic pressure can bring.
Russia’s retaliatory measures will be felt by Washington’s salmon roe industry. In 2013, according to SeafoodNews.com, the United States exported $45.9 million worth of the product to Russia; through June of this year, exports were at $8.5 million. The ban on Russian imports for salmon roe and other seafood could lead to oversupply in this country and reduced prices that will further hamper the industry. Overall, the biggest impact in the United States will be on the poultry industry, based mostly in the Southeast.
But while some U.S. agriculture interests will be hurt by the sanctions, the clear losers from Putin’s latest action will be the Russian people.