Russia has warned it is ready to continue restricting its exports of key food items after recent price hikes prompted the Kremlin to cap the domestic cost of staples such as sugar and flour, the Russian Federation said. Minister of the Economy of the country.
Maxim Reshetnikov, Minister of Economic Development, told the Financial Times that Russia, one of the world’s largest grain exporters, is considering how best to support its food exports while protecting domestic consumers from rising prices. .
The United Nations World Food Price Index hit its highest level in nearly a decade in May, rising nearly 40% year-on-year. Food prices are a key political issue for the Kremlin as 20 million people, or one in seven Russians, live below the poverty line, and rationing and hyperinflation are common memory.
In December, Vladimir Putin ordered authorities to impose temporary price controls on key foodstuffs such as sunflower oil and pasta. A wheat export quota was announced earlier this year and export duties were added this month. Moscow said the measures were necessary to offset years of declining incomes that made essentials unaffordable for many.
Reshetnikov said Russia could expand export measures to include a floating tariff of “flexible export duties” on additional products, if prices continue to rise. As for domestic consumption, Russia was ending most price caps but would continue to subsidize some basic products, such as bread and flour.
“There is no guarantee that world food prices have stabilized and peaked,” Reshetnikov said. “Any news about the crop forecast can provoke. . . still a rally for some foodstuffs, so we pay constant attention to it and take action when needed. “
Export restrictions, which Reshetnikov called a “price buffer”, are also intended to encourage domestic producers to invest more. “It is one of our sources of growth by adding new value chains – grains advance animal husbandry, animal husbandry advances milk, and so on. “, did he declare.
Russia only started exporting key foodstuffs such as wheat after 2014, when it banned most Western food imports in response to US and EU sanctions, and then began to strongly develop domestic agriculture. . Agricultural products such as wheat accounted for almost 8% of Russia’s $ 419 billion in exports in 2019, according to World Trade Organization data.
However, the country still lacks infrastructure to amass grocery stores on par with the United States or Europe. These would enable it to cope with price spikes by increasing supplies, storing additional production and releasing it as needed.
Still, the proposed export limits have gained support in the food retail sector, where executives say recent price hikes are due to increased demand from Chinese importers willing to pay more. Sugar prices rose 65 percent in Russia last year.
In contrast, officials blamed the rise in Russian food prices on what Prime Minister Mikhail Michoustine called “the greed of some producers and retail networks.” This raised fears of repression throughout the sector.
More than three-quarters of Russian businessmen said they did not feel safe from unfounded state prosecution, according to a Presidential Security Service investigation last month; furthermore, 18 percent of prosecutors agreed with them.
Concerns are so widespread that an MP joked at Russia’s Demonstration Economic Conference in St. Petersburg last week saying that “we have taken the first step [to an investment climate] – three days after the start of the forum and no one has been arrested ”.
Reshetnikov said any future trade measure would likely take the form of a tax increase.
“If you invest all of your profits, even if they are very high, in new productions, developments, research, etc., that is one thing. If you pay dividends, which is also good [ . . .] another level of taxation may well be appropriate to stimulate business investment, ”he said.