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Russia has warned that it is ready to expand key food export limits after recent price hikes have caused the Kremlin to limit the internal cost of commodities such as sugar and flour, the economy minister said. of the country.
Maxim Reshetnikov, Minister of Economic Development, told the Financial Times that Russia, one of the world’s largest grain exporters, was considering how to better support its food exports by protecting domestic consumers from rising prices.
The United Nations global food price index has reached its peak highest level in almost a decade in May, increasing by almost 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 within the living memory.
In December, Vladimir Putin ordered to impose on officials temporary price controls on key food products such as sunflower oil and pasta. Earlier this year a wheat export quota was announced with added export duties this month. Moscow said the moves were necessary to offset the years of falling incomes that have made essential goods unaffordable for many.
Reshetnikov said Russia could extend export measures to include a floating tariff on “flexible export duties” for additional goods, if prices continue to rise. In terms of domestic consumption, Russia ended most of the price caps, but would continue to subsidize certain commodities, such as bread and flour.
“There is no guarantee that world food prices have stabilized and peaked,” Reshetnikov said. “Any news on crop forecasts can provoke. . . a new rally for some food products, so we are constantly on the lookout and take some action when needed. “
Export limits, which Reshetnikov called price “shock absorbers”, are also intended to encourage domestic producers to invest more. “This is one of our sources of growth by adding new value chains: grain is advancing livestock, livestock is advancing milk, and so on,” he said.
Russia only began exporting key food products such as wheat after 2014, when it banned most Western food imports in response to US and EU sanctions, and then began to develop heavily. national agriculture. Agricultural goods such as wheat accounted for almost 8% of Russia’s exports of $ 4.191 billion in 2019, according to data from the World Trade Organization.
However, the country does not yet have the necessary infrastructure to accumulate food stores at the same level as the US or Europe. This would allow it to withstand price rises by increasing supplies, storing additional production and releasing it as needed.
However, the proposed export limits have garnered support in the food retail sector, where executives say recent price hikes are due to rising demand from Chinese importers willing to pay more. Sugar prices rose by 65% in Russia last year.
By contrast, officials have blamed higher Russian food prices for what Prime Minister Mikhail Mishustin has called “the greed of certain producers and retail networks.” This has led to fear of repression across the sector.
More than three-quarters of Russian businessmen said they feel insecure in the face of unfounded criminal proceedings by the state, according to a survey by the presidential security service last month; in addition, 18% of prosecutors agreed with them.
Concerns are so widespread that a parliamentarian joked at Russia’s economic conference in St. Petersburg last week that “we have taken the first step [to an investment climate] “Three days in the forum and no one has been arrested.”
Reshetnikov said any future business measures would likely take the form of higher taxes.
“If you invest all your profits, even if they are very high, in new production, development, research, etc., this is one thing. If you pay dividends, that’s fine too [ . . .] another tax level may be appropriate to stimulate investment in companies, ”he said.
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