Negative Economic Effects Expected Across the West and Russia
By Raphael Verelst (Contributor)
August 7th, Russian Prime Minister Dmitri Medvedev announced the Russian government’s plans to impose an across-the-board embargo on food products from countries in the European Union and those coming in from Canada and the United States. “There is nothing good in sanctions and it wasn’t an easy decision to take, but we had to do it,” Medvedev said. This move was given as a retaliation to the increasing sanctions Western countries are imposing over the crisis in the Ukraine, a situation which seems to have died down since the Russian annexation of Crimea earlier this year.
Russia purchases over 2 billion dollars in fruits and vegetables every year from EU nations, often at prices below that offered by the fledgling domestic food sector, evidenced by the fact the Swedish foreign minister sarcastically tweeted about how Vladimir Putin wants to make food more expensive for his own citizens. Furthermore, the ban on food imports is expected to increase inflation across the board and decrease lending from the Russian Central Bank.
The worst news of all is that this ban is expected to be absolutely devastating for small farmers in Eastern Europe, most notably the small, poor country of Moldova, which lies just to the southwest of beleaguered Ukraine. This small nation, a former Soviet republic that Russia appears to want to keep in its back pocket, is largely agricultural. With the average monthly salary not exceeding 300 dollars, the prospects for the country look quite bleak. Eastern European nations, most notably Lithuania and Poland, have sought to expand markets into Asia and South America.
On the home front, fishing companies and fishery unions in the Maritimes have little anxiety as to the effects of the ban on Canadian fish exports. As one union leader stated: “Russia is a limited importer of East Coast fish, hence why the New-Brunswick fishing fleets won’t feel any setbacks”. However, on the West Coast, which actively trades with the Far East Russian seaports, things are going to be felt on a much larger scale. One economist predicted that those hardest hit would be those involved in salmon fishing in the British Columbia interior.
The country expected to be hit hardest will be Australia. Given its close ties with most of the Asian market, the Eastern parts of Russia, due to a large portion of it being largely stuck in a year long permafrost, will have to do without most of the Australian cattle exports, a large source of revenue for the latter country.
Quebec, given its closer ties with domestic buyers, will suffer negligibly. Given the strong recent campaign by farmers to sensitize the public into buying local produce, the effects of the embargo will not be felt anytime soon.