Russia has warned it is ready to expand its export of basic foodstuffs after a recent rise in prices prompted the Kremlin to cover domestic prices for fixed assets such as sugar and flour, the economy said.
Minister of Economic Development Maxim Reshetnikov told the Financial Times that Russia, one of the world’s largest exporters of grain, was discussing how best to support its food exports while protecting domestic consumers from rising prices.
The UN World Food Price Index hit it the highest level in almost a decade in May, exceeding almost 40% annually. Food prices are a major political issue for the Kremlin, given that 20 million people, or one in seven Russians, live below the poverty line, and rationalism and hyperinflation are alive and well.
In December, Vladimir Putin ordered officials to impose Temporary control over the prices of basic foodstuffs such as sunflower oil և pasta. Wheat export quota was announced earlier this year, with increased export duties this month. Moscow has said the move is needed to compensate for years of declining incomes, which have made basic necessities inaccessible to many.
Reshetnikov said Russia could expand its export measures, including direct export curbs, as well as a “flexible export duty” tariff on additional goods, if prices continue to rise. As for domestic consumption, Russia cut most of the prices, but would continue to subsidize some basic commodities such as bread and flour.
“There is no guarantee that world food prices have stabilized and reached their maximum,” Reshetnikov said. “Any news about crop forecasts can provoke. “This is a rally for some food products, so we are constantly paying close attention to them and taking some action if necessary.”
The export curbs, which Reshetnikov called the price “shock absorber”, are also intended to encourage domestic producers to invest more. “This is one of our sources of growth, adding new value chains. “Grain promotes animal husbandry, cattle breeding, milk, etc.,” he said.
Russia began exporting basic foodstuffs, such as wheat, only after 2014, when it banned the import of most Western food in response to US-EU sanctions, and began to greatly develop domestic agriculture. Wheat-like agricultural products accounted for almost 8% of Russia’s $ 419 billion in 2019 exports. according to the World Trade Organization,
However, the country does not yet have the infrastructure to store grocery stores at the same level as the United States or Europe. They will allow it to cope with rising prices by increasing supplies, storing additional production, leaving it as needed.
Still, the proposed export limits have been supported by the food retail sector, where executives say the recent rise in prices is due to increased demand from Chinese importers who want to pay more. Sugar prices in Russia rose by 65% last year.
In contrast, officials have blamed higher prices for Russian food, which Prime Minister Mikhail Mishustin called “the greed of certain producers and retailers.” This has raised fears of persecution throughout the industry.
More than three-quarters of Russian businessmen say they do not feel safe from unfounded criminal prosecution by the state, according to a poll conducted by the President’s Security Service last month. moreover, 18% of prosecutors agreed with them.
Concerns are so high that at a trade fair in St. Petersburg last week, a lawmaker joked, “We have taken the first step. [to an investment climate] “For three days on the forum, no one was arrested.”
Reshetnikov said any future business ventures would likely look like higher taxes.
“If you invest all your profits, even if they are very large, in new production, development, research, etc., it’s one thing. If you pay dividends, that’s fine too [ . . .] “It may be good that another level of tax is appropriate to encourage investment in business,” he said.