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Russia claims special operation in Ukraine will help strengthen the food security of the Eurasian Union

Russian special operation in Ukraine will help strengthen the food security of the Eurasian Union

The calculation of Western countries on sanctions pressure on Russia in the food sector did not materialize. Russia fully provides itself with all the main types of products, said the head of the Ministry of Agriculture Dmitry Patrushev. This is facilitated by various measures, including a temporary ban on the export of grain and sugar. The Belarusian authorities also banned the export of a number of grains, as well as wheat flour and buckwheat. Other countries of the Eurasian Union are making similar decisions to restrict food exports. The departure of some Western companies from the Russian market and the focus on import substitution open up new opportunities for the Union countries. Irina Smirnova, an economic observer at Eurasia.Expert, analyzed the ways to strengthen the food security of the EAEU in the new conditions.

The food market in a crisis situation requires special regulatory measures. That is why Russia until August 31 introduced restrictions on the supply of wheat, rye, meslin (a mixture of wheat and rye), barley and corn to the countries of the Eurasian Economic Union. However, they do not apply to trade under export licenses issued by the Ministry of Industry and Trade. A ban on the export of sugar has also been introduced, with the exception of supplies with the permission of the Ministry of Agriculture. The decision was approved by the Subcommittee on Customs Tariff and Non-Tariff Regulation, Protective Measures in Foreign Trade of the Government Commission on Economic Development and Integration. Import duties on open field vegetables and ingredients for food production were also zeroed.

It is worth noting that the export of grain outside the EAEU was previously  limited by a  quota of 11 million tons, and floating duties were applied to the supply of wheat, rye, barley and corn until June 30. New solutions are aimed at ensuring the country's food security and will help support the market in the current situation. The Russian Ministry of Agriculture emphasized that "government measures will exclude the possibility of a shortage and a sudden increase in the cost of raw materials and socially significant products."

Grain issue

In 2021, according to preliminary data from  Rosstat , the grain harvest in Russia amounted to 120.7 million tons, including 75.9 million tons of wheat. According to the results of 11 months of 2021, the country exported 29.9 million tons of wheat and meslin. These figures are slightly below 2020 levels, but Russia remains the world's largest grain exporter.

 

 

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The stable socio-political situation in Russia, despite the attempts of the West to split society, makes it possible to develop the country's economic potential under sanctions. Independence in the food and industrial sectors will allow the economy to function effectively in the new conditions. Russia occupies a leading position in the world in the production of a number of agricultural products. For 2020, in terms of grain and leguminous crops, it ranked 5th (133 million tons), in potatoes - 3rd place (30.6 million tons), livestock and poultry meat - 4th place (15.6 million tons), milk - 6th place (32.4 million tons). At the same time, specifically from grain, Russia exports about 10% of the world's wheat, about 25% of sunflower. In addition, Russia accounts for 15% of sugar beet production and about 10% of mineral fertilizers produced in the world.

Russia has been holding the palm for several years, which is possible due to the increase in production volumes and high yields. The most successful year for Russia was 2017, when the record harvest of wheat amounted to 135.5 million tons. The top 3 active external buyers included Turkey, Egypt and Saudi Arabia, and among the partners in the EAEU - Kazakhstan.

March restrictive measures are not related to the need to feed the country - the level of Russia's self-sufficiency in wheat today is 150%. Rather, it will allow the formation of a strategic margin of "grain" strength. According to experts and representatives of the industry, the EAEU member states have already purchased the required amount of grain without duties this season, and such a harsh decision will protect the market from resale to third countries.

So, for example,  says  the president of the Russian Grain Union Arkady Zlochevsky. “This measure is aimed at solving a long-standing problem. Kazakhstan buys grain from us according to gray schemes, often without registration. There it is formalized as their own production in order to be sold to neighboring countries, for example, to Uzbekistan,” he said.

In 2021, the harvest of winter and spring wheat in Kazakhstan amounted to 11.8 million tons, which is 17.1% lower compared to 2020. The state is dependent on imports. Insignificant deliveries have been made from Belarus, Italy and Ukraine, but the bulk of imports come from Russia. Kazakhstan is also a grain exporter: last year it  sold  5.8 million tons of wheat abroad, which is 10.3% more than in 2020. The largest volume, 2.8 million tons, was delivered to Uzbekistan. Other buyers include Tajikistan, Afghanistan, Iran, Turkmenistan, Italy, China, Azerbaijan, Turkey and Kyrgyzstan.

Allied Effects

A number of Kazakhstani experts consider Russian restrictions a plus for the national economy and an incentive for the development of their own wheat production. Moreover, the republic has experience - in Soviet times it was a granary and was one of the three leaders in grain production, along with the RSFSR and Ukraine. “Why import in such large quantities when we can produce it all ourselves? It is clear that after this measure Russia will experience a painful shock, there may be a shortage of some goods on the domestic market. But any deficit makes it possible for domestic producers to increase their volumes,”  says  Yerbol Yeseneev, director of the department of agro-industrial complex and food industry of the Atameken National Chamber of Entrepreneurs.

He also confirmed the existence of schemes for "gray" grain imports to Kazakhstan. “According to the latest data for 2021, almost 2.5 million tons of grain were imported into the country, of which 1.6 million were officially, and almost 1 million were unofficial,” the expert cited the data.

Armenia also spoke about the current situation, which also imports wheat from Russia. So, in 2021, 275 thousand tons were imported into the republic, while about 100 thousand tons are produced independently in the country. Deputy Minister of Economy of Armenia Arman Khojoyan noted that there is still a possibility to solve the problem. “Even if the ban comes into force and there is a demand for this product in Armenia, it is available in Russia. And we also have a preliminary agreement that there will be no deficit in the republic. This gap will be filled with the help of other mechanisms, perhaps with the help of the demand quota mechanism,”   Khojoyan said .

Food security of the EAEU

The “grain” issue is just one of many indicators of food security both in the Eurasian Economic Union and in each individual country. The overall level of self-sufficiency in the EAEU has reached 93%, which can be considered a good result. Its build-up is one of the goals of a coordinated agro-industrial policy and regulation of the common agricultural market of the Union.

The states also have their own “product” specialization, taking into account historical traditions and climatic conditions. This allows us to compete and successfully export both raw materials and products of deep processing. So, for example, Belarus is a long-standing supplier of milk and dairy products. Armenia meets the needs of the population in fresh fruits. Russia produces grain and products of its processing, meat and fish products, sugar and vegetable oil.

In January 2022, agricultural production in the EAEU in farms of all categories  increased  by 0.8% compared to January 2021. Growth was observed in Kyrgyzstan - by 2.4%, Kazakhstan - by 1.5% and in Russia - by 0.8%. In particular, the production of the main livestock products increased: livestock and poultry - by 4.8%, milk - by 1.4%, eggs - by 3%.

Challenges

Despite the positive dynamics and systematic work to increase the level of food safety within the EAEU, there are a number of areas that require development. One of them is the level of trade between countries. According to the Deputy Minister of Agriculture of Russia Sergey Levin, according to the results of last year, the trade turnover of the agro-industrial complex between the EAEU countries, according to preliminary data, amounted to more than $10 billion. “Creating a steadily growing market is a huge achievement for all member countries of the Union,”   Levin emphasized .

At the same time, the total share of mutual trade in the EAEU does not exceed 15%, while in other integration associations it reaches 40%. Such  data  was presented at the February meeting of the Eurasian Intergovernmental Council in Nur-Sultan by the Prime Minister of Kazakhstan, Alikhan Smailov.

The second problem is the insufficient level of self-sufficiency in a number of products. For example, fruits and berries. As Director of the EEC Department of Agro-Industrial Policy Armen Harutyunyan noted, proposals are being developed for state support measures that will help increase the production of fruits and berries in the EAEU countries.

The level of self-sufficiency in material, technical and production resources is also important - the EAEU actively imports genetics, planting material and seeds. To increase local production, the commission is working on measures to support seed production. “Consultations are regularly held with the private sector, with multinational organizations, with educational and scientific centers in order to prepare an action plan that will help increase the production of these resources in our countries,”   Harutyunyan said .

"Rapid response" measures

The restriction on the export of goods is one of the most common "quick" measures aimed at regulating the market in the current situation. And to ensure collective food security, including within the borders of the EAEU. For example,  a ban  on the export of sugar may be due to the excessive demand for it in Russia. It has arisen in recent weeks and even provoked the restriction of a number of retail chains on the sale of a long-term storage product in one hand. The Rusagro group of companies, which owns the Russian Sugar and Chaikofsky brands, notes that last year Russia exported about 8% of the sugar produced, and most of the supplies fell on the CIS countries.

Another measure is the zeroing of duties on imports of a number of categories of products and food ingredients. This will help contain a possible increase in prices, in this case for open-ground vegetables, and prevent their further increase. The issue of regulation was considered at the level of the Eurasian Economic Commission. It was decided to zero import duties on potatoes, onions, garlic, cabbage, carrots, raw milk, cocoa products, bases for the production of breast milk substitutes and other products for six months. The final proposals were discussed at  the EEC meeting  on March 17, following which they were approved.

Irina Smirnova , economic observer for Eurasia.Expert

Source: http://eurasianinfoleague.com/ekonomika/spetsoperatsiya-rossii-na-ukraine-pomozhet-ukrepit-prodovolstvennuyu-bezopasnost-evraziyskogo-soyuza/