Last week, Russian President Vladimir Putin decided to impose a one-year ban on many agricultural imports from the United States and other countries that have imposed economic sanctions against Russia in connection with its actions in Eastern Ukraine—namely Australia, Canada, the European Union (EU), and Norway.
The impact on the U.S. should be relatively small. Total U.S. agriculture exports were about $144.4 billion in calendar year 2013—of which $1.2 billion, or only 0.8 percent of total U.S. agricultural exports, went to Russia.
Some sanctioned countries could feel an impact due to Russia’s actions. In 2013, the EU’s agricultural exports to Russia amounted to about 10 percent of its total agricultural exports.
Russia is also engaging other countries that are not on the sanctioned list to provide more imports. However, Russia was importing agriculture products from the sanctioned countries because people wanted them more than they wanted goods produced in Russia and elsewhere, for reasons ranging from lower prices to better quality.
It’s unclear whether products from non-sanctioned countries and Russia’s own domestic producers can meet demand. Based on an Associated Press analysis, the sanctioned countries provided Russia with 55 percent of its agriculture imports. If demand can be met, it will almost certainly come at a steep price for Russia’s consumers. Restricting the food supply will drive up food prices, limit choices, reduce quality, and possibly even create food shortages.
According to an RT article, Russian Prime Minister Dmitry Medvedev “believes the year-long embargo Russia is imposing will boost domestic agriculture. He acknowledged that Russian farmers would have to come a long way, but said it was a unique opportunity to develop facilities to substitute for imports.” The article quotes other officials explaining how these bans are a unique opportunity for Russian domestic production.
Imports from the sanctioned countries didn’t prevent domestic producers from trying to compete. If the bans do create some unique opportunity for domestic producers, it’s because products that people in Russia didn’t want before are now desired because they have no other choice.
A possible solution for those affected by these bans is provided by Russia’s recent accession to the World Trade Organization, through which the EU is considering a challenge to Russia’s actions. If Russia’s bans remain in effect, the Russian people will pay the greatest price.