The Kremlin may restrict further food exports to protect it from high prices

Russia has warned that it is ready to extend export restrictions on key food products after the recent price hike the Kremlin called for to limit the internal cost of basic commodities like sugar and flour, the country’s economy minister said.

Maxim Reshetnikov, the minister of economic development, told the Financial Times that Russia, one of the world’s largest exporters of grain, is examining how it is accepting its food exports while protecting domestic consumers from rising prices.

The global food price index of the United Nations achieved its success the highest level in almost a decade in May, it rose by almost 40% year-on-year. Food prices are a key political issue for the Kremlin, as one in 20 million or seven Russians live below the poverty line and rationing and hyperinflation are in the memory of life.

In December, Vladimir Putin ordered the imposition of officials temporary control of key food prices such as sunflower oil and pasta. The wheat export quota was announced at the beginning of the year by adding export taxes this month. Moscow has said the moves are necessary for many to compensate for years of falling income that has made essential goods inaccessible.

Reshetnikov said Russia could extend export measures by imposing direct export limits plus a floating tariff on “flexible export taxes” on additional goods if prices continue to rise. In terms of domestic consumption, Russia was running out of most price caps, but it would continue to subsidize some basic subsidies, such as bread and flour.

“There is no guarantee that global food prices will stabilize and hit a high,” Reshetnikov said. “Any news about crop forecasts can be affected. . . It’s another meeting of some foods, so we’re constantly paying close attention to them and taking the necessary precautions. ”

Export limits, which Reshetnikov called “absorbing” as a price, are intended to encourage domestic producers to invest more. “This is one of our sources of growth by adding new value chains: grain moves livestock forward, livestock moves milk forward, and so on,” he said.

Russia began exporting key foods such as wheat in 2014, then banned most western food imports in response to US and EU sanctions, and then began to develop domestic agriculture. Agricultural products such as wheat accounted for almost 8% of Russian exports in 2019, According to data from the World Trade Organization.

However, the country does not yet have the infrastructure to accumulate food stores in the US or Europe. This would lead to price increases by increasing supplies, saving additional production and releasing it as needed.

However, the proposed export restrictions have garnered support in the food retail sector, where executives have complained that there is a greater demand from Chinese importers who are willing to pay more for recent price increases. Sugar prices rose 65 percent in Russia last year.

In contrast, officials have blamed high Russian food prices on what Prime Minister Mikhail Mishustin has called “the greed of certain producers and retail networks.” This has led to fears of repression across the sector.

More than three-quarters of Russian businessmen say they feel insecure with unfounded criminal harassment by the state, according to a presidential security service survey last month; in addition, 18% of prosecutors agreed with them.

Concerns are widespread where a parliamentarian joked at the economic conference in St. Petersburg, Russia, last week, “We have taken the first step [to an investment climate] “Three days have passed in the forum and no one has been arrested.”

Reshetnikov said future business measures are likely to result in higher taxes.

“If you invest all your profits, even if they are very large, in new production, development, research, etc., that’s one thing. If you pay dividends, that’s fine too [ . . .] another level of taxation may be appropriate to stimulate investment in businesses, ”he said.