Russia banned the import of agricultural products and raw materials from Ukraine

Russia banned the import of agricultural products and raw materials from Ukraine

MOSCOW, January 1. Russia banned the import of agricultural products, raw materials and food of Ukraine as of 1 January 2016, the Prime Minister of Russia Dmitry Medvedev on December 21 announced that he had signed a decree applying counter-sanctions in respect of Ukraine since 2016.

“From January 1, 2016 ban on the import into Russia of agricultural products, raw materials and food, country of origin is Ukraine”, – stated in the explanatory note to the document. In addition, it is noted that “the decision is aimed at extending the special economic retaliation against Ukraine”.

The European Union (EU) and Ukraine have decided to implement from 1 January 2016, the economic section of the Association agreement with the European Union. Therefore, Russia decided to apply in respect Ukraine’s counter-sanctions, similar to those prevailing in the EU. Such a measure is necessary to protect the domestic market and domestic producers, said Medvedev.

In the case of the EU, and other countries sanctioners (USA, Canada, Australia, Norway) on 7 August 2014 in respect of the Republic of Albania, Montenegro, the Republic of Iceland and the Principality of Liechtenstein – 7 August 2015 to 6 August 2016, valid food embargo. A ban were meat, sausage, fish and seafood, vegetables, fruits, dairy products. Later the sanctions had been withdrawn dietary supplements, sports, baby and medical nutrition (including lactose-free products). From 6 August 2015 began the destruction of food sanctions products. The recycling is entrusted with the FCS, the Rosselkhoznadzor and Rospotrebnadzor.

At the time of the expansion of sanctions in August 2015 in Ukraine the reservation was made, that it will not be subject to limitations, if Kiev will consider Russia’s interests in the implementation of the agreement with the European Union. Since Ukraine adopted a decision on the implementation of the Association agreement with the EU without considering the interests of the Russian Federation, from 1 January these measures extended to this country.

“We have told the Ukrainian authorities that the implementation of the economic part of the Association agreement with the EU affects our interests and creates a risk of economic security for our country. Were conducted several rounds of negotiations, but they have not given, – Medvedev has explained the decision of the Russian authorities. – Both Ukraine and the EU not ready to sign a legally binding agreement that would take into account the interests of the Russian Federation”.

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As expected, Ukraine has prepared retaliatory sanctions. The Verkhovna Rada on 24 December passed a law “On foreign economic activity”, which gives the government powers to apply economic sanctions against Russia. In particular, the government was able to introduce a “ban on foreign trade restrictions, or limitations”, and also to cancel tariff preferences. From January 10, 2016 banned the import from Russia 43 kinds of products: bakery, pastry, whether or not containing cocoa chocolate candies with or without filling, meat of bovine animals, fish, roasted coffee with caffeine, black tea, baby food, filter cigarettes, beer, vodka, and a range of other products. This is almost an exhaustive list of products that Russia has supplied to Ukraine.

Area non-free trade

Also today entered into force the decision to suspend actions in respect of Ukraine to the Treaty on the free trade area (FTA). Regarding Ukraine will apply import duty tariff for all the countries importing their products into the territory of the Eurasian economic Union (EEU), which alongside with Russia includes Belarus, Kazakhstan, Armenia, Kyrgyzstan.

“Ukraine will apply the most favoured nation treatment without any exceptions. All preferences go in the past, benefits will not be”, – explained Medvedev in December last year at a meeting with his deputies.

Prior to the adoption by the Russian authorities of the decision to suspend the Treaty with Ukraine, there have been several rounds of tripartite negotiations Russia-Ukraine-EU, however, results have been given. The last talks were held in Brussels on 21 December 2015, the negotiating Partners had invited Russia to maintain zero tariffs for Ukraine and the parameters of the free trade zone. However, they rejected all proposals of the Russian Federation. The EU has blamed Russia for the failure of negotiations.

Before the entry into force of the FTA lifting of all Ukrainian goods, except sugar, were imported to Russia without customs duties. The ongoing FTA would bear for the Russian market risks. In particular, the zero rates of customs duties for the import of European goods into Ukraine could lead to uncontrolled flow to the territory of the Russian Federation. This could complicate the conditions for Russian producers.

However, the Russian economic development Ministry does not see any problems in the abolition of free trade with Ukraine: the Russian economy from these measures will not suffer, but Ukraine itself will get trading conditions worse than any EU country.

Nothing to lose

All these mutual steps are more formal in nature. Even at the best of times in the turnover of agricultural products of the two countries on mutual trade in food products was 2.5-3%, according to data of the Federal customs service (FCS).

In all directions, which Ukraine has traditionally exported dairy products and cheeses, alcohol, soft drinks, chocolate, vegetables, meat or someonespecial Russia itself, as for example, in the production of chocolate and poultry, or actively engaged in import substitution, as well as search of new suppliers in conditions of operating from August 2014 the food embargo.

The turnover of food and agricultural products between Russia and Ukraine even before the abolition of the FTA started to decline. Thus, according to the Ministry of agriculture of the Russian Federation, for 10 months of 2015 the rate was reduced by 2.2 times compared with the same period of the previous year; in 2014 fell by 1.8 times against the previous year. According to FCS, in monetary terms, the turnover of agricultural products between the two countries in January-October 2015 amounted to 678.4 million against $ 1,482 billion for the same period in 2014.

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The export of agricultural products and foodstuffs from Russia to Ukraine for 10 months in 2015 in terms of value decreased by 20.6%, imports from Ukraine fell even more – 3.6 times.

In addition to the cooling of political relations, which could not affect economic relations between the two countries, the decline in mutual trade occurred against the backdrop of a series of restrictions imposed by Russian authorities – had any claim to the quality and safety of Ukrainian products.

Rospotrebnadzor banned on July 29, 2013, the import to Russia of products of Roshen because of complaints about the quality, but supplies the Russian market with production site located in Lipetsk, continued. Roshen confectionery Corporation – one of the largest world manufacturers of confectionery products. The Corporation consists of four Ukrainian factories (Kiev, Vinnitsa, Mariupol and Kremenchug), two production sites Lipetsk confectionery factory (Russia), Klaipeda confectionery factory (Lithuania), Bonbonetti Choco Kft (Hungary), as well as maslomolochny plant “Bershadmoloko”.

In addition, since the beginning of 2010 Rospotrebnadzor and Rosselkhoznadzor banned the import of dairy products with 13 factories of Ukraine, including in April 2014 – of the Milkiland group. Among the enterprises of this Association under the ban then got PE KF “Prometey”, branch “Mensky cheese” and PE “ROS” branch “Akhtyrsky syrokombinat”. In July 2014 the CPS has restricted the import of cheeses with a further 11 plants of “Milkiland” and Lozovsky dairy plant.

From 28 July 2014, the Rospotrebnadzor banned the import of all dairy products and milk from Ukraine. This prohibition is primarily connected with the supply from the country unsafe cheese products.

Another authority – Rosselkhoznadzor – has been repeatedly detected residual amounts of antibiotics of the tetracycline group, salts of heavy metals and pathogenic microorganisms in milk and dairy products imported from Ukraine. 14 October 2014, the Rospotrebnadzor banned the import into Russia of all cheese products from Ukraine in connection with discrepancy to requirements for labeling, and legislation in the field of sanitary-epidemiological human well-being.