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Russia's trade wars

Andrey Gurkov
September 29, 2016

Conflicts can be solved diplomatically, militarily or economically. Russia has had disputes with Turkey over tourism and Egypt over wheat exports. The Kremlin has even fought economic battles over fruits and vegetables.

Russland Weizenfeld Weizen Agrarwirtschaft
Image: picture alliance/dpa/K.Kukhmar

Moscow has criticized the West for its economic sanctions against Russia. But the Kremlin has demonstrated it is also willing to use an economic weapon: the embargo. The latest example came in a dispute over Russian wheat exports to Egypt, which over the past year has represented the most important foreign market for Russian grain. International standards allow up to 0.05 percent of the crop to contain ergot fungus. In 2016, Cairo suddenly demanded 0 percent.

France and other countries that traditionally sell grain to Egypt, simply stopped trading with Cairo. Russia, however, resorted to blackmail. On September 19, it declared a temporary ban on fruit and vegetables from Egypt under the pretext of a "systematic violation of international and Russian phytosanitary requirements" on the part of the Egyptians. 

Just two days later, Egypt lifted its ban on ergot fungus in grain. Five days after that, Egypt sent a delegation to Moscow asking the Russians to lift the embargo on fruit and vegetables. Rosselkhoznadzor, Russia's food safety watchdog announced on the same day that it had - with the exception of potatoes - lifted the import ban. The success of the wheat war strengthened Russian authorities' belief that heavy-handed tactics deliver quick results.

Successful campaign against Turkey

While Moscow only had to settle a local trade problem with Egypt, the Kremlin wanted to accomplish two ambitious tasks in its recent trade war with Turkey. First, Moscow wanted to take punitive action after the Turkish military shot down a Russian fighter jet. Second, it wanted to protect Russian fruit and vegetable producers from Turkish competitors - and promote tourism in Sochi and Crimea.

Russland Recep Tayyip Erdogan und Wladimir Putin
Erdogan met with Putin in St. Petersburg in August to talk about trade and travelImage: picture-alliance/AA/K. Ozer

Russia also won this trade war. The Turkish tourism industry suffered losses in the billions when millions of Russian tourists stayed home, because Moscow banned the sale of package holidays in Turkey. Russian tour agencies and airlines also suffered from this ban. 

Turkish President Recep Tayyip Erdogan eventually had to travel to St. Petersburg, where he met with Russian President Vladimir Putin on August 9 to reach a "peace." But afterwards, Russia was not afraid keep up the economic pressure. Moscow did not lift its embargo on Turkish fruit and vegetables, simply promising instead to do so in the future. The Kremlin also waited until the end of the summer break in Russia to resume charter flights to Antalya.

Protectionism disguised as counter-sanctions

Russia's biggest and longest trade war, however, has been waged against the European Union. Once again, protectionism is the motive. The Russian market for European agricultural products was gradually closed - in violation of regulations put place by the World Trade Organization. This began long before Putin put an embargo in place on August 6, 2014 against food products from the EU and a string of Western countries as a response to economic sanctions levied by the West. On July 1, 2013, importing seeds and potatoes from the EU was restricted. On January 27, 2014, importing live pigs and pork from the EU was restricted. Then on August 1, 2014, the importation of apples and other fruits and vegetables from Poland was halted.

Russland Vernichtung westliche Lebensmittel Sanktionen Importverbot
Cheese illegally imported from the EU was dumped into a landfillImage: picture-alliance/dpa/S. Medvedev

Domestic producers in Russia profited from this trade war. The consumers suffered, however, as they were stuck buying products of a lower quality at a higher price. In the EU, it was eastern European countries that suffered the most as losses in pork, milk, fruit and vegetable sales piled up. This trade war, however, did not have a macro-economic impact on the EU as a whole as European farmers were partially compensated by Brussels, and most of them then oriented themselves towards new markets or lowered production.

A trade war in a free-trade zone?

In the meantime, Moscow seems to have grown comfortable solving trade disputes with pressure. Some see the Kremlin adopting similar methods in relation to its partners in the Eurasian Economic Union (EAEU), although trade wars within a common internal market make no sense.

Russia, for example, is not in an official economic war with neighboring Belarus. Yet the country's president, Alexander Lukashenko, accused Russia and Rosselkhoznadzor on September 20 of blocking the import of Belarusian goods, chiefly food products, in the interest of Russian oligarchs. Two days later, Russian authorities called the complaints baseless. Such a tone is usually a feature of an escalating trade war.