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Russian authorities set to prevent food price growth

August 25, 2014, 16:38 UTC+3 Alexandrova Lyudmila

MOSCOW, August 25. /ITAR-TASS/. Russia’s embargo imposed this month on food imports from the European Union, the United States, Australia, Canada and Norway has not caused an acute shortage of foodstuffs but threatens with food price growth.

The Russian government is taking efforts to prevent food price hikes. Administered price regulation will be effective, if price growth is economically unfounded and is explained only by the desire to exploit the current situation for deriving extra profits, experts say.

Over the past two weeks, wealthy Russians have made stocks of premium-class foodstuffs that were included in Russia’s food embargo list. Italian and French cheeses, Spanish ham, Norwegian salmon and seafood were swept off the shelves of expensive stores in large cities, making a profit for retailers. At the same time, the food embargo has not produced a strong impact on the consumer demand structure and has not caused any panic-buying in more affordable stores where banned foodstuffs constitute an insignificant part of imported products.

Meanwhile, Russia’s Federal Anti-Monopoly Service hotline has started to receive reports from all Russian regions about food price hikes. Most complaints relate to the growth of meat, fish and poultry prices.

Russian Agriculture Minister Nikolai Fyodorov admitted on Friday that while average prices were largely unchanged, some increase was already registered in the prices of beef (0.3%), pork (0.6%), poultry (0.9%), raw milk (1%), apples (1.5%) and frozen fish (1.5%). It is true, though, that poultry prices had been seen to rise throughout the summer before the embargo.

In order to restrain the price growth, the Russian government plans to allow regional governors to conclude individual agreements on price control with trade chains and food producers. The Russian authorities resorted to this measure twice - in 2007 and 2010.

Administrative pressure is increasing. City officials will carry out inspections at stores jointly with the Interior Ministry for the purpose of price control. The Russian Prosecutor General’s Office is establishing an interdepartmental working group to control food prices.

“Even if high self-sufficiency indicators are achieved through a build-up of local production within a short period of time, it is necessary already now to make considerable investment in agrobusiness to attain this goal,” Nezavisimaya Gazeta daily quoted AForex analytical department head Artyom Deyev as saying.

“Such expenses will be included in the final cost of products and will be borne by consumers. It is quite possible that the state may establish threshold levels for retail prices of socially significant foodstuffs,” he said.

If the price growth is caused by objective reasons, then administrative measures will not work, said Galina Ivleva, head of the chair for anti-crisis management of social and economic systems at the Russian Academy of the National Economy and State Service.

“You can press down but then the coil will unwind, as we have seen many times,” she said.

“If the talk is about a subjective factor, the desire to make situational gains, if economically unfounded mechanisms are involved, then the businessmen’s greed will be pressed down and certain results will be achieved,” the expert said. “But if costs start to grow, they will not be stopped by administrative measures.”

The expert said she feared that administered measures might overplay their role. “If total control is established, there is a danger that there will be no control at all - the state has no resources to exercise it,” she said.


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