- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009., David FrancisDavid Francis was a senior reporter for Foreign Policy, where he covered international finance.
Russia banned food imports from Europe and the United States Thursday in retaliation for Western sanctions against the Kremlin, escalating the economic war over the conflict in Ukraine, but in a way that could hurt Russia more than its intended targets.
Economists say Russia’s latest volley in tit-for-tat sanctions with the West could raise inflation and hurt its economy. Russia imports over 40 percent of its food, so the ban could cause prices to spike.
Steven Pifer, a former ambassador to Ukraine and a senior fellow at the Brookings Institution, said relying on domestic agriculture will likely prove politically popular for Russian President Vladimir Putin but impractical.
"It will appeal to the domestic constituency in rural areas," Pifer said. "The problem is, you don’t build apple orchards to replace 700 tons of Polish apples overnight."
Russia is also threatening to ban European and American airlines from flying over Siberia. That move would boomerang on Moscow as well because foreign carriers pay millions of dollars in fees to Russia’s Aeroflot for the privilege of taking a shortcut through Russian airspace.
For American producers, the ban isn’t expected to be very painful. The announcement elicited a dismissive shrug from the United States’ largest agricultural trade group.
"America’s farmers and ranchers would have been more surprised if Russia’s leaders had not announced bans and restrictions on food and agricultural imports," stated Bob Stallman, the head of the American Farm Bureau Federation.
Although the ban will hit Europe harder, food exports to Russia are still a small percentage of the bloc’s overall exports. Still, the restriction could test Europe’s already shaky resolve to sanction Russia. Since March, the United States has sought tougher economic penalties against Moscow for annexing Crimea and destabilizing eastern Ukraine. However, European leaders were more sanguine, holding out for a domestic resolution until recently.
Poland’s strong economic ties to Russia could hit it hardest. Tsveta Petrova, a Europe analyst for risk consultancy Eurasia Group, said Poland’s trade with Ukraine and Russia has dropped 25 percent since the sanctions merry-go-round started spinning. Poland has led the European charge to sanction Russia.
"Poland is a key state because Poland has for a long time been warning their Western European partners that Russia is becoming too aggressive," Petrova said.
Poland’s exports to Russia could drop further — in half, by some estimates — but Poland is willing to bear the economic pain in light of the threat that Russia poses. "They prioritize security over economics," Petrova said.
Western European countries such as France, Italy, and Spain might reach a different conclusion. In France, farming unions warn that the ban would be "tragic." Xavier Beulin, the president of the French farmers union FNSEA, told AFP that "products that were originally destined for Russia will end up on the European market and it will create a crisis situation." As Belgian farmers and Norwegian fishermen start clamoring for compensation for canceled contracts, political support for a tough response to Russia could fray.
Outside of the Netherlands, which lost nearly 200 people when Malaysia Airlines Flight 17 was shot down over Ukraine by pro-Russian separatists, enthusiasm for the latest round of penalties was measured. A YouGov poll taken prior to Russia’s food ban found that 53 percent of Germans supported sanctioning Russia further. In France, only 48 percent did.
The back-and-forth sanctions’ long-term effect on a European economy struggling to recover from the sovereign debt crisis is unclear. But the potential is there: Russia is the European Union’s third-largest trading partner, trailing China and the United States. The European Union is Russia’s largest trading partner, buying $277 billion in Russian goods.