Article: Russia steps up efforts to maintain food security amid Covid-19

Read below an article taken from our IEG Vu platform dated 27/03/20.

Russia became one of the latest countries to react to the Covid-19 pandemic's rapid spread and its implications to the economy. In the last week, the government has introduced a number of proposals to mitigate the worst effects.

Putin's proposal of moratorium on sanctions and trade war

Putin, during his speech at the G20 summit today (March 27), has proposed to the world leaders a moratorium on trade wars and sanctions and an establishment of mutual supply of medicines, food, equipment and technology.

"Ideally, we should introduce a moratorium, a joint moratorium on restrictions on essential goods, as well as financial transactions for their purchases," the president said. Putin emphasised that the main countries to benefit are those that "suffer most from this pandemic".

Import 'green corridors' established

Russia's prime minister Mikhail Mishustin has announced that Russia will open 'green corridors' for a number of import categories to reduce the impact of coronavirus (Covid-19) on the country's economy.

Mishustin said: "We are taking proactive measures to prevent the mass spread of the virus in our country and reduce its impact on the economy… From tomorrow [March 20], for one month, all restrictions, including customs, for the supply of essential goods are lifted. A zero-customs duty rate is set for the import of a number of goods, including medicines and medical devices."

According to importers, at the moment there is no exact list of the types of products that can be classified as essential goods. The only point of reference the industry has is the 'List of certain types of socially significant essential food products, for which maximum allowable retail prices may be set', which was created after passing of the Decree of the Government of the Russian Federation of July 15, 2010 No. 530.

The list includes:

• Beef, pork and lamb (except boneless meat)
• Chicken (except chicken legs)
• Unfinished frozen fish
• Butter and sunflower oil
• Drinking milk
• Eggs (from chickens)
• Granulated sugar
• Edible salt
• Black tea
• Wheat flour
• Rye bread, rye-wheat bread, wheat flour bread and bakery products
• Vermicelli
• Cereals (polished rice, millet, buckwheat)
• Vegetables (potatoes, white cabbage, onions, carrots)
• Apples
• Abolition of preferential tariffs for imports from developing countries

In a separate development, the country's finance ministry (Minfin) supported a proposal by Minselkhoz to exclude some HS codes from the list of goods originating from developing countries that currently have preferential tariffs, when imported into the EAEU.

Minfin has proposed to remove tariff references for palm oil, frozen cattle meat, cheeses and cottage cheese, cut flowers, apples, pears and quinces.

The system of tariff preferences for imports from developing countries was introduced in the EAEU on January 1, 2010. It gives the right to apply zero or reduced import duty rates; the current list of goods was approved on January 13, 2017.

The list of developing countries, which currently enjoy preferential tariffs, includes large exporters of meat Brazil and Argentina, one of the main exporters of flowers in Ecuador and the main supplier of palm oil, Malaysia.

Import duty reset proposal

Minselkhoz has proposed to abolish import duties on multiple agriculture products to avoid Covid—19 related food, raw material and agricultural product shortages in the country.

The ministry said: "In order to curb rising prices for socially significant products, the Ministry of Agriculture is considering the possibility of initiating the issue of zeroing import duties on certain groups of goods and raw materials for the production of agricultural products".

The letter, asking for proposals on establishing a temporary zero import duty on agricultural products, raw materials and foodstuffs, was sent to the 21 largest industry associations. This included the Association of Confectionery Enterprises (ASKOND), the National Meat Association, the National Union of Milk Producers (Soyuzmoloko), the National Union of Pig Breeders, the National Union of Fruit and Vegetable Producers, the All-Russian Association of Fishery Enterprises, Entrepreneurs and exporters (WARPE), Russian Union of Flour and Groats Enterprises, Union of Russian Sugar Producers, Union of Potato and Vegetable Market Participants.

The dairy industry is enthusiastic about the proposal. Head of Soyuzmoloko, Artem Belov, said that the measure would make sense for those product categories, on which Russia is dependent for imports -like baby formula, veterinary preparations, breeding material and so on. On the other hand, the country's dairy production is also dependent on currency movements.

He added: "For these items, which are sensitive to the exchange rate and are not produced in Russia, it would be correct to clear customs duties in order to restrain price increases."

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.