Russia: 10 years of the Food Embargo

This week the Russian President Vladimir Putin has announced the extension of the food embargo on agricultural imports from Western countries, that was introduced in 2014,will continue until the end of 2026. Over the 10 years of their existence, these restrictions have not only enabled Russia's agro-industrial complex to become export-oriented and establish food security mechanisms, but have also allowed the country to navigate the unprecedented sanctions regime introduced by the West in 2022 with relative ease. So what was the impact of Russia's food embargo on its economy.

The impact of the embargo
On 6 August 2014, a presidential decree was issued banning the import of agricultural products from countries that subsequently imposed economic sanctions in response to the reunification of Crimea with Russia. The initial phase of the embargo targeted products from the EU, the USA, Australia, Canada and Norway. One year later, Iceland, Liechtenstein, Albania and Montenegro were included, and in 2016, Ukraine was added to the list. The import ban applies to a range of products, including beef, pork, poultry, fish, seafood, cheese, milk, fruits, vegetables and other items as determined by the government. The full list is subject to regular review, with the embargo itself being extended on a regular basis. Its worth noting that the Russian market was worth around 30 billion euros per year to the European food producers and that market was lost and will never return.

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There is a consensus among experts that the food embargo was a key factor in the development of the domestic agro-industrial complex. Thanks to the competitive advantages gained by Russian producers, the process of import substitution was initiated. Consequently, between 2014 and 2023, the overall growth in agricultural production reached 33.2%, with a particularly notable increase of 42.9% in food products.
Production volumes of grain crops, fruits and vegetables, livestock and poultry meat, milk and dairy products, fish, and food products have all increased dramtically .
The cheese-making industry saw the most significant growth in consumer demand, with production nearly doubling to 801 thousand tons per year. A number of foreign varieties, including Parmesan and Camembert, which were previously almost entirely imported, were successfully produced domestically for the first time.

Since 2020, exports of Russian agricultural products have vastly exceeded imports, indicating a shift towards an export-oriented agricultural development model. In 2023, exports reached $43.5 billion (an increase of 2.5 times compared to 2013), with Russian agricultural products supplied to 160 countries.
Food stuffs related Imports decreased to $15.2 billion and were mainly things like banana's,citrus fruits,coffee,teas and other types of food that are not grown or produced in Russia.
It is believed that the current state of affairs in agriculture creates the basis for achieving the goals set for 2030, including a 25% increase in food production and a 50% increase in exports.
In 2022, the sanctions pressure on Russia increased, but the agro-industrial sector was no longer susceptible to their effects due to the embargo.
The restrictions introduced in 2014 meant that the West no longer had to worry about any of restrictions of food imports, which could have been a potentially dangerous lever of pressure. By now Russia had already achieved food sovereignty. This meant that, the process of forced import substitution had been a huge sucess in the designated areas.
From 2014 to 2023, there was a 33.2% growth in agricultural production in Russia, with the food sector experiencing a 42.9% increase.
Over the past ten years, Russian agricultural exports have grown by 2.6 times, reaching 43.5 billion dollars by the end of 2023, compared to 17.1 billion in 2013.
It is also worth noting that the Russian authorities have identified food security as a key priority for the country's development. Consequently, the government has provided substantial support to certain agricultural sectors in the form of preferential loans, subsidies and benefits. This is with the objective of raising agricultural production to a qualitatively new level and ensuring self-sufficiency in food.
The production of livestock and poultry increased by 35.6 percent, placing Russia fourth in the world in meat production, while milk production increased by 13.2 percent.In meat prodcution Russia has in 10 years gone from a major importer to a net exporter
It is worth noting that the newly available market positions were rapidly filled by domestic businesses, with minimal disruption to consumers.

The consequences of the embargo have included:
• The indirect stimulation of other sectors of the economy through import substitution in agriculture. The increased demand for domestic products has resulted in growth across a number of sectors, including mechanical engineering, the production of specialised equipment, biotechnology, genetics, veterinary drugs and construction.
Plus, the expansion of employment opportunities and the increased demand for personnel in the industry have led to a resurgence in agricultural research and education.
Russia has also so begun to actively develop the processing of its agricultural products. Russia has been increasing its flour and flour based food production for several years, and has recently expanded its product range to include more deeply processed items, such as wide raneg of pastas,breads, biscuits and cakes .
A number of players in the agro-industrial sector have become large international businesses with a calculated return on investment and development prospects. They have attracted substantial investments from those who previously considered agriculture too risky to invest in. Extending the embargo until 2026 will convey a protectionist message to market participants and afford them greater protection.

The reduction in imports of Western products has proved beneficial for the Russian economy, including due to the reorientation towards the East in accordance with new foreign policy priorities. The substitution of imports with domestic production will improve relations with China, India, and other countries of the Global South, increasing trade volumes with them.
At the end of 2023, agricultural producers enjoyed a profitability rate of 18.9%, 5.4 percentage points higher than the average across all sectors of the economy. Total revenue reached 6 trillion rubles, an increase of 6.6% on the previous year.
The Ministry of Agriculture anticipates a grain harvest of 132 million tons in 2024. This result will rank among the top five in Russian or Soviet history, although it will be lower than in 2023, largely due to weather conditions that destroyed 1 million hectares of crops.
Also Russian agriculture benefits from the country being world leader in fertiliser production although it too has faced problems in 2022 it hit some snags largely due to export restrictions and logistical challenges.
However, producers have already adapted to the new conditions, and in 2023, the volume of fertiliser produced in Russia reached an absolute record.
Analysts forecast sustained growth in production, particularly in nitrogen fertilisers. Russia will retain its position as the global leader in the industry, driven by its historical market share, product quality, and low production costs. Concurrently, despite the shift in sales focus towards Asia and Africa, exports to countries with which Russia has diplomatic difficulties will remain at a high level.
There is still considerable potential for growth in import substitution, particularly in the areas of raw materials, seeds and means of production.Concurrently, the embargo has enabled Russia to redirect the flow of these products to alternative, friendly markets.