In retaliation for US and EU sanctions, Putin issued an executive order yesterday banning or restricting food imports from countries that imposed sanctions on Russia. Bershidsky predicts that the counter-sanctions will hurt the Russian economy more than the countries they target:
In all, Europe’s biggest economies plus Poland, Norway, the U.S., Canada and Australia stand to lose some $6 billion in the next year from the Russian food sanctions. That is far from deadly for them. The Russian Micex stock index has lost a third of that amount in capitalization since the food sanctions were announced, because they are expected to hurt retailers such as the discounter Magnit, which has called itself the biggest food importer to Russia. More upscale retailers will need to reconsider their entire sales matrices, shifting to Asian and Latin American imports. That cannot but have an effect on their bottom lines.
Putin appears to care little about the effect of the sanctions. His focus is, as ever, domestic. He is showing his voters in the most tangible way possible that Russia doesn’t need the West to survive. The Kremlin’s propaganda is already playing up this message. “I can survive perfectly well in a world without polish apples, Dutch tomatoes, Latvian sprats, American cola, Australian beef and English tea,” Yegor Kholmogorov wrote on Izvestia.ru before it became clear that tea or cola would not be sanctioned. “Especially if this results in a substituting expansion of Russian agribusiness and food industry.”
Julia Ioffe speculates that the move might backfire:
This is the thing. If the ban really does go through and is as wide-sweeping as the Russian blogosphere fears, it will hurt not America and not the E.U., but the class of people who are well-educated, well-paid, and well-traveled, who know the difference between a Nero d’Avola and a Nebbiolo, and between prosciutto and jamón serrano. That’s a relatively small set of people, and it’s also the people who went out into the streets in the winter of 2011-2012 to protest against Vladimir Putin: the urban middle class, or, as the Kremlin derisively dubbed them, the creacles (from the words for creative class). Still, it will have a wider effect, too. Most restaurants in the country these days serve something from the E.U., things like Czech or German beer (a favorite of Russians of all stripes) and cheap Italian and French wines. Not to mention that much of the beef in Russian restaurants comes from Australia, which has already threatened to ban entry to Vladimir Putin. The ban won’t go unnoticed outside the creative class.
Tyler Cowen still finds it worrying, though:
Commentators are criticizing the economics of such a move, but I think of this more in terms of Bayesian inference. Long-term elasticities are greater than short. Under the more pessimistic reading of the action, Putin is signaling to the Russian economy that it needs to get used to some fairly serious conditions of siege, and food is of course the most important of all commodities. Why initiate such a move now if you are expecting decades of peace and harmony? Or is Putin instead trying to signal to the outside world that he is signaling “siege” to his own economy? Then it may all just be part of a larger bluff. In any case, Eastern Europeans do not take food supply for granted.
The Dish 