For some reason, Russia has decided to respond to western sanctions over its behaviour in Ukraine by banning imports of stuff Russians like to eat. Other blogs have covered the story well in terms of its stupidity and likely impact, but I’d like to weigh in as well.
Firstly, I think Russia will find it quite difficult to diversify its suppliers across a whole sector for the simple reason that doing business with Russian companies is a nightmare at the best of times and their current suppliers will have gone through a long, hard, and painful route to get where they are now. New entrants from South America and Asia will find themselves having to leap through endless bureaucratic hurdles, provide reams of documentation containing papers which don’t exist outside of Russia, negotiate umpteen obstacles thrown in their path by every bureaucrat and gangster who has seen a way to make a quick buck, and then probably find that, after all that, they’re not actually going to get paid.
Secondly, I think enterprising Russians based overseas will quickly re-route, repack, and relabel EU produce and then send it through the otherwise normal channels, in the manner in which Israeli products routinely get sold in the Gulf States after passing through Lebanon or Jordan. This operation needn’t be sophisticated, just good enough to allow a well-bribed customs official to plausibly claim deniability. Although what it will do to the accuracy of sell-by dates of products on supermarket shelves may have some Russian consumers hoping toilet paper is one such foreign product that can still be imported.
We can also expect “businessmen” in Kazakhstan and Belarussia to do well out of this. These two countries have not adopted the Russian sanctions yet are in a customs union with Russia. Therefore, in theory, these countries can import as many EU goods as they like and re-export to Russia without interference.
I expect these two re-routing options to meet the bulk of the demand for goods banned by the sanctions, at a cost to Russian residents of somewhere around 10-30% in price and reduced freshness of the produce itself. Where the Russian government intervenes with price controls, we can expect those products to disappear from shelves almost entirely and a healthy black market springing up. The EU producers will suffer, but only in the short term whilst these re-routing schemes are put in place.
I am quite certain that the demand won’t be met, as some Russians have been confidently predicting, by domestic suppliers. Yes, Russia does make cheese but Russia also makes cars. There are good reasons why these imported goods appeared in the first place. There is also the issue of whether Russia’s factories can increase production to meet demand. I once pointed out to a rather dim journalist that just because watercress can be grown in Britain, it does not mean that all imports of watercress are unnecessary, i.e. ability to produce a certain quantity does not equate to an ability to be self-sufficient.
As several people have noted, the nostalgia for the USSR among sections of Russian society has been apparent for some time. Up until now, I didn’t know such nostalgia included Brezhnev-era food shortages and 1920s double-digit inflation. But as I’ve said before, many times, Russians will gladly endure any manner of hardship if it allows them to thumb their noses at the West and feel better about themselves. See this post, for example.
Good luck to them.