The war in which nobody wins: the trade battle between Russia and the EU
Anna Sonny, 22 August 2014
This week, Switzerland refused requests from European countries to re-export European agricultural products to Russia. In the latest development of the escalating battle between Russia and the EU, Switzerland refused to help the EU on legal grounds, saying it could not certify food exports for hygiene if the products were processed outside its borders.
The EU’s response to the conflict between Ukraine and pro-Russian separatists has triggered a trade war; in retaliation to sanctions on top Russian officials and economic sectors such as energy and finance, Putin has banned all agricultural imports from the EU and other Western countries including the US, as well as Australia and Japan. Switzerland is not a member state and did not apply sanctions as widely as the EU, so has been left out of the ban. In fact, it seems to be the only side to have benefited, seeing an increase in cheese sales to Russia as supplies from France and the Netherlands run out.
It seemed that US-owned McDonald’s restaurants in Russia weren’t going to be affected by the ban either, seeing as they source all their ingredients locally, but they were not safe. Four outlets have been shut down by Russia’s consumer-safety regulator, including the flagship restaurant in Moscow, in one of Russia’s favourite moves – citing ‘health concerns’ for highly unsubtle politically motivated actions, as they did last year when they banned imports of wine from Moldova as the country sought closer ties to the EU.
The potential loss for the EU looks huge, with food exporters set to lose €6.7 billion and 130,000 jobs across the bloc expected to go. But the Russians are feeling it as well. Despite being told by the authorities that this is a chance for Russia’s agriculture sector to flourish, Russians are seeing food prices rise as Western supplies run out, with jumps of up to 6% for some products. Empty shelves are expected to be filled with supplies from Brazil, Argentina, Turkey or Egypt instead.
As this war escalates, EU leaders may have to rethink the sanctions; the €167 million offered in aid to vegetable growers to counteract the Russian ban is not nearly enough to close the gap. It is only a matter of time before ordinary citizens resent feeling the effects of decisions made by political leaders. It remains to be seen who will back down first, but it is unlikely to be Russia.