Russian farmer subsidy plan violates WTO rules

03/09/2014 12:00 - 515 Views

Russia’s Agriculture Minister Nikolai Fyodorov said the country’s farmers need 636 billion rubles ($17.6 billion) of extra state support in 2015 through 2020 to boost output, mainly of pork and poultry, after Russia banned Western food imports, but experts warn that agriculture subsidies could be in violation of World Trade Organization rules.

Earlier in August, Russian President Vladimir Putin ordered an embargo on meat, poultry, fish, dairy and produce from the United States, Canada, Australia, Norway and the European Union in response to those countries’ economic sanctions against Russia over the Ukraine crisis.

Fyodorov told Russia’s Prime Minister Dmitry Medvedev that the ministry had drafted a new plan for 2015-2020. The current plan envisions 1.6 trillion rubles ($44 billion) in investments from Russia’s federal and regional budgets.

“Taking into account all the realities and all the changing conditions ... we’ve prepared a moderate scenario of [the agriculture] industry development, which sees additional volume of resource support of ... 636 billion rubles in 2015-2020,” Fyodorov said during a government meeting on August 22.

Natalya Orlova, chief economist at Russia’s Alfa Bank, told New Europe on August 25 that Russian producers definitely have to think about options how to address the high demand. She said their production capacity is close to maximum.

“For a number of companies involved, they were not able to benefit from the food import bans. As a result there is a request for the Cabinet to come with some financial help which I think is not an easy deal because Russia, being a WTO member, has obligation to limit the size of the agricultural subsidies,” Orlova warned.

She predicted that sanctions and countersanctions would remain in place in 2014.

“Unfortunately the political decisions are not very clear at all, but I think the market sentiment is definitely before this year ends it’s very unlikely that the sanctions will be eased. The transit will probably should come next year only,” she said.

Cherkizovo and Rusagro are Russia’s largest meat producers.

Fyodorov also told the Russian Cabinet meeting that the country’s exportable grain surplus for 2014-15 was seen at 25-27 million tonnes, up from an earlier estimate of 25 million tonnes. He said Russia kept its 2014 grain crop forecast unchanged at 100 million tonnes and was planning to buy 5 million tonnes of grain on the domestic market in the 2014-15 agricultural year to replenish government stocks.

While the Russian government has major revenue from exporting oil and gas, the slowing economy and uncertainty has nearly choked off growth.

However, Orlova told New Europe that the sentiment is much worse than the actual figures at the moment. She said that a lot of Russian companies fear instability in the financial markets, fluctuating interest rates and difficulties in securing loans.

“At the same time if you looking at economic indicators, there is no any significant economic shock we have experienced at the moment,” Orlova said, adding that the impact of the sanctions will be rather long term. “This means the longer the sanctions are in place, the worse the effect will be,” she said.

Source: neurope.eu