Kremlin may restrict more food exports to shield it from high prices

Russia has warned that it is prepared to continue with its export curbs on key food products after recent price rises prompted the Kremlin to cap the domestic cost of staple goods such as sugar and flour, the country’s economy minister said.

Maxim Reshetnikov, minister of economic development, told the Financial Times that Russia, one of the world’s biggest grain exporters, was considering how to best support its food exports while protecting domestic consumers from rising prices.

The United Nations global food price index hit its highest level in almost a decade in May, surging nearly 40 per cent year-on-year. Food prices are a key political issue for the Kremlin given that 20m people, or one in seven Russians, live below the poverty line, and rationing and hyperinflation are within living memory.

In December, Vladimir Putin ordered officials to impose temporary price controls on key foodstuffs such as sunflower oil and pasta. A wheat export quota was announced earlier this year with export duties added this month. Moscow said the moves were needed to compensate for years of falling incomes that have made essential goods unaffordable for many.

Reshetnikov said that Russia was continuing to monitor and adopt export measures, including a floating tariff of “flexible export duties” on additional goods, as prices continue to rise. As for domestic consumption, Russia was ending most of the price caps but would continue to subsidise certain staples, such as bread and flour.

“There’s no guarantee that global food prices have stabilised and peaked,” Reshetnikov said. “Any news about crop forecasts can provoke . . . yet another rally for some foodstuffs, so we are constantly paying close attention to them and taking some measures when need be.”

The export curbs, which Reshetnikov called a price “shock absorber”, are also meant to encourage domestic producers to invest more. “This is one of our sources of growth by adding new value chains — grain moves animal husbandry forward, animal husbandry moves milk forward, and so on,” he said.

Russia only began exporting key foodstuffs such as wheat after 2014, when it banned most western food imports in response to US and EU sanctions and then began heavily developing domestic agriculture. Agricultural goods such as wheat accounted for almost 8 per cent of Russia’s $419bn of exports in 2019, according to World Trade Organization data.

However, the country still lacks the infrastructure to amass food stores on the same level as the US or Europe. These would allow it to weather price spikes by increasing supplies, warehousing the extra production and releasing it as needs be.

Still, the proposed export limits have won support in the food retail sector, where executives claim recent price rises are due to increased demand from Chinese importers willing to pay more. Sugar prices rose 65 per cent in Russia last year.

By contrast, officials have blamed higher Russian food prices on what Prime Minister Mikhail Mishustin has called “the greed of certain producers and retail networks”. This has prompted fears of a crackdown throughout the sector.

More than three quarters of Russian businessmen said they feel unsafe from unfounded criminal prosecution by the state, according to a presidential security service survey last month; moreover, 18 per cent of prosecutors agreed with them.

The worries are so widespread that one MP joked at Russia’s showcase economic conference in St Petersburg last week that “we’ve taken the first step [to an investment climate] — three days into the forum and nobody’s been arrested”.

Reshetnikov said any future business measures would probably take the form of higher taxes.

“If you invest all your profits, even if they’re very high, in new production, development, research, and so on, that’s one thing. If you pay dividends, which is also fine [ . . .] it may well be that another tax level is appropriate to stimulate investment in business,” he said.

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