The reports on the consequences of Russia's import ban on trade in food products from various Western countries are stacking up. The political logic behind the sanctions is less clear than the consequences. What is clear, is that a political power game is being played between the West and Russia; advanced chess.
Rally around the flag
The whole situation also has a positive aspect for Putin. Not long ago, there were demonstrations in Russia against his re-election. The mounting tensions between Russia and the West are causing a 'rally around the flag'. This is a well-known phenomenon in which the population of a country rallies behind the political leader of the country en masse when a conflict is looming. Putin is still able to utilize that now, but as the conflict drags on, the 'rally around the flag' effect weakens.
The consequences of the import ban can partly be absorbed by increasing domestic production, which is hardly realizable in the short term. A second option is to find new trade partners that are able to supply the products.
For instance, by increasing trade with old Soviet republics, Putin is expanding his political influence. These countries become more dependent on Russia through the trade, which plays into Putin's hand. In addition, Putin is able to make use of the export from emerging economies in the Southern hemisphere.
Egypt and Russia recently discussed a free trade zone between the two countries. The North African country reportedly wants to increase export of agricultural produce to Russia with 30% in the short term. In return, Russia will deliver 5 million tonnes of grain to Egypt this year. This deal would compensate a part of the import ban on Western agricultural products.
BRICS new power bloc?
The BRICS are already working together a lot, and these countries are looking at ways to cooperate further. These nations established an alternative World Bank in July, with a budget of 100 billion dollars to invest in infrastructural projects in developing countries. In addition, the bank received 100 billion in foreign exchange reserves to be able to cope with payment problems from developing countries. The bank is an alternative for Western-dominated international institutions such as the World Bank and the IMF.
Latin America in particular appears to benefit from the boycott of Western food. Brazil has given permission to 90 companies to export chicken, beef and pork directly to Russia. These countries can also offer an alternative for other products.
Argentina can also play a part in Russia's food supply. From this South American country, Russia imports pears, apples, grapes, citrus, meat, peanuts, butter and cheese, among others. In 2012, Argentina exported $1 billion's worth of agricultural produce to Russia. Meat producers in Argentina are considering an increase in their production, to be able to meet demands of the export market.
Chile can also benefit from the trade sanctions, because last year this country already supplied $567 million in goods to Russia. These are products like salmon, fruit, pork, wine and gelatine. At a regional level, Chile exports grapes, avocados, berries and kiwifruit, among others.
But Chile is still facing shortages due to frost and drought. That means exporting large volumes to Russia is infeasible. "At the moment we don't have any reserves, apart from some apples, to jump into the Russian market fast", manager José Manuel Alcaíno of Decofrut says. "Kiwi production has gone down by 50%, we hardly have any grapes, and there are practically no pears and stonefruit available. We will have to wait until January or February for us to have some volume available for Russia. Of the Chilean citrus, 90% has already been sent to the US."
China
Russian site Chelovek Online writes that China is prepared to supply more fruit and vegetables to Russia. This news is also directly related to the new Russian sanctions against the 'West'. But China can deliver more than just agricultural products.
Some reservations can be made regarding the Chinese plans, however; the focus of Chinese export will mainly be on Eastern Russia, where Europe is hardly active when it comes to exports. Secondly, the Chinese products are of inferior quality. But more importantly, China is a big importer of fruit and vegetables, so the question is whether China has sufficient volume to export.
The possibility of these countries benefiting from the situation led the EU to open talks with the South American countries. The EU expects these countries not to 'inordinately profit from the current situation'. Europe can put the continent under pressure through current negotiations with Mercosur, the economic partnership of Latin American countries.
Uncertain future
But Putin also has a problem: there is really no way out without losing face at home and abroad. A possibility to take the sting out of the conflict without losing too much face, could be a UN peacekeeping mission in Eastern Ukraine. With that, the conflict could be de-escalated without any of the parties losing too much face.
How long Putin will win in popularity, whether the country will be able to find replacing trade flows and whether BRICS will grow into a counterweight to Western dominance, is still up in the air. This article puts the situation in a wider perspective, but there are still numerous other scenarios imaginable.