Politicians must give us Russia back
The distress caused by the Russian boycott is still evident in the Borloon area in Belgium. There, a large banner, placed near the N79, shouts a distress call to politicians: "Politicians must give us Russia back". This same banner pops up in, among other places, the fruit cultivation area of Southern Limburg as well. Belgian hard fruit traders, have been asking for this, perhaps against their better judgement, since the summer of 2016. This call to action is not an isolated incident.
In 2014, the hashtag #toffepeer was used to show support to the Belgian pear growers. The peerfie, where people took selfies with pears, became very popular. The pear got attention as never before. These online protests and shows of support, for apples, began in Poland. In one fell swoop, this Eastern European country had lost their most important export market. Here, a journalist posted the first #EatPolishApples on Twitter. The selfies picturing apple-eating Poles grew into a spirited protest against the boycott.
It was quieter in other countries. In the Netherlands a small campaign was started to promote Dutch products. Supermarket chains advertised boycotted Dutch products in order to help the affected farmers. The affected sector saw no use in this as the damage was already done. The "Stichting Samen Sterk" website, set up to counter the effects of the boycott, has been offline for about two years now. In many other countries, no action was taken to support the affected sectors. Politicians were asked for support from the very beginning. It did not come.
Product destruction and market withdrawal
The consequences of the boycott were, in certain aspects, the same on both sides of this economic war: investment, destruction (removal from the market), and other trade routes.
Investment
The Russian government reached deep into its pockets and, as always, invested heavily in its domestic fruit and vegetable cultivation. The boycott was well-suited for the Kremlin's plan of self-sufficiency.
To partly counter the European sector's huge losses, the European Commission decided to introduce a package of support measures. Growers could get compensation for taking their products off the market. Europe began with a budget of EUR 125 million. This money was intended to be used to absorb the losses of export to Russia. In September 2014 it, however, became clear that countries were claiming damages far exceeding the export value to Russia. Poland, especially, was accused of this and the EU suspended this measure. A new version of the support measure set a quota for maximum volume per product for each member country. Not everyone was happy with this. Dutch growers, among others, said this compensation tariff was less than market price and decide to simply bring their products to market. The EU still has a, greatly reduced, buy-out system for withdrawing from the market.
Destruction (removal from the market)
As soon as the borders closed, a black market immediately sprung up. Fruit and vegetables became contraband. This illegal trading brought some relief to affected traders in Europe. The most common route to Russia runs through Belarus. Here European products became Belarusian products. Smugglers also became more creative over time. Belarus was not the only country named as a country of origin. Other countries, including African countries which hardly export fruit and vegetables, were being listed on labels.
This explosive increase in products from Belarus, which happened to be the same as those no longer imported from Europe, did, of course, not go unnoticed. In 2015, a presidential decree was handed down: illegally imported products would be destroyed. This resulted in a continuous stream of reports from the Russian phytosanitary services about the destruction of products. In addition, they did not hesitate to name the original country of origin. In many cases, according to the service, this was still discernible via the labels, packaging or pallets used. These products mostly originated in Spain (citrus or stone fruit), Poland (apples) and the Netherlands (a range of products).
The growth in tomato imports in various countries. In both 2012-2016 (horizontal axis) and between 2015-2016 (vertical axis), the increase in imports from Belarus were notably high. Click here to enlarge.
Removal from the market
Under the EU's measure, products got taken off the market. Farmers also had a choice to green harvest their products or donate them to a food bank or other charitable organisation. This last option, however, called into question whether it would not disturb the market.
Whatever the case may be, claimed volumes were not brought to the market via regular channels. Fruit ended up as stock feed or in the organic composter. In one case, the product was "spread on the field". The images released in 2016 by a Belgian farmer caused much controversy. Especially because of the comparison to Russian images of the destruction of illegally imported fruit. In one image, hundreds of thousands of apples and pears are lying in a field in Belgian Limburg, waiting to be destroyed.
Trade flows
There was also a deterioration in Russian markets after the loss of the European imports. Immediately after the borders were closed, various countries across the world wanted to take advantage of the gap left in the market. Many European competitors, apart from the Latin American countries who do direct exports, benefited from the situation. Morocco, Turkey, Egypt, Israel and various countries from central Asia and the Caucasus benefited from the chance at the huge Russian market. Due to the fall in oil prices, the ruble was in a downward spiral. This meant a huge risk for these new exporters. As the oil price recovered, so did the rouble.
The Belgians lost an important pear market. Poland lost its biggest apple market. Spain lost an important market for citrus, kaki and tomatoes. This is then also the way in which EU member countries bounced back from the loss of the Russian market. Each country looked, independently, for new markets for its products. These were found in, inter alia, India and Canada. China was also considered, but breaking into this market requires patience. In the short term, European markets were flooded by Polish hard fruits, which disturbed the market in 2014.
2016's moment
The summer of 2016 is, in retrospect, the moment in which an important change was possible. The Russian Minister of Foreign Affairs, Sergey Lavrov, called 2016 "the moment of truth" for Europe. The EU reviews their sanctions every six months, where a vote is also taken with regard to extending its measures against Russia. In the prelude of the 2016 vote, the topic was on various countries' parliamentary agenda. Greece, plagued by the euro crisis, openly flirted with the Russian regime. The Greeks were not the only ones who opposed the sanctions. Italian and Spanish politicians also voiced their criticism of the sanctions. France and Germany also questioned extending the sanctions, with German politicians openly opposing them.
The summer of 2016 is, in retrospect, the moment in which an important change was possible. The Russian Minister of Foreign Affairs, Sergey Lavrov, called 2016 "the moment of truth" for Europe. The EU reviews their sanctions every six months, where a vote is also taken with regard to extending its measures against Russia. In the prelude of the 2016 vote, the topic was on various countries' parliamentary agenda. Greece, plagued by the euro crisis, openly flirted with the Russian regime. The Greeks were not the only ones who opposed the sanctions. Italian and Spanish politicians also voiced their criticism of the sanctions. France and Germany also questioned extending the sanctions, with German politicians openly opposing them.
Yet, the call was not heeded. Sanctions were extended with another six months. Russia responded by extending the boycott.
The economic war's results
What have these sanctions achieved after three years? The short answer: nothing. The European sanctions, imposed as retaliation for Russia's interference in the Ukrainian conflict, did not lead to an end of the conflict. Although agreements were made in Minsk, which were supposed to lead to a ceasefire in Eastern Ukraine, fighting continued. The fact the the European countries link the end of sanctions to the implementation of the Minsk-accords, and the return of Crimea to the Ukraine, makes it doubtful that it will mean an end to the economic war in the short term. There has been no attempt made to end the conflict in the Eastern Ukraine. President Putin is also not talking about annexing the Crimea, but of unification. This choice of words reflects exactly how far removed the parties are from each other. ABN AMRO has concluded that it was not the sanctions that caused problems for Russia, but rather the fall in the oil prices that had a far greater impact on the Russian economy.
Russia has always seen the boycott as retaliation for the European policy of economic sanctions. The Kremlin has repeatedly said they will only consider ending the boycott if the EU lifts the sanctions. Studies have found that Russian consumers have adapted to the new assortment in the supermarkets. The terms of the sanctions and the boycott have not been in line for some time. This divergence increases with each extension. Just before the summer, Europe extended the sanctions to the end of the year, when the extension will again be deliberated. Russia responded by extending their boycott by a year. It is now officially in place until the end of 2018.