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Russians start to stockpile

Moldavian apples for the EU

The European Parliament has voted on a proposal to open the borders for small volumes of Moldavian apples, grapes and plums. The fruit will most likely be set for the Romanian market. The parliament also voted for a cooperation agreement with Georgia, where political and economic ties with the country were cited. In a recent speech, Putin blamed the west for the current economic situation with Russia. In the meantime, Russian consumers have started to stockpile. Supermarket prices have risen sharply, especially for import products. Turkish traders are balancing on the edge of bankruptcy due to the fall in value for the roebel.

During a press conference lasting three hours, Putin pointed to the west for the current economic situation in Russia. In that regard, Putin wasn't really saying anything new and he in turn defended his policies and the policies of the banks. He then referenced the bear metaphor, often used in the west to describe Russia, and said that the claws had been clipped and the teeth sawed as the bear was quietly eating berries in the woods.

Throwing oil on the fire?
To say the Russia doesn't like that Europe has been doing deals with countries in its 'backyard' is an understatement. The past few years has shown that Russia has always reacted to these situations, Georgia and the Ukraine being only two examples. It is this expansion drive that is partially at the heart of the current conflict. Yesterday, the European Parliament ratified an agreement of cooperation between Georgia and the EU. Georgia is the third country in the past few months to sign this type of agreement; with Moldavia and the Ukraine before it.

The cooperation agreement defines the political cooperation and expansive economic integration between the Union and Georgia. The agreement applies to all of Georgia, also for Russian occupied Abkhazia and South Ossetia. The European Parliament also called for Russia to recall its strategic partnership that it had made with Abkhazia.

Separatists in South Ossetia reacted to the signing by publishing its own proposal where the Georgian region would join Russia. The drafted treaty carried important components, such as the police, army and border patrols over to Russia. Alongside that, the border between Russia and South Ossetia would be opened; with free passage of people without checks. The separatists sentiments escalated after the Crimea and eastern Ukraine planned to join Russia.

Moldavian apples for the EU
Members of the European Parliament also supported a proposal that would regulate the import of Moldavian apples, grapes and plums. Moldavian received permission to export 40,000 tonnes of apples, 10,000 tonnes of grapes and 10,000 tonnes of plums to Europe without import taxes. These volumes are in line with 0.4%, 0.6% en 0.7% respectively, of European production volumes. According to estimates, the largest part of these exports will come into the Romanian market. The majority of the Moldovan exports, 90%, was already freely placed on the European market, fruit and vegetables fall under the 10% where restrictions apply.

Incidentally, a delegation from the Moldovan Ministry of Agriculture Russia visited to negotiate lifting the sanctions. Moldova is also included in the boycott. The country is trying to open the Russian borders with these negotiations.

Implications for prices boycott investigated
The LEI investigated the effects of the boycott for three major export products: tomatoes, apples and pears. The study compared the price movements after the boycott with comparable periods for the closed borders. It was concluded that the boycott hardly had any effect on tomato export. The boycott began at the moment where that the peak in the export had all ready taken place, and the export volume was almost identical to previous years in the months that followed. The conclusion for apples and pears is that the price trend has not been so good in the last few years. A good harvest is the main cause. The total export of apples is lower due to the large demand on the European market. This oversupply is partly caused by the boycott. The export volume of pears has remained stable. Therefore, the effects of the boycott are not reflected in the figures.

Turkish traders on the edge of bankruptcy
The ag sector in Turkey had hoped to profit from the boycott and to expand their market share in Russia, but now that the value of the roebel has declined, companies are hanging with bankruptcy over their heads. Exporters who sold on credit in roebels are balancing on the edge of ruin. The Russian currency lost dozens of percent of its value, which had a negative effect for Turkish exporters who supplied which payment terms of three months. Exporters have issued a statement crying out that intervention is needed to prevent bankruptcies.

Russians starting to stockpile
With the free fall of the roebel earlier this week, along with negative prospects, Russians have started to stockpile. The value of money in savings accounts is unsure, while supermarket prices are rising. Import products in particular are quickly becoming more expensive. According to local media in Moscow, residents are purchasing coffee and tea in massive amounts. The director of Auchan Russia says that he negotiates with suppliers for every price increase, therefore there is no general rule that applies to the company.

Twice as bad for Israel?
Exporters and entrepreneurs from Israel are keeping close ties with Russia. The downward spiral the Russian economy sees itself in can also have negative effects for Israel. For produced food exports, with a value of $950 million, 6% goes to Russia. Russia is also an important market for other sectors. Trade with Europe is increasingly touchy now that its stance on the Israeli-Palestinian conflict seems to be changing. The Russian market had seemed like a good alternative.