President Vladimir Putin told officials on Wednesday to come up with a list of western agricultural products and raw materials to be banned, in reaction to western sanctions over Russia’s policies in Ukraine.
Russia’s prime minister, Dmitry Medvedev, said the ban was effective immediately and would last for a year. It covers most foodstuffs from the US, the 28 EU countries, Canada, Australia and Norway.
“Until the last moment, we hoped that our foreign colleagues would realise that sanctions lead to a blind alley, and that no one benefits from them. But they didn’t realise this, and now we have been forced to respond,” Medvedev said.
The EU and US have sanctioned a number of Russians, including billionaires believed to be close to Putin and those actively involved in the annexing Crimea and the unrest in eastern Ukraine. After the downing of Malaysia Airlines flight MH17, which pro-Russia rebels are believed to have shot down , a number of key Russian banks were also sanctioned, cutting them off from European capital markets.
The key question is whether the import ban would hurt European producers more than Russian consumers. The Kremlin’s English-language channel, Russia Today, said the food ban could spark a “crisis in Europe” and would cost billions of pounds in lost revenues.
There was less musing on the cost to ordinary Russians, who have become used to readily available imported foods.
“I am sure that our market will be filled with fresh quality Russian products, which anyway many Russians prefer to the imported ones,” said Medvedev.
The agriculture minister, Nikolai Fyodorov, said more Brazilian meat and New Zealand cheese would be imported to offset the newly prohibited items. He also said Moscow was in talks with Belarus and Kazakhstan to prevent the banned western foodstuffs being exported to Russia from the two countries.
Medvedev said Russia was prepared to introduce further measures in aviation, shipbuilding and automobile sectors, but said it would do so carefully. Moscow has already floated the idea of banning European airlines from flying over Russian airspace, which could add several hours to some flights between Europe and Asia.
Russia is Europe’s second-largest market for food and drink. Exports of food and raw materials to Russia were worth €12.2bn (£9.7bn) in 2013, following several years of double-digit growth.
The UK is less likely to lose out. In 2013, its biggest food and drink export was £17m of frozen fish, followed by £5.7m of cheese and £5.3m of coffee.
The president of the European Central bank, Mario Draghi, said on Thursday that the Ukraine crisis was contributing to heightened geopolitical risks that are threatening the eurozone’s faltering recovery. “Some of them, like the situation in Ukraine and Russia will have a greater impact on the euro area than they … have on other parts of the world,” he said.
The world’s second-largest bottler of Coca-Cola drinks has become the latest company to be hit by the escalating standoff between Russia and the west, along with the sportswear maker Adidas.
Coca-Cola HBC, which bottles and distributes the US company’s drinks in 28 countries, said volumes would fall for the rest of the year, citing a sudden deterioration in Russia, its biggest market.
Financial markets were quick to react to Putin’s tit-for-tat move. Moscow’s main two share indices extended Wednesday’s sharp declines, with retail and banking shares among the biggest fallers. The RTS index lost 1.9%, and the rouble-denominated Micex fell 1.5%. European indices were also weaker.
Food has already been caught up in political tensions between Russia and the west. Moscow’s food safety authorities have recently banned the import of Polish fruit and vegetables, and a regional branch of the consumer protection agency Rospotrebnadzor is investigating McDonald’s cheeseburgers and milkshakes.
European pork was banned at the start of the year as the Ukraine crisis escalated, cutting off 25% of all EU pig meat exports in a move that the European commission said exposed farmers to significant losses.
The EU and US stepped up punitive action against Russia last week in response to Moscow’s support for eastern separatists in Ukraine, which has been unwavering despite the downing of MH17.
A Dutch rescue team had to abandon its work at the crash site on Thursday, judging that the frontline of fighting between Ukrainian forces and Russia-backed rebels was too close.
Ukrainian forces have made gains in the east in recent weeks, but at the expense of civilian casualties. The rebels are now mainly holed up in the regional centres of Donetsk and Luhansk, leaving Kiev with a dilemma of how to win back the strongholds without enormous civilian loss of life.
Russia is carrying out military exercises near the border with Ukraine this week, and there are fears that the option of a ground invasion is still on the table. Nato said earlier this week that Moscow had amassed around 20,000 troops near the border and could be planning an invasion under the guise of a humanitarian intervention.
In Kiev, there were clashes on Thursday morning as authorities attempted to clear Independence Square, known as the Maidan, of tents and protesters. The square was the centre of the protests against President Viktor Yanukovych’s rule, and a small hardcore of protesters have refused to move on and have remained living in the square since Yanukovych was deposed in February.
The square was cleared by armed members of volunteer battalions which had returned from fighting the pro-Russia separatists in the east, themselves made up of former Maidan activists. The violent clashes suggest tough times ahead for Ukraine, where President Petro Poroshenko will have to deal with the presence of many armed volunteer groups when the crisis in the east is over.