Tags: Russia | Ukraine | US | EU

Russia Bans Array of US, EU Foods in Response to Sanctions

Image: Russia Bans Array of US, EU Foods in Response to Sanctions Russian Prime Minister Dmitry Medvedev. (Alexander Astafiev/AFP/Getty Images)

Thursday, 07 Aug 2014 09:25 AM

 

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Russia slapped import bans on an array of food goods from the U.S. and Europe and threatened to target the automotive, shipping and aerospace industries, striking back at sanctions over the conflict in Ukraine.

The restrictions include all cheese, fish, beef, pork, fruit, vegetables and dairy products, Prime Minister Dmitry Medvedev told a cabinet meeting today in Moscow. Russia may also impose “protective measures” on the aviation manufacturing, shipbuilding and auto industries, he said. The curbs target nations that sanctioned or supported punitive measures against Russia and also include Canada, Australia and Norway.

“The decision on retaliation wasn’t easy for us,” said Medvedev, who announced a ban on Ukrainian planes flying over Russia and a review of the use of Siberian air space for other carriers. “But I’m sure that even under such conditions we will be able to turn the situation to our own benefit.”

Russia is embroiled in the worst standoff with the U.S. and its allies since the Cold War over Ukraine, where government troops are cracking down on pro-Russian insurgent strongholds in the east and Russia’s military is massing thousands of troops across the nearby border. The U.S. and the European Union have targeted Russia’s economy, expanding penalties last week, joined by Canada, Japan and Switzerland, after the downing of a Malaysian Airline System Bhd. jet in a rebel-controlled area.

The Micex Index fell to a three-month low in Moscow, declining 1.6 percent and extending this year’s drop to 12.7 percent, data compiled by Bloomberg show. The ruble weakened 0.6 percent to 36.3767 per dollar, its lowest level since March, when Putin annexed Ukraine’s Black Sea peninsula of Crimea.

Norwegian salmon farmers including Marine Harvest ASA, the world’s largest, slumped in Oslo, with Marine Harvest, controlled by billionaire John Fredriksen, falling as much as 12 percent, the most in more than six months.

Putin has refused to bow to sanctions, aiming with food restrictions “to protect national interests,” according to a decree yesterday on the Kremlin website in which plans for the food ban were revealed. He called on the government to boost domestic supplies with the help of producers and retailers and to avoid spurring food-price growth.

“Retaliating against Western companies or countries will deepen Russia’s international isolation, causing further damage to its own economy,” said Laura Lucas, a spokeswoman for U.S. President Barack Obama’s national security council. “We continue to call on Russia to take immediate steps to de- escalate the conflict and cease its efforts to destabilize Ukraine.”

The EU said it “regrets” Russia’s bans and may respond.

The move “is clearly politically motivated,” European Commission spokesman Frederic Vincent said in Brussels. “Following full assessment by the Commission of the Russian Federation’s measures, we reserve the right to take action as appropriate.”

Ukraine will announce sanctions against Russia tomorrow, including measures targeting individuals and whole industries, Interfax reported, citing Justice Minister Pavlo Petrenko.

Today’s restrictions affect about 5.6 percent of Russia’s 77 million tons of annual consumption of those products. It imported $43.1 billion of food and raw agricultural materials last year. Of that, $36.9 billion came from countries outside of the former Soviet republics in the Commonwealth of Independent States, according to Federal Customs Service data.

Even before the decree, Russia’s public health regulators banned some imports from EU countries, the U.S. and Ukraine.

While the food ban will harm countries supplying food to Russia, “it will likely only amplify the effects of financial and sectoral sanctions imposed on Russia,” Dmitry Polevoy, an economist at ING Groep NV in Moscow, said in an e-mailed note. “This will likely add to overall sanction costs via higher food inflation and so will have a widespread effect on households.”

Russia remains at odds with the U.S. and its allies over events on the ground in Ukraine. The U.S. joined NATO and Poland in warning about the risk of Russia sending troops into its neighbor, with Russia calling reports of a military buildup on its western border “groundless.” The threat of an incursion is “reality,” U.S. Defense Secretary Chuck Hagel said in Germany.

The government in Kiev has estimated that Russia has deployed 45,000 soldiers, 160 tanks and 192 warplanes among other equipment along its border, including soldiers stationed in Crimea. NATO Secretary General Anders Fogh Rasmussen is due to meet with Ukrainian officials in Kiev today after the alliance said there’s a threat of Russian troops crossing the border under the “pretext” of a humanitarian mission.

Russia denies involvement in the Ukrainian conflict.

Fighting between separatists and Ukrainian troops continued in the city of Donetsk, where tens of thousands of the city’s one million people have fled amid civilian deaths, power cuts and water shortages. Artillery was used overnight in two districts, with three people dying and five wounded, the city council said on its website.

Seven Ukrainian soldiers have been killed and 19 wounded in the last 24 hours, Defense Ministry spokesman Andriy Lysenko told reporters in Kiev today. A cease-fire around the area the Malaysian plane went down has been called off until at least next week, the government said on its website.

In the capital, police clashed with protesters as workers began dismantling camps erected during the unrest that ousted President Viktor Yanukovych. Ten officers and two demonstrators were hurt, TV5 reported.

Andriy Parubiy, head of Ukraine’s National Security and Defense Council, resigned, his spokesman confirmed by phone, without giving a reason for his exit.

© Copyright 2014 Bloomberg News. All rights reserved.

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