The Russian government is looking at new sources of revenue in order to slow the rate at which it's quite considerable national wealth fund is run down following the drop in the price of oil. One area under consideration is to apply excise duty to unhealthy foods. This intention was announced to journalists from the Vedemosti newspaper on January 18. The food is under consideration include palm oil, sugar, carbonated drinks, potato crisps, e-cigarettes and perhaps other foods containing fats. The one product where there is a concrete commitment is palm oil. Excise duty will be placed on palm oil, starting on 1 July, 2016. The rate is yet to be determined but might be $200 a tonne, or even 30% of customs value.
There may be a little bit more to this than considerations of health. Russian sanctions against the EU included sanctions against the import of cheese and liquid milk. This was designed to stimulate import substitution in the domestic industry. Dairy farmers in particular have been under a lot of financial stress. In practice, Russian cheesemakers switched to using palm oil and imported dried milk as a substitute for cheese, rather than pay good prices to the local dairy industry. The Russian phytosanitary agency then found reasons for banning the import of palm oil from Malaysia and Indonesia. This was perhaps helped by the failure of Malaysia and Indonesia to see the downing of MH17 through the same eyes as the Russian diplomatic service. The largest plantation owner is IFFCO, company based in the United Arab Emirates, another country that might need encouragement to see things the Russian way. The phytosanitary ban was temporary. An excise duty imposed on health grounds is within the rules of the WTO and may be permanent. However, even to mention the politics is to overemphasise it. The main issue here is the stimulation and protection of the Russian dairy industry. Excise duty on palm oil will be a long-lasting protection measure which can give dairy farmers confidence to make long-term investments.
Agricultural production is actually an area where, prompted by sanctions and later by the large fall in the value of the ruble, import substitution has been a successful policy. Cheesemaking and milk being an exception. For example, fresh vegetable production for 2015 was 12.3% abouve the long term average. This has made it possible to contemplate the ban on the import of Turkish vegetables to add to the ban on EU vegetables. The EU ban only affected about 5% of consumption. None of this has helped the Egyptian exporters of vegetables who would like to penetrate the Russian market. Almost none of them are interested in investing in the sales and delivery process. The same applies to potential sources further afield in Pakistan and India. Iranian companies, although starting later than the Egyptians have made more progress, largely due to direct interest from Russian importers rather than sales efforts by the Iranians.
The dairy industry is just one example of a Russian production industry that needs to buy equipment and process supplies from abroad. Russia may no longer be a major growth market for consumer goods. It has become a major growth opportunity for capital equipment and all kinds of industrial consumables.
There may be a little bit more to this than considerations of health. Russian sanctions against the EU included sanctions against the import of cheese and liquid milk. This was designed to stimulate import substitution in the domestic industry. Dairy farmers in particular have been under a lot of financial stress. In practice, Russian cheesemakers switched to using palm oil and imported dried milk as a substitute for cheese, rather than pay good prices to the local dairy industry. The Russian phytosanitary agency then found reasons for banning the import of palm oil from Malaysia and Indonesia. This was perhaps helped by the failure of Malaysia and Indonesia to see the downing of MH17 through the same eyes as the Russian diplomatic service. The largest plantation owner is IFFCO, company based in the United Arab Emirates, another country that might need encouragement to see things the Russian way. The phytosanitary ban was temporary. An excise duty imposed on health grounds is within the rules of the WTO and may be permanent. However, even to mention the politics is to overemphasise it. The main issue here is the stimulation and protection of the Russian dairy industry. Excise duty on palm oil will be a long-lasting protection measure which can give dairy farmers confidence to make long-term investments.
Agricultural production is actually an area where, prompted by sanctions and later by the large fall in the value of the ruble, import substitution has been a successful policy. Cheesemaking and milk being an exception. For example, fresh vegetable production for 2015 was 12.3% abouve the long term average. This has made it possible to contemplate the ban on the import of Turkish vegetables to add to the ban on EU vegetables. The EU ban only affected about 5% of consumption. None of this has helped the Egyptian exporters of vegetables who would like to penetrate the Russian market. Almost none of them are interested in investing in the sales and delivery process. The same applies to potential sources further afield in Pakistan and India. Iranian companies, although starting later than the Egyptians have made more progress, largely due to direct interest from Russian importers rather than sales efforts by the Iranians.
The dairy industry is just one example of a Russian production industry that needs to buy equipment and process supplies from abroad. Russia may no longer be a major growth market for consumer goods. It has become a major growth opportunity for capital equipment and all kinds of industrial consumables.
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