Yesterday, President Vladimir Putin singed an executive order on special economic measures to protect Russia’s security.
Under this order, all entities and individuals under Russian jurisdiction “shall, in carrying out their activities, respect for a duration of one year following this Executive Order’s entry into force a ban or restriction on foreign economic operations involving the import to Russia of particular kinds of agricultural produce, raw materials and foodstuffs originating in countries that have decided to impose economic sanctions on Russian legal entities and/or physical individuals, or have joined such decisions.”
In this respect the government has been instructed to:
- draw up detailed measures (lists of products, countries);
- take measures to ensure a balanced goods markets and prevent accelerating price rises;
- arrange for timely monitoring of the goods markets; and
- design and implement measures to increase the domestic supply of the respective goods.
As diplomatic relations with the West sour, the protectionist rhetoric from Russia has been gaining momentum. The scope of both the food products and the regions that are subject to import restrictions has already been extended visibly since the start of the year, and that has helped to prop up local production, but at the same time it is the primary reason behind elevated food inflation in Russia.
Details of the additional import restrictions, as well as the government’s plan to ‘ensure balanced good markets’ and increase domestic supply, have not yet been made public and so a comprehensive assessment of the potential consequences is not possible at this stage. Overall, it will clearly strengthen the trend for import substitution, but on the other side it blurs visibility on the outlook for inflation and monetary policy.