Photo: Ekaterina Kuzmina / RBC
The war of sanctions
The number who believe sanctions are good for Russia peaked
17 Mar, 11:37
The Kremlin has promised to take steps to protect Russian banks in Ukraine
16 Mar, 13:07
Even 2615 materials
The prices of goods in Russia now could be 3% lower if the authorities imposed food embargo, according to Ranepa. Monetary loss of consumers from the embargo are estimated at 4.4 thousand rubles per year
If Russia did not impose a food embargo in 2014, a set of sanctions goods cost would be 3% cheaper than now, and nesanktsionnymi — 2.9%. Such calculations are in the monitoring of the economic situation prepared by the experts of the Ranepa, the Gaidar Institute and the Russian Academy of foreign trade. The authors investigated the period from 2014 to 2016.
Economists identify two effects of the embargo consumption and production. The “consumer effect is associated with the decline of the population because of rising prices resulting from the imposition of sanctions. Production attributable to the net profit of agricultural producers and food producers by limiting import competition,” the report said.
Assessment of the impact of counter-sanctions on the prices obtained by the authors as the difference between the actual cost of a fixed set of products and predictive value of this set in the hypothetical absence of the embargo. The figure of 3% is too low, says chief economist at Alfa Bank Natalia Orlova. The total contribution of the counter-sanctions from the commencement date until the end of 2015 in food inflation was 4.1%, while overall in the basket is 1.6%, reminds the economist of “VTB Capital” Russia and the CIS Alexander Isakov, since it could be reduced due to a redistribution of consumers.
The authors also estimated the loss in the welfare of Russians from behind the counter. Monetary loss of consumers are estimated at 4380 RUB annually — a figure that is fair, if we assume that the demand structure of citizens with the introduction of the embargo has not changed. When calculating this effect, the authors relied on the so-called compensating variation in income: this is the amount the user needs to increase his income, so higher prices do not lead to a deterioration of welfare.
Experts stress that the embargo led to a further rise in prices as the sanctions and nesanktsionnymi goods. Kontrsanktsii affect annual inflation unevenly specified in the monitoring. In General, the average increase in inflation due to the introduction of counter-sanctions during the study period was 3.1 p. p. as for the sanctions, and nesanktsionnymi goods. In the first six months of growth sanctions goods amounted to 29.9 PPT, nesanktsionnymi — 5,1 p. p. However, in the first year of the contracti these figures dropped to 8.6 percentage points and 4.3 percentage points respectively.
“This imbalance is due to the fact that consumers due to the rising costs of analog products embargoed goods identical switch to cheaper and lower quality domestic and imported goods from other countries. In addition, the gradual reduction of the sanctions effect in time can be explained by the decrease in average production costs due to the growth of domestic production,” write the economists.
The strongest impact of counter-sanctions occurs within the first 6-12 months after their introduction, but then the rise in prices and the fall in consumption is slowing down, the authors write. Thus, “the embargo benefits the producers only in the short term, in the long-term effect of the embargo on the performance of the market is reduced”, says the monitoring.
Food embargo did not cause significant damage to the countries against which it was introduced, wrote economists Ranepa last fall. They pointed out that the case of a significant fall of the volume and value of total exports sanctions due to the reduction of deliveries to Russia are rare and insignificant from the point of view of the damage. Embargoed countries compensated for the loss of supply in other States and have even increased their food exports in the context of sanctioned goods.