Russian authorities assess the threat of new US restrictions on agricultural products

A bill passed in the lower house of the US Congress aimed at reducing dependence on Russian agricultural products has worried the Russian authorities. The Federal State Budgetary Institution Agroexport, subordinate to the Ministry of Agriculture, has begun assessing the impact of the initiative and is collecting the positions of market participants, creating a basis for international disputes. Some experts doubt the effect of the bill, but others consider it a “harbinger of complications in trade” and expect an increase in discounts on Russian grain and oil.

The Federal State Budgetary Institution “Agroexport”, subordinate to the Ministry of Agriculture, is assessing the potential impact of the bill No Russian Agricultural Act, adopted by the House of Representatives of the US Congress, on the export of Russian agricultural products. This is stated in a letter from the head of Agroexport, Dmitry Krasnov, dated January 18, a copy of which is available to Kommersant. A market source clarified that the letter was also sent to industry associations. Agroexport asks to provide a position on the bill by January 26.

The No Russian Agricultural Act, according to the Congress website, obliges the US Treasury, through representatives in international financial institutions, “to the extent practicable,” to support investments in projects aimed at reducing countries’ dependence on the Russian agricultural sector, including grain supplies. At the same time, it is prescribed to ensure the sustainability of global grain supplies and stimulate private investment. As of January 16, the document was submitted to the Foreign Relations Committee of the US Senate. Agroexport, the Ministry of Agriculture, and the House of Representatives of the US Congress did not answer Kommersant.

Verba Legal advisor Marat Samarsky believes that Agroexport’s request is part of a regulatory impact assessment, and “information is probably being collected to develop a common position at the Russian level.”

There is time to analyze and prepare a reaction: before the law comes into force, it must be approved by both houses of Congress and then signed by the president. “This is, to put it mildly, a difficult path,” emphasizes Mr. Samarsky. If the bill is adopted, he notes, it is possible to launch proceedings at the World Trade Organization and negotiations on the removal of barriers to trade, but “there are few prospects for such disputes.”

The Ministry of Agriculture estimated food exports from the Russian Federation in 2023 at $45 billion. Significant shares in the structure of supplies are occupied by grain, vegetable oils, fish and seafood.

Director General of the Institute for Agricultural Market Studies (IKAR) Dmitry Rylko notes that Russian food has not yet been subject to direct sanctions, and the adoption of a new bill may be “the first signal of a likely change in the situation.” While the initiative is at an early stage, it “can already be read as a recommendation not to deal with products from the Russian Federation,” he says. As the expert notes, key buyers of Russian food are integrated into the global financial system.

A Kommersant source in the industry clarifies that US pressure has already led to a delay in payment for grain from, for example, Egypt: “The pressure will probably increase, which means that discounts on products from the Russian Federation will increase.”

French Foreign Minister Stephane Sejournet, in an interview with Le Parisien newspaper over the weekend, already stated that the EU’s refusal to further support Ukraine in the conflict with the Russian Federation threatens to increase the share of Russian wheat on the world market. According to ICAR estimates, this season the Russian share in global wheat trade may increase to 25% compared to 22% a season earlier. ICAR estimates the EU’s share in this season at 11%, the USA and Canada together at 20%, and the total share of Australia, Argentina and Ukraine at 22%.

Sovecon director Andrei Sizov, however, notes that countries importing Russian grain do not depend on international financial institutions like the World Bank and the International Monetary Fund. It is impossible to support the construction of, for example, a grain terminal with guarantees that it will not transship wheat from Russia, the expert believes.

Chairman of the Board of the Union of Grain Exporters Eduard Zernin believes that “the very name of the bill No Russian Agriculture Act carries a serious negative message.” “From the example of hidden sanctions and problems with banking support for transactions with Russian grain, we know well the influence of informal texts of documents,” he emphasizes. In this regard, the union advocates for the speedy launch of exchange export trading for rubles on the basis of the Moscow Exchange and proposes to create a grain exchange of the BRICS member countries.

President of the Association of Pollock Harvesters Alexey Buglak adds that in the global white fish market, the United States has been putting pressure on Russian companies for many years to provide advantages to their suppliers. He cites as an example the opposition to pollock miners from Russia in obtaining environmental certification. At the same time, says Alexey Osintsev, president of the Association of Fishing Fleet Shipowners, suppliers were able to adapt to the restrictions and “found alternative markets.”

Anatoly Kostyrev