The Russian government announced on August 6 that it will ban imports of most food and agricultural products from Australia, Canada, the European Union, Norway and the United States for one year. The full extent of the ban, as well as its effects on exporters and Russian consumers, are not yet clear. It is interesting, though, to contrast this action with an earlier effort to use food sanctions as a diplomatic weapon: the 1980 embargo of U.S. grain sales to the Soviet Union.
The Soviets had invaded Afghanistan in December 1979 with 80,000 troops and 1800 tanks. President Carter responded by cancelling private contracts to supply 17 million metric tons (MMT) of U.S. wheat and corn to the Soviet Union. However, he chose to allow shipment of 8 MMT that had been agreed as part of the 1975 U.S.-Soviet Grains Agreement. Sales in excess of the level assured in the Grains Agreement were embargoed.
Because grains are relatively fungible, and because numerous countries had surpluses available for export, the Soviets were able to replace most of the embargoed grain from willing suppliers. Argentine agriculture did particularly well during that timeframe. U.S. agriculture did not do so well. Market prices had been relatively high, in large part due to strong export demand. When a considerable portion of that demand evaporated with the stroke of a pen, commodity prices fell precipitously.
The grain embargo became a potent political issue in the 1980 presidential campaign. Ronald Reagan’s opposition to the embargo helped to boost his campaign in rural areas. He took office in January 1981 and revoked the embargo three months later.
In retrospect, the grain embargo generally is seen as supporting the proposition that economic sanctions often inflict greater costs on the country imposing them than on the country at which they are aimed.
The new sanctions are expected to cut off some $15 billion in Russian imports from the EU. Russia has been Europe’s second largest (behind the United States) export market for foodstuffs, accounting for 10 percent of the EU’s total foreign sales. The United States has a smaller stake, with only $1.3 billion of food/ag exports to Russia. That country has been the third largest market for U.S. poultry exports. About 7 percent of U.S. poultry exports – valued at over $300 million – were shipped to Russia last year, down from 20 percent as recently as 2008. Russia’s WTO commitments should prevent import restrictions based on political pressures. Nonetheless, trade in poultry appears to have fluctuated over time in response to the influence of Russia’s domestic poultry producers. (It’s worth noting that Russia’s import ban does not include either baby food or wine. It’s not clear how those omissions should be interpreted.)