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Abstract
As part of Russia’s strategic tilt to Asia, Russian policymakers hope to increase food exports to the Asia-Pacific region. This article analyzes prospects for increasing Russia’s penetration of Asian food markets by surveying initiatives to increase local food production in the Far East and efforts to attract investment into agriculture. Obstacles to increased market penetration are examined, including contradictory policy goals.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. The Far East federal district includes the Republic of Sakha (Yakutiya), Kamchatskiy Kray, Primorskiy Kray, Khabarovskiy Kray, Amurskaya Oblast, Magadanskaya Oblast, Sakhalinskaya Oblast, Evreyskaya Avtonomnaya Oblast, and Chukotskiy Avtonomnyy Okrug.
2. An agricultural year runs 1 July–30 June.
3. Effective 15 May 2015, the government ended the original export tariff. But a new tariff on grain exports was announced that would take effect on 1 July, perhaps as a precaution, given warnings about a smaller harvest in 2015 due to drought in some regions of Russia as summer approached. The Ministry of Agriculture, however, remained optimistic that the harvest would total more than 100 million tons. Grain exporters resisted the new tariff as well and asked the government to reduce it (“Eksportery” Citation2015).
4. The list to be accomplished is not small: incomes of agricultural workers need to be raised, sustainable rural communities need to be created, processing plants need modernization, ports need updating and their capacity needs to be expanded, agricultural production needs to be increased, and infrastructure needs to improve in order to bring better connectivity (Shelepa Citation2013, 22–30). This list is hardly exhaustive.
5. Interestingly, the instructions issued by the government in April 2015 indicated that railway tariffs (transportation rates) were to be reduced in order to spur economic development in the Far East.
6. China is Russia’s largest trading partner in Asia, followed by Japan, and bilateral trade with each has increased significantly since 2000. Russia’s trade with China increased tenfold from 2000 to 2011 (Kuhrt Citation2014, 96). Trade with Japan grew more than fivefold during the same period (Takahashi Citation2014, 113).
7. See Duncan and Ruetschle (Citation2002, 193–205) for a discussion of the problems related to land privatization and farm reorganization in the Far East. Several of these problems were found in other regions as well, but were not sufficient to stop the general direction of reform in the Far East or elsewhere.
8. For large farms, extensive land holdings made the shortage of farm machinery particularly acute. Large agricultural enterprises also suffered from inadequate storage capacity, which forced them to sell at harvest time when supply was highest and prices the lowest. Competition from Chinese farms, which had sufficient storage, aggravated the situation. Chinese traders bought Far Eastern production when prices were low and resold in the winter and late spring when prices were higher (Duncan and Ruetschle Citation2002, 209).
9. Consider, for example, that the Far East consistently produces <1 percent of Russia’s total grain crop.
10. The Law on the Development of Agriculture, first adopted in 2006 and subsequently amended several times, and the Doctrine on Food Security, signed into law in early 2010, provide the philosophical and legal foundation for agricultural policy, but are conceptualized in broad terms.
11. In 2013, the Far East was hit hard by historic flooding that enveloped more than 627,000 ha of cultivated agricultural land – the equivalent to 400,000 square miles – and covered more than 2635 km of roads. The floods necessitated the evacuation of tens of thousands of people, and the cost of the damage was estimated at R25 billion. In response, authorities in Khabarovskiy Kray announced plans to construct several new high-capacity dams on the Amur River at a cost of R15 billion (Konstantinova Citation2014c, 3).
12. The revised version of the program, issued in January 2015, actually decreased total expenditures from R299 billion in the original program to R252 billion.
13. In 2013, foreign workers comprised 44 percent of the workforce in construction. Almost 59 percent of foreign workers in Primorskiy Kray were from China, followed by 27 percent from North Korea.
14. The regional program has nine subprograms. Funding for the regional program also envisions R8 billion from the federal budget and R11 billion from other sources.
15. Rusagro is one of Russia’s largest producers of pork, sugar, margarine, and mayonnaise. The holding company consists of more than 35 agricultural enterprises, 6 sugar processing factories, and a series of trading offices.
16. In September 2014, Fedorov visited Russia’s Far East, where he consulted with agricultural leaders, visited food processing plants in Primorskiy Kray, attended an exhibition of food producers in Kamchatskiy Kray, and met with potential investors. While there, Fedorov urged development of animal husbandry. In February 2015, Fedorov visited Sakhalinskaya Oblast, where meetings were held to discuss the development of the fish industry and expansion of animal husbandry. In particular, the sessions worked on removing administrative barriers to the expansion of fish production and processing for the domestic market by preparing rules and procedures to ensure that sanitation criteria are met (“I ryba, i myaso” Citation2015).
17. Retail prices for meat and meat products are significantly higher than in western Russia. Moreover, in the wake of the August 2014 food embargo, domestic suppliers have greatly increased their market share and occupy shelf space in retail stores that once was taken by imports (Hansen Citation2015, 2).
18. Volkov was replaced as Deputy Minister following the departure of Fedorov.
19. The expanded size of permitted land plots was already in use. Private farmers were given up to 20 ha and plots for household subsidiary farming were 2.5 ha from municipal land funds.
20. In early 2014, a division of Japan’s Nomura Group signed a contract to invest in the fishery cluster in the southern part of Primorskiy Kray (Konstantinova Citation2014b, 2).
21. Nationwide, the number of people employed in the fishing industry (fish farming and wild catch) declined from 172,000 in 2005 to 119,000 in 2012 (Rosstat Citation2013b, 87).
22. According to information from the regional administration, in 2013, Primorskiy Kray ranked second out of 30 Russian regions in a Forbes survey of “Best Russian Regions to Conduct Business.” The kray also ranked third out of 30 in “ease of registering private property.” In a World Bank analysis that looked at four key economic indicators, Primorskiy Kray ranked 15th out of 30, ahead of Moscow and St. Petersburg (“Investitsionnaya strategiya” Citation2013, 9).
23. For comparative context to domestic spending, foreign investment will also be converted into ruble equivalents using the exchange rate for that year. According to official sources, the 2013 exchange rate was R32.7 = $1; and for 2014, it was R56.2 = $1. The ruble equivalent will be indicated in parentheses following the dollar amount.
24. The memorandum of cooperation is set within an improving relationship between the two countries since 2006. After a troubled relationship in the 1990s, Putin’s diplomatic initiative to Mongolia and Russia’s writing off billions in Mongolian debt paved the way to the 2006 Moscow Declaration that outlined areas for political and economic cooperation. Former President Medvedev visited Mongolia in 2009, and Putin visited in 2014. Mongolia remains heavily dependent upon Russia’s oil and gas. In 2009, Russia provided funding to Mongolia to expand its rail system using Russian standard gage, thereby creating conditions for greater economic interconnectivity (Reeves Citation2015, 3–4). Mongolia imports more from Russia than any other country except China.
25. Policy problems included confusing and ill-defined federal laws, a budget and subsidy problem, the decline in defense spending that was an important part of the Far Eastern economy, and a political climate that allowed for the proliferation of corruption, theft, bribery, and contract killings. Structural problems included a small and declining population, deep poverty in northern regions, distant location and a lack of integration to European Russia, and widespread deficiencies in infrastructure (Davis Citation2003, 132–133).
26. The population of the Far East has contracted since the early 1990s, from over 8 to 6.2 million in 2014. Thus, population density has declined. Moreover, the size of the Far East and the small number of medium and large cities means that there are vast stretches of empty space between the largest cities. The two largest cities, Khabarovsk and Vladivostok, are separated by 755 km (by road); Khabarovsk is also 400 km from Komsomol’sk, 694 km from Blagoveshchensk, and 2354 km from Yakutsk. Vladivostok is even farther – more than 1152 km from Komsomol’sk, 1280 km from Blagoveshchensk, and 3111 km from Yakutsk. The Far East is dotted with small urban settlements that may not be economically connected to larger cities.
27. Overall, there are just 54.2 thousand km of hard-paved roads in the entire federal district. In contrast, the Far East federal district encompasses over 6.2 million square km, or approximately two-thirds the size of the entire United States.
28. In addition to infrastructure deficiencies, there are political barriers for foreigner investors, high taxes and customs, and high administrative barriers that regulate the fishing industry.