Russia Taxes Grain Exports to Check Domestic Prices

Russia introduced a new tax on grain exports earlier this month, as part of a broader response to rising domestic food prices. The measures comes as Moscow works to respond to a faltering economy and recent currency crisis, among other difficulties.

Russia had already reacted to food price inflation with a number of informal curbs on grain exports, including tighter quality controls from 1 December, prior to imposing the tax on 1 February.

The duty will be in place until 30 June of this year, and is set at 15 percent of the customs price plus €7.5, and will amount to no less than €35 per tonne.

Officials rule out export ban, for now

This is the third time Russia has imposed grain export restrictions since 2008, having banned exports altogether in August 2010. The ban, which followed severe drought and record low harvests, was in place until June 2011. (See Bridges Weekly, 1 June 2011)

Although Russia is restricted from repeating the export ban under WTO rules, having joined the organisation in 2012, domestic officials have yet to rule out the use of such measures.

Major grain importers, exporters alerted

Russia is currently the world’s fourth largest-exporter of wheat, and the export price increases from new measures are expected to limit international demand over the coming months. Moscow may still ship over 2 million tonnes of wheat from February to June, as traders must fulfil previously agreed contracts.

Russia had been exporting record volumes from a large grain crop as the value of the rouble plummeted, with a dash for foreign currencies pushing up domestic prices.

International wheat prices increased to US$25 per tonne this month, following a seven percent dip in January from December 2014, which analysts say was a reflection of strong supply conditions.

Some analysts say that the tax is unlikely to have a substantial impact upon international grain markets or low-income food deficit countries due to an abundant global supply. Those most likely to be affected are major importing countries such as Egypt, Iran, and Turkey.