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Experts: Russian seafood market long adjusted to import ban

Last week's extension of the sanctions came to no surprise and won't have a significant impact on the country's seafood market, industry watchers say.

Last Friday, Russia extended its import ban -- which first came into force in August 2014 -- until the end of 2019.

Alexey Aronov, deputy head at the Russian Association of Fish Processing and Trading Companies (Fish Alliance), said this was a "highly expected" move, which "most likely" won't have a significant impact on processors and the domestic seafood market.

“Russia’s fish processing industry has adjusted to the trade restrictions, with domestic buyers having shifted to other markets and to domestic fish," he told IntraFish.

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The list of banned items includes meat and meat products, milk and dairy products, fish and fish products, vegetables and fruits.

The stability or instability of the Russian ruble is having a much greater impact, Aronov said.

“A sharp drop of the Russian ruble against major world currencies would of course badly affect prices in the domestic market and would not be in the interest of fish processors," he said.

The extension of the import ban to Dec. 31, 2019, could even be beneficial in the short term, Aronov said, especially for those who shifted to alternative sources to buy their fish, including domestic supplies.

"Just imagine if the embargo is lifted," he said. "That would mean some Russian fish processors and traders have to shift to other countries again.

"It will take some time to stabilize the domestic seafood market and the consequences, in particular for Russian fishing sector, will not be positive."

Four years of ban: A look back

The sanctions came into force four years ago. The initial ban covered food and seafood products from the United States, Europe, Canada, Australia and Norway.

Albania, Montenegro, Iceland, Liechtenstein were added to the list of banned countries in August 2015, with the Ukraine joining the list on Jan. 1, 2016.

Initially, the embargo was introduced for one year, but was it was extended annually in response to similar actions against Russia.

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The sanctions had a very quick and strong impact on the Russian fishery sector: Overall seafood import dropped 12.8 percent in 2014 compared with 2013 to 884,800 metric tons, according to Russia’s federal statistic service Rosstat.

This downward trend continued in the following two years and was overcome only in 2017 with seafood imports rising 16.4 percent to 599,000 metric tons.

All major imported species, including salmon, trout, mackerel, herring, capelin and sardines, were hit by the initial downturn, which led to stark shortages of raw materials for processors, which could run as high as 50 percent of the volume required, Russian Fish Alliance estimates.

As a result, some processors were forced to enter bankruptcy proceedings. Another consequence was the initially sharp rise of consumer prices.

According to experts at the Analytical Center of the Russian federal government, the increase in seafood prices since the ban has been among the highest of any food products, growing by 23 percent during 2015 alone.

The domestic market deteriorated, also due to the weak ruble, making foreign markets more attractive to Russian fish producers, who started focusing on exports.

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As a result, average per capita fish consumption in Russia dropped from 22 to 18 kilograms between 2013 and 2015, according to Rosstat data.

Consequently, the Russian government announced its new policy of import substitution in 2014.

Canned fish producers were those who took the biggest advantage of the new market conditions. For instance, Kaliningrad-based sprat producers increased the volume of production by nearly three times over the last two years from 1.5 million cans to 4.3 million cans per month due to a ban on the Latvian and Estonian canned fish sprats.

However, the other side of the coin was a price hike for fish sprats from around RUB 30 (€0.43/$051) per kilogram to RUB 70 (€0.99/$1.19) per kilogram, backing a general upward trend for seafood pricing in the domestic market.

In 2018, Russian market watchers forecast fish price growth by around 6 percent in average.

Import substitution reaching 80%

“The new extension of food sanctions will no longer have such a significant impact on the domestic market," Sergey Gudkov, executive director at the Russian Fishing Union, another industry association representing several large processors and traders, told IntraFish.

Russia's seafood market has come to terms with the new conditions and the country's processing sector is now able to substitute large amounts of the previously imported products, he said.

According to him, full substitution took place with exception for some fish products.

“We didn’t replace cod and capelin roe, high-quality surimi and herring fillets," he said.

According to Russia’s federal fishery agency, Rosrybolovstvo, in 2017 the volume of domestically produced and sold fish and seafood reached 80.3 percent compared to 50 percent in 2014.

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