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Russian food production BOOMING thanks to import substitutions, Western sanctions

Cheddar, Brie, Prosciutto, Blue Cheese, Bagels and Ciabatta are now all made in Russia

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A relatively recent phrase is now part of the lexicon of everyday life among Russians, it is “import substitution”, or if it were marketed in the USA, it would probably be packaged as “Made in Russia”.

Sanctions and similar geopolitical micro-management policies instituted by Western countries, and directed against Russia have added urgency to efforts in transferring key components of agricultural, consumer and industrial business to domestic producers. At the end of the day, it is hoped (by local companies) that Russian ones will replace the majority of foreign goods traditionally imported.

The import substitution projects are considered here to be a temporary phenomenon, a temporary tool for adjusting to the current situation.

According to President Putin. “The idea of import substitution itself is not universal and is not what we should strive for in the long run, because import substitution should not undermine competition. This is an extremely important thing. We should aim at producing products of such quality and price that it is competitive not just on our own, but on the world’s markets.”

He went on to say “In some cases we did it and are doing it to support domestic producers in difficult economic conditions, especially in situations when our partners violate and distort competition by imposing different sanctions, which are politically motivated, as they claim, but in fact are based on ambition’s to gain some advantage.”

Efforts to reduce imports began in 2014. By 2016, it was already possible to note the presence of impressive successes in many areas of the economy.

On New Year’s Day, January 1 2017 the purchase of Russian goods and services were legislated to have priority over those of foreign origin in accordance with Russian Government Decree No. 925 dated 16 September 2016. Sanctions were the stimulus, but common business sense was the driver. The new decree applies to all suppliers selling goods and services to state corporations, natural resource monopolies, as well as companies in which the Russian state has at least a 50% interest. All types of procurements are affected, as the Decree does not restrict its application to any specific goods or services.

The Decree has placed foreign goods and services suppliers at disadvantage when compared to Russian suppliers in several respects: Russian Local Suppliers will benefit from a 15% virtual discount from the prices specified in their ‘Made in Russia’ offers.

Goods are considered of Russian origin, if they are made or have been sufficiently processed in country according to customs regulations that are applicable in Russia. A supplier is Russian if it is a legal entity registered in Russia (which can be fully foreign-owned, except in cases of specifically regulated sectors, such as media) or a Russian citizen.

Introduction of these rules is to encourage foreign manufacturers to localize their production in Russia, take advantage of low ruble costs, enhance job creation, and provide needed competition between similar providers of goods and services both foreign and domestic.

Products labelled “Made in Russia” now (in 2018) appear frequently in all parts of the market.  This program of import substitution has taken on the force of a countrywide mobilization of domestic as well as non-Russian producers covering a very broad range of goods and services.

The program has one main goal – to reduce or completely stop the import of specific groups of goods, and instead establish Russian production of the same or similar products. For the past three years, this task is seen as one of the highest priorities for the government of the Russian Federation.

By 2015, approximately 20 programs were prioritized as needing assistance in non-governmentally controlled industry for the neediest sectors of private industry. To appreciate the scale of activity, as well as accountability for this challenge it is enough to see that the main players involved in supporting this effort are the Ministries of Transport, Energy, Industry & Trade, and Communications of the Russian Federation.

All have been deeply involved in this program, not to mention a raft of Russia’s analytical, research, banking and commercial associations. Fast forward to 2018, there are today just over 2,500 projects worth $38 billion in development with full completion targeted by latest 2020.

The import ban has of course affected the supply of many goods, but the boost in domestic production has taken up some of the slack. For many foodstuffs, the substitution effort has encouraged investment and development – today, according to the central bank many foodstuffs are more plentiful than they were before sanctions, and more affordable.

The areas prioritized today for Russian manufacturing are:

Machine-tool manufacture (as current imports are 90%)

Civil aviation manufacturing (as current imports are 80%)

Heavy engineering (as current imports are 70%)

Supplies of equipment for the oil and gas industry (as current imports are 60%)

Manufacture of power equipment (as current imports are 50%)

Agricultural machinery (as current imports range from 50-90% in various categories)

Many residents of Russia agree that sanctions were the long-awaited spark that has kick-started domestic producers. Almost immediately after the introduction of sanctions from the west, and reciprocal mirror responses from Russia, a number of experts have identified groups of products that can be easily replaced with domestic products on a countrywide scale without much effort.

These include Meats, Oils (several vegetable and animal varieties. At the beginning of import substitution, the share of imports was about 20%), Milk, including cheeses: by 2020, it is planned to completely “cheese independent”.

According to both international and local expertise, Russia is able to meet 90% of its food requirements, as well as providing some food support to its neighbors.

Financial support for the import substitution projects are implemented via:

  1. Government subsidies, and co-financing of research;
  2. Grants, with preference given to companies participating in government purchases.
  3. Increased lending to companies on preferential percentages and for long terms.

The proposals apply only to competitively demonstrated projects that have been approved by competent assessors. The selection is conducted among enterprises and holdings that are active in the following sectors: Agriculture; mechanical engineering; housing construction; manufacturing industry; chemical industry; power engineering; telecommunications; and transport.

The main requirement for obtaining financial support on favorable terms is the need to locate production in one of the regions of the Russian Federation.

The government has taken other measures to help support projects of import substitution. The government proposes: large targeted loans from the federal budget, financing of enterprises at the pre-production stage, special measures to stimulate import substitution through governmental or municipal procurement.

With the help of these steps, the Russian government can restrict the purchase of raw materials and finished products from foreign producers. The reflective of western embargoes also apply to the procurement of certain groups of essential goods. These include medicines, clothing, equipment manufactured by machine-building companies, technical equipment and components for the defense industry.

From the standpoint of foreign-owned companies, these measures have presented them a “fork in the road”. Either they just try to carry on, in which case eventually they will lose the Russia and associated markets, or they take the necessary steps to establish all or most of their manufacturing in Russia.

Apparently, since 2016 a great many European as well as US companies have managed to begin this process, either by setting up direct subsidiaries, or more often through imaginative origin masking methods to protect themselves against future amplified sanctions and/or other business restrictions from their own governments.

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Photos of swastika on Ukrainian mall stairway creates a stir [Video]

Ukrainian nationalist press in damage-control mode to explain away the Nazi sign, but they forgot the name of the street the mall is on.

Seraphim Hanisch

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One of the aspects of news about Ukraine that does not make it past the gatekeepers of the American and Western news media is how a significant contingent of Ukrainian nationalists have espoused a sense of reverence for Nazis. The idea that this could even happen anywhere in the world in an open manner makes the claim seem too absurd to be taken seriously. Gone are the days when the Nazi swastika adorned streets and buildings in Europe. Right?

Well, maybe, wrong.

This was seen in Kyiv’s Gorodok (or Horodok, if you insist) Gallery, a shopping center in that city, located on Bandera Avenue.

The pro-nationalist news service UNIAN wasted no time going to press with their explanation of this incident, which admittedly may be accurate:

Children and teenagers who participated in the All-Ukrainian break dance festival held in the Kyiv-based Gorodok Gallery shopping mall were shocked to see a swastika image projected onto an LED staircase.

The mall administration apologized to visitors, explaining saying that their computer system had apparently been hacked.

“The administration and staff have no relation to whatever was projected onto the LED-staircase, and in no way does it support such [an] act. Now we are actively searching for those involved in the attack,” it said in a statement.

According to Gorodok Gallery’s administrative office, it was not the first time a cyber breach took place.

As reported earlier, Ukraine is believed to be a testing ground for cyberattacks, many of which are launched from Russia. Hackers have earlier targeted critical energy infrastructure, state institutions, banks, and large businesses.

This time, it appears, hackers aimed to feed the Kremlin’s narrative of “Nazis in power in Ukraine” and create a relevant hype-driving viral story for Russian media to spread it worldwide.

The Gorodok Gallery also apologized on its Facebook page and said that this was a result of hacking.

But what about the street that the mall is on? From the self-same Facebook page, this is what we see:


To translate, for those who do not read Ukrainian or Russian, the address says the following:

23 Steven Bandera Prospekt, Kyiv, Ukraine 04073

This street was formerly called “Moscow Avenue.” Big change, as we shall see.

Steven Bandera got his birthday designated as a national holiday in Ukraine last December. He is known in Ukraine’s history for one thing. According to the Jerusalem Post:

The street where the shopping mall is located is named for Stepan Bandera, a Ukrainian nationalist who briefly collaborated with Nazi Germany in its fight against Russia.

His troops are believed to have killed thousands of Jews.

Several Israeli papers picked this bit of news up, and of course, the reasons are understandable. However, for the West, it appears possible that this news event will largely go unnoticed, even by that great nation that is often called “Israel’s proxy”, the United States.

This is probably because for certain people in the US, there is a sense of desperation to mask the nature of events that are happening in Ukraine.

The usual fare of mainstream news for the West probably consists of things like “Putin’s military seizes innocent Ukrainian sailors in Kerch incident” or, “Ukraine’s Orthodox Church declared fully independent by Patriarch of Constantinople” (not that too many Americans know what a Constantinople even is, anyway), but the overriding narrative for the American people about this country is “Ukraine are the good guys, and Russia are the bad guys,” and this will not be pushed aside, even to accommodate the logical grievance of Israel to this incident.

If this article gets to Western papers at all, it will be the UNIAN line they adhere to, that evil pro-Russia hackers caused this stairway to have a swastika to provoke the idea that Ukraine somehow supports Naziism.

But UNIAN neglected to mention that the street name was recently changed to Stephan Bandera (in 2016), and no one appears to have hacked this. Nor does UNIAN talk about the Azov fighters that openly espoused much of the Nazi ideology. For nationalist Ukrainians, this is all for the greater good of getting rid of all things Russia.

A further sad fact about this is the near impossibility of getting assuredly honest and neutral information about this and other similar happenings. Both Ukrainian nationalists and Russian media agencies have dogs in the race, so to speak. They are both personally connected to these events. However, the Russian media cannot be discounted here, because they do offer a witness and perspective, probably the closest to any objective look at what is going on in Ukraine. We include a video of a “torchlight march” that took place in 2017 that featured such hypernationalist activity, which is not reported in the West.

More such reports are available, but this one seemed the best one to summarize the character of what is going on in the country.

While we do not know the motive and identities of whoever programmed the swastika, it cannot really be stated that this was just a random publicity stunt in a country that has no relationship with Nazi veneration.

The street the mall is on bears witness to that.

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Putin: If mid-range missiles deployed in Europe, Russia will station arms to strike decision centers

Putin: If US deploys mid-range missiles in Europe, Russia will be forced to respond.

RT

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Via RT…


If the US deploys intermediate-range missiles in Europe, Moscow will respond by stationing weapons aimed not only against missiles themselves, but also at command and control centers, from which a launch order would come.

The warning came from President Vladimir Putin, who announced Russia’s planned actions after the US withdraws from the INF Treaty – a Cold War-era agreement between Washington and Moscow which banned both sides form having ground-based cruise and ballistic missiles and developing relevant technology.

The US is set to unilaterally withdraw from the treaty in six months, which opens the possibility of once again deploying these missiles in Europe. Russia would see that as a major threat and respond with its own deployments, Putin said.

Intermediate-range missiles were banned and removed from Europe because they would leave a very short window of opportunity for the other side to decide whether to fire in retaliation after detecting a launch – mere minutes. This poses the threat of an accidental nuclear exchange triggered by a false launch warning, with the officer in charge having no time to double check.

“Russia will be forced to create and deploy weapon systems, which can be used not only against the territories from which this direct threat would be projected, but also against those territories where decision centers are located, from which an order to use those weapons against us may come.” The Russian president, who was delivering a keynote address to the Russian parliament on Wednesday, did not elaborate on whether any counter-deployment would only target US command-and-control sites in Europe or would also include targets on American soil.

He did say the Russian weapon system in terms of flight times and other specifications would “correspond” to those targeting Russia.

“We know how to do it and we will implement those plans without a delay once the relevant threats against us materialize,”he said.

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Russia’s Lukoil Halts Oil Swaps In Venezuela After U.S. Sanctions

Under the new wide-ranging U.S. sanctions, Venezuela will not be able to import U.S. naphtha which it has typically used to dilute its heavy crude grades.

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Via Oilprice.com


Litasco, the international trading arm of Russia’s second-biggest oil producer Lukoil, stopped its oil swaps deals with Venezuela immediately after the U.S. imposed sanctions on Venezuela’s oil industry and state oil firm PDVSA, Lukoil’s chief executive Vagit Alekperov said at an investment forum in Russia.

Russia, which stands by Nicolas Maduro in the ongoing Venezuelan political crisis, has vowed to defend its interests in Venezuela—including oil interests—within the international law using “all mechanisms available to us.”

Because of Moscow’s support for Maduro, the international community and market analysts are closely watching the relationship of Russian oil companies with Venezuela.

“Litasco does not work with Venezuela. Before the restrictions were imposed, Litasco had operations to deliver oil products and to sell oil. There were swap operations. Today there are none, since the sanctions were imposed,” Lukoil’s Alekperov said at the Russian Investment Forum in the Black Sea resort of Sochi.

Another Russian oil producer, Gazprom Neft, however, does not see major risks for its oil business in Venezuela, the company’s chief executive officer Alexander Dyukov said at the same event.

Gazprom Neft has not supplied and does not supply oil products to Venezuela needed to dilute the thick heavy Venezuelan oil, Dyukov said, noting that the Latin American country hadn’t approached Gazprom Neft for possible supply of oil products for diluents.

Under the new wide-ranging U.S. sanctions, Venezuela will not be able to import U.S. naphtha which it has typically used to dilute its heavy crude grades. Analysts expect that a shortage of diluents could accelerate beginning this month the already steadily declining Venezuelan oil production and exports.

Venezuela’s crude oil production plunged by another 59,000 bpd from December 2018 to stand at just 1.106 million bpd in January 2019, OPEC’s secondary sources figures showed in the cartel’s closely watched Monthly Oil Market Report (MOMR) this week.

By Tsvetana Paraskova for Oilprice.com

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