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Weak rouble delays recovery Russian economy

EU: 500 million extra compensation

The weak position of the rouble, paired with low commodity prices, are slowing down the recovery of the Russian economy. The government in Moscow also recognizes that the recovery will take longer than expected. For exporters looking to export to Russia, the exchange rate means an additional risk. Also, a plan was presented to introduce food stamps in Russia, in order to help the poor parts of the population. In response to demonstrations in Brussels this week, of dairy farmers in particular, the EU has reserved an additional 500 million euros for support to the agricultural sector. Uzbekistan is limiting the transport possibilities for export, Poland is reportedly unable to find new markets for the lower quality apples, and China is pleased with Russia's investments in the east of the vast country.

Recovery Russian economy delayed
Late last week, the Russian government admitted that the recovery of the economy will take longer than expected. Main cause is the weak position of the rouble. In addition, the oil price is historically low, but prices for other commodities the Russian economy relies on, such as nickel, have also gone down. In May, President Putin still argued that the crisis was over, when the oil price reached a value of 70 dollars per barrel again.

The economical situation has direct consequences for big projects. The construction of a storage facility for fruit and vegetable, introduced as the biggest in Europe, has been delayed. Work is resumed as soon as the rouble gains value again, the project is expected to be delayed until the end of this year.

EU: 500 million extra compensation
In response to the protests this week in Brussels, mostly by dairy farmers, the EU has reserved an additional 500 million euros for support measures following the boycott. "The packages provides 500 million euros, to directly benefit farmers," says the deputy president of the Agriculture and Fisheries Council, Katainen. "This is a robust and sufficient measure. The decision shows the Commission is taking its responsibility toward the farmers, and is prepared to support the sector. That's important, in view of the many requests for funds." The text of the measure doesn't make clear whether the support applies to all parts of the agricultural sector, or just to dairy farmers, who made themselves heard in Brussels this week. The text does give the impression that the measure only applies to dairy farmers. Read more about the support package here.

South African citrus association warns against weak rouble
The weak rouble poses a risk for exporters, which is why the CGA, the South African citrus association, is warning the sector. Exporters are advised not to ship any produce without full payment on the day the ship is loaded. The fluctuating exchange rate of the rouble can be a bottleneck for export on credit.

Russia introduces food stamps
The Russian Ministry of Industry and Trade has drafted a plan to provide support to the poor. The plan is twofold, on the one hand support on food purchases is given by means of a stamp system. On the other hand, meals are given out to the poor in restaurants, canteens and cafeterias. The food stamps are to enter circulation in 2016. The free meals should be available in 2018. The extent of the support depends on the region. The food stamps cannot be used for alcohol and cigarettes.

Greenhouses for organic vegetables
The government of the Usman district and agricultural cooperative EcoTurService will together invest in the development of 150 greenhouses where organic vegetables are to be grown. Realizing the project will take about three years, costing 10 million roubles (150,000 dollars), after which 50 tonnes a year can be harvested in the greenhouses. That should make for a revenue of 7.6 million roubles (110,000 dollars). At the moment, it's unknown when construction will start exactly.

Committee for execution government programme self-sufficiency
Russian Deputy Prime Minister Arkady Dvorkovich will head a committee focusing on the development of import substitution. The committee is to promote and implement the government programme related self-sufficiency. The group was founded on the initiative of Prime Minister Medvedev.

Uzbekistan blocks export by truck
Since the beginning of this month, export of vegetables, potatoes, melons and grapes from Uzbekistan is only possible by train or plane, the Uzbek government has decided. With the new measures, the government wants more control on export, and to prevent illegal export and fraud. The railway company has been ordered to transport the products in a timely manner. Exporters pay a sort of tax of 25% over revenue from export. That measure was circumvented through transport by road.

Poland can't find alternative markets
While there are regular positive reports on Polish export of apples since the export, Roman Jagielinksi, ex-minister and fruit trader, is in a critical condition. Poland is able to export apples "to many regions in the world and Western Europe or faraway destinations, but that fruit has to be of top quality. Nobody wants the non-premium apples, but that's just what Poland produces in large volumes," the former minister said in an interview with Polish site The only destination for this fruit is the processing industry, but that yields different prices than the export to Russia.

China supports Russian development plan Far East
Putin's plan to give the east of Russia economical support, is well-received in Beijing. During a summit, Deputy Prime Minister Wang Yang said that the plan is in line with the Chinese strategy of developing the northeast. According to the deputy prime minister, a partnership will be very fruitful. With the plan, Putin is turning his gaze eastwards, where he hopes to attract Asian investors for projects.

Russian Minister of Agriculture Tkachev sees a lot of potential in the east for food production. "In Russia, demand for organic, sustainable food is increasing. I am certain that the Far East has a lot of potential in this respect," the minister said.

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