Exactly 5 years ago today Russia imposed an embargo on a wide range of imports from the EU and other countries. This embargo included greenhouse vegetables. Ever since, the Russian industry has skyrocketed.
This week we're offering you various insights on the embargo and the short- and long-term effects. Let's first look back on the start of the embargo and the situation nowadays.
Back to the start
On 6 August 2014 the Russian president signed a decree "On the application of certain special economic measures to ensure the security of the Russian Federation".
One day after, on August 7, it became clear what products and countries were included in this ban: almost all EU countries and also greenhouse vegetables.
The ban has been ongoing. On 12 July 2018 the validity of the embargo was further prolonged until 31 December 2019 by the Presidential Decree No. 420.
This week the Ministry of Agriculture of Russia summed up the five-year results of the food embargo. "Over the past 5 years, our country has reduced food imports by 31.2% - from $43.3 billion in 2013 to $29.8 billion in 2018. Thanks to the implementation of the import substitution policy, Russia has reached and exceeded the threshold values of the Food Security Doctrine for a number of key food products", they said.
The developments in the greenhouse industry have been more than remarkable. It has been no secret Russia seeks self-sufficiency in greenhouse vegetable production. Over the last couple of years the Russian government strongly supported the growth of the horticultural industry. After the start of the boycot, a support program started for new greenhouse projects, making it possible for investors to get up to 20% financial support for their project by reimbursing part of the costs incurred for the construction and modernisation of greenhouses as well as preferential investment loans. The Russian industry grew tremendously, as well as Russia's self-sufficiency.
Current state of greenhouse production
Deputy Minister of Agriculture Elena Fastova noted last month that the production of greenhouse vegetables had increased by 65% compared to 2014. Last year, Russian producers collected more than 1 million tons, and in the next 4-5 years, annual production could be increased to 1.5 million tons.
"This progress resulted from expanding the area of greenhouses, the establishment of large vegetable growing companies and improved performance of production facilities. Nevertheless, despite the serious pace of development, the country still faces the problem of winter time self-sufficiency in vegetables."
Therefore further development of this sector will be supported by changes in the current mechanism of preferential investment loans developed by the Ministry of Agriculture", she said. Indeed: the extensive reimbursement programs imposed in 2014 were cancelled last year. However still options remain for greenhouse growers to build under very favorable conditions.
"Taking into consideration, the achieved results, the Ministry of Agriculture proposes to increase the maximum term of investment loans for borrowers implementing new projects for the construction of greenhouses from 8 to 12 years starting from 2019. Producers who have not previously received reimbursement of capital costs will also have the right to such a prolongation. These measures will help reduce the financial burden on enterprises, which has increased due to an expantion of the payback period for investment projects amid the rise in electricity tariffs."
Aleksey Gordeev, Deputy Prime Minister, stressed that the control over tariffs and the preservation of comfortable conditions for business is extremely important for the greenhouse vegetable growing industry. "Too high tariffs of natural monopolies may adversely affect the development of this sector." The Vice Premier also reminded of the legislative limitation of their inflation rate.
Although there are no concrete numbers on the Russian acreage, it is estimated there was about 2000 hectare greenhouses in 2014 - although this number wasn't precise nor has it ever been cleared up what the state of this acreage was. In the past 5 years that same number has been named to let the industry grow to meet the internal demand. Fact is however that various impressive projects have and are being realised and that the project size has only grown larger. Not only the well-known names of Eko-Kultura and Agro-Inwest are reaching dozens of hectares of size, more and more companies grow this way.
Only last month for example the Renova Group announced completion of their 5th 12 hectare phase. The company is on the lookout for a 100 hectare farm. Another investment of 4 billion Rubles in a Krim greenhouse was announced by the Gorkunov Group of Companies, adding another 17.2 hectare to their acreage. And there's more going on: the company Teplichny was sold last month and acquired by investment company Agrocapital. They announced to invest another 2.5 million rubles in the greenhouse.
However not every announcement from the country will be realised. On the lookout for investors, sometimes local regions announce a project hoping this to become a self-fulfilling prophecy.
Agriculture and related industries
So looking back on 5 years of import ban, the Russian government seems to have no regrets. "In general, the restrictive measures kicked off the development of the agro-industrial complex of Russia, contributed to the influx of investments, the creation of additional jobs both in agriculture and in related industries."