Thursday, August 07, 2014

The stuff that works in the former USSR doesn't always work with the rest of the world

Actually, Russia is kind of imposing sanctions on itself. Refusing imports from other countries works within in the former Soviet borders. Georgian and Moldovan wines, for example, do not have much of a market outside the former USSR. Russia by far is the biggest ex-USSR market. So Russia's ban on those wines was a huge hit to those countries' economy.

The rest of the world, however, is not so dependent on the Russian market. It just isn't that big of a deal for the American economy if we cannot sell our agricultural products to Russia. There are a lot of other buyers out there, several are bigger economies than Russia. We also have a diversified economy, so the end of some kinds of agricultural sales to one specific country is not going to cause as much pain to the U.S. as cutting off Moldova's biggest import to its biggest customer hurts Moldova.

Plus, the ban on imports is going to hurt Russia's economy a lot more than it hurts any of the "sanctioned" countries. As the article says, "Russia imports about 25 percent of its food, worth some $43 billion annually. Of that, about 75 percent, or $30 billion, comes mainly from Europe and the United States." So in other words, Russia is restricting imports from countries that supply about 19% of its food (75% of 25%). You can't cut off one-fifth of a country's food supplies without causing economic pain.