Further Adventures in Russian Commercial Reliability
Russia is going to ban wheat exports, and is “coordinating” with the members of its “Customs Union,” Kazakhstan and Belarus, to do the same. This ban has caused a worldwide spike in wheat prices; prices on the CBT and KCBT were limit up, about an 8 percent move on the former, and a 7 percent move on the latter. Moreover, the cancellation is undermining Russia’s reputation (yeah, I know) as a reliable trading partner.
Cargill makes the point that Adam Smith made in the Wealth of Nations in the chapter “A Digression on the Corn Trade:”
Cargill, the world’s biggest trader of agricultural commodities, criticised Moscow’s move. “Such trade barriers further distort wheat markets by making it harder for supplies to move from areas of surplus to areas of deficit, and by preventing price signals from reaching wheat farmers,” it said.
Russian exporters argue that the precipitous announcement will make it harder for Russia to export going forward:
Arkady Zlochevsky, president of the Grain Union lobby group, said that the swift imposition of the ban risked undermining Russia’s reputation as a reliable supplier.
. . . . .
Arkady Zlochevsky, president of the Grain Union lobby group, said the government needed to warn exporters ahead of such a decision and give them time to meet existing contracts, according to Interfax. “What are we to do with the grain that has already reached port?” he asked. “We have no mechanisms for returning it.”
There are understandable domestic reasons for this decision. It is political, not economic, and reflects the government’s concern about a rekindling (no pun intended, given the current circumstances) of inflation, which has abated in recent months. The immediate takes precedence over the future, especially in many Russian decisions.
The interesting question is the “coordination” with Kazakhstan and Belarus. I haven’t been able to find out whether a Union-wide ban would prevent exports from say Kazakhstan to Russia, or just prevent exports from within the Union to without it. I would imagine the latter. Since it appears that Russia is hardest hit by the drought, a “coordinated” ban would benefit Russia, at the expense of the other two countries. Is Russia leaning on the other countries in the Union? Given recent Belarussian obstreperousness, it will be interesting to see how it reacts. Will the threats fly? Reporting I’ve seen doesn’t permit me to answer these questions now, but I will try to keep an eye on how Russia handles this particular issue in the “Near Abroad.”
Update (8/5/10, 2000 CT): Just saw a Stratfor video piece on the grain export ban. According to Stratfor, (a) Russia is leaning on Kazakhstan and Belarus to export to Russia, rather than elsewhere, and (b) is making it plain that this is a loyalty test. Loyalty being, like many Russian roads, a one way street.
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Pingback by Tweets that mention Streetwise Professor » Further Adventures in Russian Commercial Reliability -- Topsy.com — August 5, 2010 @ 4:03 pm
A mighty BOLSHOE SPACIBO to the hapless Putin regime, whose utter incompetence is causing the price of American wheat to skyrocket beyond all imagining. At last, Russian incompetence finds its purpose!
http://www.nytimes.com/2010/08/06/world/europe/06russia.html?_r=1&hp
Comment by La Russophobe — August 5, 2010 @ 4:29 pm
I don’t know if this is a Junior Varsity practice version of how to handle trade properly by using the Custom’s Union as an intramural game before they play for real, or simply an example of how this really is their varsity effort. Neither looks too good, frankly.
Comment by Howard Roark — August 5, 2010 @ 5:28 pm
You are all completely correct, as usual.
It would be for the best if Russia continues to export grain, even if it runs the risk of low-income Russians going hungry. Stalin is shrugging!
Actually this drought is Putin’s fault. Because real democracies never have natural disasters. None of this would have happened if Khodorkovsky was still free.
Comment by Sublime Oblivion — August 5, 2010 @ 7:02 pm
You’re lying again, SUBLIME LIAR.
The Russian government has already proven that this is nothing but an American plot to destroy Russia by manipulating the climate.
https://themoscowdiaries.wordpress.com/2010/08/04/proof-in-the-charred-pudding/
You ought to be better informed.
Your suggestion that Putin is blameless is hysterically idiotic. Real democracies have disasters, bungle them, and BLAME THE BUNGLER. Then, as in the last American election, they toss the bunglers out of office. WHEN IN ALL OF RUSSIAN HISTORY HAS RUSSIA EVER, EVEN ONCE, DONE THAT?
Cretins like you are why Russia just keeps burning.
Comment by La Russophobe — August 5, 2010 @ 9:27 pm
Vladimir Putin agrees he is not at fault. But he disagrees that nobody is. In his view, it’s Medvedev who’s to blame:
http://www.themoscowtimes.com/news/article/putin-gives-inflamed-blogger-a-bell/411828.html
Russian blogger also disagrees with SUBLIME MORON:
“Why the [expletive] do we need an innovation center in Skolkovo if we don’t have common firefighting vehicles?”
Comment by La Russophobe — August 5, 2010 @ 10:17 pm
While Russia was burning, Putin was singing.
http://larussophobe.wordpress.com/2010/08/06/while-russia-burned-putin-sang/
While Russia was burning, Medvedev was vacationing.
http://en.rian.ru/photolents/20100804/160067213.html
Yet, SUBLIME IDIOT thinks their leadership is just fine, like most of the other clueless sheep in Russia.
What a country! No wonder it has collapsed four times in the past century.
Comment by La Russophobe — August 6, 2010 @ 7:54 am
Russians are dropping like flies:
https://themoscowdiaries.wordpress.com/2010/08/06/surprise-lots-more-death-in-moscow/
Nice work, Mr. Putin. You’re well on your way to catching Stalin as the leading killer of Russians in world history.
Comment by La Russophobe — August 6, 2010 @ 8:00 am
Two great cartoons, by Russian artists, on the Russian conflagration:
http://larussophobe.wordpress.com/2010/08/06/cartoon-putin-and-medvedev-to-the-rescue/
http://larussophobe.wordpress.com/2010/08/01/editorial-the-greatest-russian-political-cartoon-ever-drawn/
Comment by La Russophobe — August 6, 2010 @ 9:15 am
Having run her own blog into the oblivion, La Russophobe is now exporting her neanderthal “logic” and infantile ad hominem insults to this blog. Go suck on a pacifier, child.
Comment by SF — August 7, 2010 @ 1:37 pm
BTW, I heartily recommend people to press on the link that the word “La Russophobe” currently points to:
http://larussophobe.wprdpress.com/
“wprdpress.com” – this womanchild can’t even spell her own address.
Comment by SF — August 7, 2010 @ 1:45 pm