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Putin's Union Troubles With His Food Embargo: Leonid Bershidsky

Aug. 12 (Bloomberg View) -- Russian President Vladimir Putin's food embargo against the West will ultimately be little more than a symbolic move: It won't work in practice because it interferes with Putin's pet project, the Eurasian Economic Union.

Before he was elected for his third term in 2012, Putin said one of his priorities would be the creation of a powerful economic union of post-Soviet states -- and any others than might care to join. The year Putin returned to the Kremlin, Kazakhstan and Belarus adopted a single customs border with Russia. That left Ukraine as the only missing piece among the four republics whose leaders agreed to break up the Soviet Union in 1991.

Last year, Putin brought all his influence to bear on former Ukrainian President Viktor Yanukovych to drop a trade and association deal with the European Union, whose rules are incompatible with the Eurasian union's. Yanukovych caved, setting off the protests that led to his overthrow. His successor Petro Poroshenko has signed the EU deal, dealing a heavy blow to Putin's plans.

Putin has not given up. Rebuilding at least a smaller, narrower version of the Soviet Union remains at the center of his agenda. He wants it to be part of his legacy. Armenia -- dissuaded by Moscow from EU association -- and Kyrgyzstan are on track to join the EEU this year. As of 2015, the member states will harmonize their tax systems.

The other members of Putin's union, however, don't have the same interest in imposing or enforcing a ban on imported food. Belarus and Kazakhstan have nothing to retaliate against: Only Russia faces Western sanctions. "This is our domestic matter," Belarussian President Alexander Lukashenko said yesterday. "If we need Polish apples, we buy them, but for our domestic market, not for Russia." Kazakhstan President Nursultan Nazarbayev's press service clarified after he talked to Putin on the phone that the food embargo was "Russia's unilateral measure that doesn't involve" other EEU members.

Because these countries have no customs border with Russia, it's hard to see how banned imports -- such as French and Italian cheese, German sausage or Spanish oranges -- won't get through. If importers redirect goods purchased for the Russian market to Belarus, there is no easy way to stop Russian companies from buying them there. Besides, it's only the import of these goods, not their sale in stores, that is banned in Russia. The members of the union will probably make efforts to stop the transit of banned goods -- Lukashenko has apparently promised as much. But this will mainly serve to create opportunities for officials to enrich themselves, either by closing their eyes to contraband shipments or by allowing imported goods to be relabeled as locally produced. Belarussian oysters or Kazakh clementines, anyone?

So wealthy Russians probably won't lose access to the delicacies to which they've grown accustomed. As for poorer Russians, they'll absorb all the pain as retailers and restaurants raise prices because of the diminished supply. Other winners will be Belarussian producers of dairy and other food items. "This is like the Klondike for us," Deputy Agriculture Minister Leonid Marinich recently crowed.

The conflict between Putin's embargo and the much-advertised economic openness of the EEU illustrates Putin's lack of a coherent strategy in the current crisis. All he can do is keep whipping Russians into a patriotic frenzy with moves that make no longer-term economic or political sense. The West is similarly clueless: Like Putin, it has no idea what its sanctions might actually achieve.

To contact the writer of this article: Leonid Bershidsky at lbershidsky@bloomberg.net.

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