Page 55 - bne magazine September 2021_20210901

bne September 2021 Eastern Europe I 55
rise in prices for the "borscht set", and in early August reported on the successes: "We agreed that the mark-up for seasonal vegetables in retail chains
will be minimal –10-15%.”
But the problem is not so much the rise in prices as the low incomes of
the population. It is the decline in
real incomes against the backdrop
of inflation that causes the greatest concern among two thirds of Russians, according to polls by VTsIOM and Levada.
Atuchina’s original ingredients in the borscht set, also adopted by the CBR and Rosstat, include only vegetables but the traditional recipe often also contains meat, which would make the borscht
set even more expensive.
“The so-called borsch set, which includes only vegetables, is not indica- tive, because not everyone is vegetar- ian,” says Oleg Komolov, associate professor of the Financial University under the government of the Russian Federation, as cited by Vedomosti.
The 1952 "The Book of Delicious and Healthy Food" recommends 500g of meat for 800g of vegetables.
The borscht set has risen on aver-
age from RUB273 ($3.68) in 1H20 to RUB293 ($3.95) in 1H21. The most active food prices rose in April-June: from RUB293 ($3.95) to RUB316 ($4.26). The price of borscht decreased by RUB2 this July, but that did not nearly offset the rise in prices in the first half of the year.
Average incomes of Russians in the first half of 2021 amounted to RUB35,200 ($475), enough to prepare 111 serv- ings of borscht a month. Of this, 15.2% went to taxes and other mandatory payments, as opposed to the first half of 2020 when 14.8% of income was spent on taxes. Ten years ago only the tax and mandatory payments were only 13-14%, so the tax burden has increased albeit slowly.
The coronacrisis has eaten into incomes once again. Average incomes in the first half of this year were RUB35,200
Harsh US sanctions on Belaruskali to have limited impact due to loophole
Ben Aris in Berlin
The US handed down some of the harshest sanctions yet on the Belarusian government and its leading companies on August 9, the anniversary of the disputed presidential election that plunged the country into its worst political crisis since the fall of the Soviet Union. But analysts say the US Treasury Department Office of Foreign Assets Control (OFAC) has pulled its punches again; while the sanctions will hurt the company’s business badly, it could have been worse as there is a loophole in the new regulations that will allow Belaruskali to continue working.
The new OFAC sanctions on Belaruskali prohibit US companies from trading with the Belarusian company and its affiliates. Belaruskali exports account for around 20% of Belarus’ entire export revenues and Western Europe is one of the main customers, although its potash is exported all over the world, especially to India and China.
The new US sanctions won’t come into effect until December 8 (120 days) and a special license has been created to cover the interim period to give companies with contracts with Belaruskali time to settle their affairs. All new contracts are prohibited.
Potash has already been targeted during the round of EU and US sanctions imposed this summer following the forced landing of a commercial Ryanair flight and arrest top opposition blogger Roman Protasevich and his girlfriend on May 23. However, those sanctions precluded the most widely bought class of potash that make up 80% of the company's exports. Under the terms of the new sanctions US companies are precluded from doing any business at all with Belaruskali.
The White House’s decision immediately made investors nervous, fearing a spike in potash prices. In 2018 the OFAC imposed similar sanctions on Russian oligarch Oleg Deripaska and his Rusal aluminum producer that caused chaos on the international metals market and led to a spike in aluminum prices that boomeranged back and threatened to undermine the profits of US companies. Aluminum prices jumped 33% in only 10 days and there was a 7% decrease
in the company’s sales for the full year. According to one report the cost of a can of Coca-Cola was set to rise by 10 cents as a result. OFAC backed off and by the end of the year was forced to embarrassingly rescind the sanctions completely – the only sanctions to be withdrawn since the sanctions regime was introduced in 2014.
Now investors are worried the same thing will happen again in the fertiliser markets: Rusal accounted for only 6% of the global market whereas Belaruskali has a 16% share of the global market. Taking it out of the picture could potentially have a much larger impact on the price of the widely used fertiliser.
Potash prices have already been driven higher in recent weeks as sanctions began to target Belarusian business. Prices were up for the fourth week in a row and now potash saw the largest month-to-month gain, increasing 10% from June to an average price of $501/ton.
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