Development of the agricultural sector in Russia

Agriculture plays a critical role in the entire life of Russia. Agriculture is the backbone of economic system of the country. In addition to providing food and raw material, agriculture also provides employment opportunities to very high percentage of population [4].

Consequently any economic and political changes can affect this area and the life of all the citizens. On 6 August 2014, the Russian government decreed a ban on certain agricultural and food products from the European Union, the United States, Canada, Australia and Norway, as a result of the implementation of economic sanctions against Russia due to unstable political situation in Ukraine [3].

According to RBK surveys in the third quarter of 2014 comparing to the same period in 2013 import of dairy and meat products decreased by 26%, and the import of fish, at the same time, decreased by 48%.

It is obvious that it resulted in changes of food price. According to the ROSSTAT analysis, price of grits has changed most crucially, despite the excellent crop in 2014-2015. Prices of alcohol, however, have changed the least. Thus, the general change in all prices of food was 21.5 % in 2015, while we’ve seen a 7.8% change compared to the previous year. Influenced by noticeable changes in prices of food in shops, the demand fell by 8% in 2015 in comparison with the previous year.

As total import decreased by almost 40%, it is logical that Russian farmers and agricultural companies expected some support. Driven by that, in January 2015 the government of the Russian Federation confirmed a plan of economic development, which included financial support of 50 billion rubles. Furthermore, almost a month later government approved the subsidizing of loans [1].

The support might have sounded as a noble gesture, if you don’t know how this system works.

Concerning the subsidies, the scheme is as follows: let’s pretend we take a loan with an annual rate of 22% and 15%. The annual percentage rate will be paid by the State. Seems attractive, doesn’t it? It doesn’t work that simple, because of the bureaucratic system. As a rule you are able to claim the interest you have paid in 3, 6 or even 9 months [2].

Farmers work just to pay the bills. As a result, more than 80% farms face difficulties.

Under such circumstances only huge agro-industrial corporations can benefit and it is obvious that if the situation remains the same small local farms will disappear.

But there is the way to solve the problems mentioned above. Each local farmer should receive financial support in time. This means that it is essential to get rid of slow and corrupted bureaucratic processes.

Thus, implementing the schemes of funding the sector by the government, fighting bureaucracy, replacement of imported products by domestic ones will change Russian agriculture significantly.