The threat of an escalating trade war looms. U.S., Russia trade war escalates

U.S. and European officials could ask the World Trade Organization to block Russia’s yearlong ban on food imports — a move that could spare farmers from losing all access to a massive market.

The threat of an escalating trade war looms after Moscow announced a major agriculture embargo over the latest action in a monthslong battle of sanctions and economic restrictions that have stemmed from the country’s intervention in Ukraine.


Western governments have hoped to heap on enough economic pressure that Russian President Vladimir Putin will buckle, but the ban — closing a market worth $1.3 billion to U.S. farmers and $15.8 billion to European exporters last year, starting Thursday — is another signal that tensions won’t be eased soon.

U.S. Trade Representative Michael Froman’s office said it views Moscow’s latest restrictions — unlike U.S. and European sanctions — as a break from the type of retaliation typically allowed by the international trade body.

“The sanctions that the United States has imposed comply with our international obligations. By contrast, Russia’s move to ban agriculture goods from the United States and the EU appears to have no grounding in the WTO rules governing international trade,” spokesman Trevor Kincaid said. “We will monitor the situation and take actions as appropriate.”

European officials were more direct.

“Politically motivated large-scale trade restrictions are a direct violation of WTO rules, which Russia pledged to comply with,” Russia’s state-owned news agency ITAR-TASS quoted a European diplomatic source as saying. “These measures will be thoroughly analyzed, and then relevant claims will be submitted with the WTO.”

The European Commission is readying its response, ITAR-TASS reported the diplomat as saying.

Russian officials said they were imposing the ban on food and agricultural imports in direct retaliation for the sanctions the United States, EU, Canada, Australia and Norway have dealt them in recent months.

“Until the last moment, we hoped that our foreign colleagues would understand that sanctions lead to a deadlock and no one needs them,” Russian Prime Minister Dmitry Medvedev said, according to The Associated Press. “But they didn’t, and the situation now requires us to take retaliatory measures.”

To make up for the food that won’t be coming from the United States, EU, Canada, Australia and Norway, Russian Agriculture Minister Nikolai Fyodorov said the country would ramp up its other imports, such as Brazilian meat and New Zealand cheese.

But it’s not clear whether the country will be able to prevent major food shortages in a country that is one of the world’s leading agricultural importers, bringing 40 percent of its food in from foreign sources.

Russia’s embargo on food imports will backfire because it “goes directly after the Russian people’s access to food” without doing significant damage to the American economy, said David Cohen, the Treasury Department’s undersecretary for terrorism and financial intelligence.

“The steps that Russia announced are likely insignificant as an impact on the U.S. economy, but they are also in some respects a cruel irony, because what the Russians have done here is essentially impose sanctions on their own people,” he said.

On a White House conference call, Cohen said the United States would never have imposed sanctions limiting Russia’s access to food or medicines.

The food ban is “clearly politically motivated,” he said, adding that Russia saw an inflation rate of 7.9 percent in the first half of 2014, and the agricultural embargo will “only exacerbate that inflation.”

Cohen’s comments echoed the message President Barack Obama delivered in a Wednesday night news conference. Obama said the U.S. sanctions are forcing Putin to grapple with the prospect of “hurting his economy and hurting his own people in the long term” unless Moscow ends its involvement in Ukraine.

He argued that the freezes the United States and EU have slapped on Russia’s defense, energy and financial services sectors, plus some of the country’s high-ranking officials, are “putting enormous pressure and strain on the Russian economy,” leading to more than $100 billion in capital flight.

However, he acknowledged it’s too soon to tell whether the economic pinch will force Putin to buckle.

“We don’t know yet whether sanctions are working,” Obama said.

There has been little outcry so far from Congress, which is in the midst of its August recess, but Rep. Mike Conaway, a Texas Republican who is seen as the most likely candidate to take over as the next House Agriculture Chairman next year, expressed outrage.

“These sanctions are just another sign that Russia is a criminal enterprise masquerading as a country,” Conaway said in a statement provided to POLITICO. “The Russians have been using questionable tactics for years to target U.S. farmers and ranchers. They have continually blocked imports of U.S. poultry and pork by making specious claims that imports represent a health threat.

“Because they have already been using illegitimate means to block imports of U.S. agricultural products, I am optimistic that Russia’s latest move is not likely to have a dramatic impact on U.S. farmers and ranchers. Those who will be hurt the most are Russian consumers who will have to pay substantially more for an inferior product.”

Bill Tomson contributed to this report.