Despite the ongoing mainstream media meme that Russia is becoming 'isolated' from the rest of the world thanks to Western sanctions, it appears they have found a few new 'old' friends to become un-isolated with. On the heels of Russia's food-import-ban sanctions last week, Russian and Chinese officials have announced an agreement that China will start selling fruit and vegetables directly to Russia via a special logistics center in Russia's far east. Notably, this week saw Russia's GDP beat consensus expectations, Ruble rally, and stocks jump as German confidence plunged - can you say blowback?
China will start selling fruit and vegetables directly to Russia, and Baorong company plans to set up a special logistics center in Dongning on the border with Russia’s Far East to do it.
The 70,000 square meter wholesale market and 30,000 square meter warehouse, fitted out with refrigerators and other equipment, will be in a special cross-border customs zone, ITAR-TASS cites the head of the Association of Applied Economy of the Heilongjiang Province Zhang Chunjiao.
“Direct export of fruit and vegetables to Russia will be organized from it," she said.
It will cost $9.7 million to construct. Customs clearance times will be reduced, and there will be no need to double-check the cargo because of video surveillance in the warehouse.
A Chinese company Dili, also intends to create a similar cross-border trade zone by the end of 2014, Zhang Chunjiao added.
The announcement comes after Russia introduced a 1-year ban on imports of some agricultural products from the EU, US, Australia, Canada, Australia and Norway last week. If it lasts, it could cost European Union members $16 billion, Vygaudas Usackas, the EU ambassador to Russia, estimated.
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We assume payment for these imports will be in Rubles or Renminbi... not US Dollars.
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As we noted last week, there is good reason why Europe is being battered by these new sanctions; but who is hit hardest?
EU member states have already complained their economies would be hit hard, with Germany and Poland losing the most trade with Russia, and the Baltic states – Lithuania, Latvia and Estonia – seeing their shares of GDP falling even sharper.
For the US the effect will be very limited, as agricultural exports to Russia are about one tenth of one percent of total US gross domestic product of about $144 billion, according to the US Department of Agriculture.
US food exports to Russia in 2013 amounted to less than 1 percent of the country’s total agricultural exports, the US Department of Agriculture said to RIA Novosti. Conversely, Russian exports to the US and European markets are 13 percent of its GDP. In 2013, the US exported $1.3 billion of food goods to Russia, about a quarter of which were poultry products.
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Furthermore, perhaps in the interests of not embarassing itself, the EU is not asking China to refrain from supportinG Russia:
The European Union has no plans to ask a number of states, in particular China, to refrain from replacing banned European food products in the Russian market, a source close to EU leadership told RIA Novosti on Tuesday.
“There are no concrete plans,” the official said, answering a question on whether the EU will ask China and some other countries not to replace banned agricultural and food products from Europe with their own goods in the Russian market.
Media reports earlier suggested that the European Union planned to convince Brazil, Chile and other Latin American states not to export their food products to Russia. It was said that EU expects these countries not to take advantage of the embargo on European products.
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So it seems, US sanctions sparked European blowback... how long before Washington finds itself alone again.
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