A good crisis can be the making of a politician – and farm commissioner Dacian Ciolos has been handed the perfect chance to show how he can handle a crisis. The Russian food import ban is the biggest crisis for European agriculture since BSE, and to date Mr Ciolos has performed well. He has his officials well coordinated and has promised a long-term plan to manage a ban that could be in place for 12 months.
Fruit and vegetables were the first casualties of the Russian trade ban. The Commission agreed to fund compensation schemes to the tune of almost £150 million. This will compensate farmers for unsold products, which will now be destroyed. The Commission has also been forced to introduce private storage to take surplus dairy products off the market. Storage will be for three or seven months, and the Commission will pay daily costs. At the same time the ban is driving up food prices in Russia, because it has closed its markets to the world’s biggest agricultural exporters – the EU and the United States.
Given that the crisis will still be there when Member States and the European parliament are making final decisions on the new Commission, it will be difficult to unseat someone seen to be doing a good job. Ireland, which has said it would like to see its nominee, Phil Hogan, become farm commissioner, might be reluctant to push this if Mr Ciolos is doing a good job over Russia. This puts the ball in his court. If he wants to keep his job he must show the decisiveness lacking for much of the CAP reform negotiations.
The message from Brussels on the import ban is that it is handling it based on priorities. The officials that monitor and manage markets now meet weekly to plan their response to events as they develop. From here it is easy to underestimate the impact of what Russia has done. We have lost a valuable market for milk powders when the global market for dairy commodities has weakened, thanks to China cutting back its buying might. This is unfortunate rather than a disaster. Equally pigmeat exports to Russia were already blocked, because of concerns about African Swine Fever in some EU Member States, while beef exports are opportunist, rather than a regular trade.
Move to some of the countries neighbouring Russia, however, and the situation is very different. Countries such as Poland, Estonia, Latvia and Lithuania have decades of trade links with Russia, back to the communist era. These links continued after that era ended, and for them losing that market is on a par with the overnight loss of beef markets here in 1996, because of BSE. These were obvious casualties, but the impact of the ban is spreading, with its potential economic fallout for agriculture across the EU becoming more evident every day.
Aside from the lost market in Russia there will be a diversion impact, with products that normally went East now having to find new homes. This is causing problems for the dairy sector, and private storage might not be enough to stem this without more radical action – possibly including the return of export refunds. Livestock from eastern Europe that went East, might now come West onto already weak markets.
The Commission’s message is that it will manage this situation, based on priorities. It has a e400m crisis reserve to fund this but this looks paltry compared with the scale of the problem, and EU heads of state will almost certainly be asked to provide more. There’s no quick fix to this crisis. Russia won’t back down, even if the ban is hurting consumers there. For Mr Ciolos this is an opportunity to show he can handle a massive crisis – an opportunity to earn new respect, which should leave him well placed to retain his job as farm commissioner.