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By John Helmer, Moscow

First question:  What is as mealy as ex-Polish foreign minister Radoslaw Sikorski but not as tart as his wife, American journalist and Russia-hater Anne Applebaum?  Answer: the Polish apple scam.  Second question:  What has more worms in it than the Polish apple scam?  That’s the Russian apple scam.

On August 7, 2014, Russia imposed counter-sanctions on food imports from the European Union (EU) and several other countries which had already imposed sanctions on Russia after the putsch in Kiev triggered the secession of Crimea and began the civil war in eastern Ukraine.   At the time,  Poland was the largest supplier of apples to Russian consumers. They comprised more than half of all Polish exports, and the same fraction of all apple imports to Russia. Because imported apples comprise roughly two-thirds of Russian consumption, Polish apples were popping into Russian mouths at a rate of one fruit out of every three.

At the time of the August 2014 ban, , the Polish Foreign Minister, Radoslaw Sikorski, announced in London “if you want to show what you think of [President Vladimir]  Putin, eat a Polish apple and then give one to a friend.”     At an EU foreign ministers’ meeting in Milan the same week, he declared: “What we’re dealing with is such a security threat that I can’t think of since the collapse of communism.” 

Sikorski’s ministry website went on to report: “According to the most recent data published this April by the Ministry of Agriculture and Rural Development, Poland this year surpassed China in terms of apple exports, becoming the biggest global supplier of this fruit. In the 2012/13 season apple exports stood at 1.2m tonnes and were worth EUR 438m. Last year [2013], the largest importers of Polish apples were: Russia, with 677,000 tonnes at EUR 256m (56% of the entire apple exports), Belarus, with 145,000 tonnes at EUR 45.5m, Germany, with 66,800 tonnes at EUR 18m, and Ukraine, with 53,000 tonnes at EUR 17.5m.”

“Unfortunately, Polish fruit farmers have been put in a very difficult situation following the Russian embargo and are forced to look for new outlets for Polish fruits. There are also campaigns in gestures of solidarity with the Polish farmers. We encourage you to join in with the promotion of Polish apples abroad in your communities and on the internet (Facebook, Twitter).”

For a repeat of Sikorski’s Eat Putin-Eat a Polish apple line in Milan, watch this. For analysis of the impact of the Russian sanctions on the EU food trade, click to read.  

In a briefing on August 7, when the counter-sanctions were promulgated, Prime Minister Dmitry Medvedev said  the ban was regrettable tit-for-tat for the sanctions already imposed on Russia. “For a long time, Russia has not responded to the so-called sanctions declared against it by certain countries. Until the last moment, we hoped that our foreign colleagues would realise that sanctions lead to a blind alley, and that no one benefits from them. But they didn’t realise this, and now we have been forced to respond.”  Medvedev continued: “if our partners display a constructive approach towards cooperation issues, then the Government would be willing to revise the specific implementation deadlines for these measures.”

“We had a hard time deciding on retaliatory measures, and we were forced to make this decision. But I am confident that we’ll be able to take advantage of the situation even under these conditions… I would also like to warn everyone that any attempts to obtain speculative profits from this situation will be stopped and held accountable.”

Almost three years have now elapsed. Under investigation for a variety of offences – they  include disclosing official secrets when his mouth was full of taxpayer-paid food at a Warsaw restaurant —  Sikorski was forced out of the foreign ministry and then from the post of Speaker of the Polish Sejm (parliament). He is employed now in the US.  He and his wife, Anne Applebaum (“apple tree” is her Jewish surname following the 1787 decree of the Austro-Hungarian Emperor Joseph II), continue to campaign for tougher sanctions, NATO military operations against Russia, and regime change in Moscow.

Left: Sikorski at home with books; right: Applebaum at home with beets.

The initial estimates were that the Russian ban on Polish apple imports would cost Poland several hundred million euros or dollars. But that was assuming all Polish apples would stop being sold to Russia. In 2013 Polish apple exports to Russia were reportedly worth $341 million (€256 million); in 2014 the sales value grew to just over $400 million. In 2015 Polish exporters told reporters their sales to Russia had been slashed by more than a third. 

Officially, according to the Russian Customs figures, that’s what happened.  In 2013, Polish apple imports to Russia totalled 544,637 tonnes; in 2014, Russian Customs reported the total had plummeted to 22,280 tonnes. But that number is not the real one.  


In metric tonnes

Reproduced by the US Department of Agriculture

In practice, apple sales in Russia, along with apple imports, had begun to drop in 2013 and 2014, before the August embargo was imposed. The table shows the fall in imports by volume was 10% between 2012 and 2013; then almost 33% between 2013 and 2014.  What has been happening since then is far from clear; the accounts from industry experts, grower representatives, state statistics, and think-tanks conflict with one another.   

A report  from the Agro Business Centre (AB Centre) in Moscow suggests that total imported apple volume reached a peak of 1.21 million tonnes in 2010. This dropped to 1.19 million tonnes in 2011; recovered  to 1.32 million tonnes in 2012; and then peaked anew at 1.4 million tonnes in 2013. In 2014 the apple import volume was down by 20% to 1.13 million tonnes.  The AB Centre version is that Polish exports to Russia topped at 705,600 tonnes in 2013 – exactly 50% of the aggregate for all imports.  Total declared value that year, $812.9 million; the Polish share, $409 million.

Between 2014 and 2015, the total tonnage imported dropped to about 500,000 tonnes, a decline of 39%; that’s according to Sergei Korolev, President of the National Union of Vegetable Producers.  But Korolev’s numbers aren’t confirmed by other experts cited in the same report in March.   Igor Muhanin, President of the Association of Fruit and Berry Producers (ASPRUS), told Vzglyad the 2016 results indicate 1.38 million tonnes of apples were imported; 1.9 million tonnes were consumed; 760,000 tonnes were produced in domestic orchards, of which 500,000 tonnes went to processing factories for juicing and canning.

Last week, Muhanin revised this to claim that last year 1.25 million tonnes were imported. This still confirms an increase over both 2014 and 2015. Muhanin explains: “Smuggling is increasing from year to year and the authorities can’t do anything.”

Left, Sergei Korolev; right, Igor Muhanin;

The combination of rising apple prices and falling Russian consumer incomes has been the biggest factor in the decline of both imports and apple sales in the Russian market, industry sources acknowledge.   The chart indicates that since 2013 the price of apples per kilogramme is up 30%.  This is far from the worst of the foodstuff inflation recorded.  


Source: Vedomosti, March 27, 2017

The sanctions reduced overall imports by a smaller than expected margin, then rerouted them, so that Polish sales to Russia and deliveries across the border have continued. But instead of direct deliveries from Poland the apples travelled circuitously – through Belarus, Serbia, Moldova, Macedonia, Azerbaijan and other countries. False papers of origin or dual certification  have been used to disguise Poland as the source.  

Because Belarus and Russia are members of a common customs union, Belarus cargo shipments across the border can avoid regular customs checks, so smuggling through Belarus was the first thing Polish shippers, Russian importers and Belarussian intermediaries thought of doing. How much of the Polish apple shipments arriving in Russia goes physically to Serbia and Moldova, and then back to Russia, or at dark of night through Belarus with false papers as disguise,  isn’t known.  Because the volume of smuggling of sanctioned foodstuffs – not just of Polish apples – has accelerated, flying squads of customs and Rosselkhoznadzor (the Federal Service for Veterinary and Phytosanitary Surveillance, RSN) agents have been despatched to intercept them.  But the tonnage of contraband cargoes far exceeds the capacity of the authorities to intercept it. Instead, RSN issued a press release calling on “the Serbian accredited body to carry out consultations and to provide information on apple production in Serbia and re-export of apples produced in third countries.”   RSN chief Sergei Dankvert announced sharper measures against Belarus and Moldova. 

Medvedev’s warning against “speculative profits” has turned out to be on the mark, but less so, his action to enforce it.

Left: Crimea’s agriculture minister Vitaly Polishchuk with Prime Minister Medvedev at the Yarosvit Agricultural Enterrpise in Crimea, April 27, 2015. Right: Medvedev at Sad Gigant, the largest apple-grower in Russia, in Ingushetia on October 21, 2016.  

Russian consumption of Polish apples hasn’t suffered from the embargo by as much as planned in Moscow or forecast in Warsaw. This year apple industry experts expect the volume of imports from Polish orchards will be roughly the same as it was before Sikorski started giving the apples away. The reason is that sanctions-busting of the Polish apple trade has been flourishing for the benefit of the Russian apple industry as much as the Polish producers.  That’s the combination of the Polish apple scam and the Russian apple scam.

Together, they are restoring Polish apple-grower incomes, and adding to the incomes of an intermediary industry for smuggling the contraband fruit; constructing new smugglers’ roads and other infrastructure in the Russian-Belarus frontier region; adding pay for night-time truckers and bribes to Russian Customs inspectors. By adding to the price of apples on Russian supermarket shelves, the two scams are increasing protection for domestic apple-growers to plant costly new orchards and plan on delivering more fruit.  The largest apple-growing farms,  in league with federal and regional government officials, are scooping up the lion’s share of state budget funding for new orchard planting and cool storages for the apple harvest to come.

For the time being, the agro-industry businesses of established oligarchs like Oleg Deripaska (Kuban Agro)  and Vadim Moshkovich (RusAgro)  say they are not growing apples commercially on their farms. Gennady Timchenko is reported  to be a substantial stakeholder in Alma Holding, a Krasnodar apple-grower, but he doesn’t make it into the top-20 largest orchardists in the country.

According to Muhanin, the top-5 apple-growers in Russia at present are Sad Gigant (“Giant Garden”), Agronomist (Lipetsk), Agronomist (Krasnodar), Central Chernozem Fruit and Berry Company (CCPAC of Voronezh), and Gardens of Pridonya.  These remain relatively small in plantation area, fruit output,  and market share. The biggest of the apple oligarchs is Bekhan Hamchiev (pictured below, left). He controls Sad Gigant in Ingushetia through a Moscow company called Service Plus. Sad Gigant says it will produce 12,000 tonnes of apples this year, compared to 7,000 tonnes in 2016.   Yury Zamyatin (centre) controls CCPAC,  while Andrei Samokhin (right) controls the fifth ranked Gardens of Pridonya.

This company, based in Volgograd, started by growing apples for juice; it says it is “the absolute leader of the Russian fruit market. It is one of the three major juice producers in the country and the only domestic company among them.” 

At present, says Muhanin, the Agriculture Ministry is providing a subsidy payment to apple growers for planting new orchards and equipping them for higher yields of Rb236,000  ($4,140) per hectare. The experts say this represents between 10% and 25% of the costs of planting and equipping new high-yield apple orchards.

Korolev has told reporters the Ministry of Agriculture’s target last year for new, subsidized planting of apple orchards had been 10,000 hectares, but almost 15,000 ha were planted. “We are laying more than 14,000 ha of orchards per year,” according to Korolev. “We haven’t had such a rate of growth since the Soviet Union. If we keep up the momentum and wait for when these trees will grow and begin to bear fruit, we will be able to completely abandon the import of apples.”

That’s more optimistic than anyone else in the industry will acknowledge. According to the USDA report, issued at the end of 2015, the growth of Russian production will be small, at least for the next couple of years – “a modest 2 percent to 1.3 million tons on favorable growing conditions. This includes a 4-percent increase in commercial production to 572,000 tons, which accounts for near 40 percent of total production.” But USDA has been predicting imports would drop below 800,000 tonnes. Polish and Russian ingenuity have proved the Americans wrong. 


Source: USDA

A report by Agro-Investor, published in Moscow last October,  estimated that Russian apple consumption came to 2.5 million tonnes in 2016, about 100,000 tonnes (4%) more than 2015. By 2020 the forecast is for consumption of 3 million tonnes; this represents an annual rate of growth of 4%. By then, the report quotes Korolev as predicting the volume of domestic production will have jumped; less than 10% of consumption will come from imports, he says.  

This year, comments Irina Koziy, chief executive of Fruit News,  production gains have been set back by late frosts and heavy rains.

The rate of growth of both domestic production and imports will depend, claims a report in April  by BusinesStat, a Moscow consultancy, not on the effectiveness of sanctions, nor on the increase in state and commercial investment in orchards, but on the recovery of Russian consumer incomes and demand.

“In 2012-2016,” says BusinesStat, “the volume of apple sales in Russia decreased by 18.8%, from 1.89 to 1.54 million tonnes.  In 2016 for the first time in five years the share of domestic products offered on the market exceeded the share of imported products. The reason for this was as growth of apple production in Russia in 2016 (by 15.6% compared to the previous year) and a decline in import volumes (by 31.1% compared to 2015).”

“In 2012-2013, sales of apples showed an increase from the previous years. But in 2014, 2015 and 2016, they decreased by 11.5%, 6.7% and 7.9%, respectively, compared to the levels of the previous years.  The decline in sales in 2014-2016 were the result of increased product prices amid devaluation of the ruble and reduced imports.  In addition, the decline in real incomes in the years 2014-2016 has aggravated the situation in the market and led to an even greater drop in demand.”

According to BusinesStat,  this year apple sales will grow by just 1.7% — that’s roughly the same as government and expert forecasts for Russia’s GDP growth.  “As the resumption of growth in real incomes will start, apple sales will grow in the retail sector. In 2021 the sale of apples in Russia will amount to 2.08 million tonnes, which will exceed the 2016 level by 35.7%.”

The new Russian apple business is also an open secret which noone in the business will agree to discuss, not even off the record. 

Polish and Russian press reports indicate the cost of fabricating false cargo papers and moving a lorry-load of Polish apples to the Russian border is about €500 (about $600). The additional costs of delivering the apples through the frontier to the cool store or wholesale distribution point may be $200 to $400 per 20-tonne truck.

In addition to the top-5 producers named by Muhanin, BusinesStat identifies another 15 for the top-20.  Each of them was contacted and asked:  Who are the major producers of apples in Russia? To what extent do they depend on state grants and loans for their business development?  Is private investment increasing and by how much? How do they assess the dependence on imports of the Russian apple market this year, compared to the pre-sanctions period? Off the record, they were also asked to say why there is still smuggling of Polish apples through Belarus? Not one of the top-20 answered.

In the meantime, what the reports and industry organs aren’t saying is that the new phase of Russian apple business is operating corruptly at the border and expensively in the interior; it is also generating benefits for almost everybody – Poles, Belarusians, Russians.  That is except for Sikorski and Applebaum, whose idea of what’s good for Poland is ignorant of the commerce, and for Russians irrelevant. The other exception is those Russian apple-eaters who don’t have the income to afford the new apple price and lack a dacha orchard to grow their own.

Russian gardeners, planting and harvesting from home or dacha orchards, are advised in dozens of publications on growing techniques and cultivars best suited to regional soil, pest control, and weather conditions. Click to open. Soviet botanists reported that the domestic apple evolved from a species of wild apple native to southern Kazakhstan.  The Antonovka (left) has been a traditional Russian variety since the 17th century, and its hardy rootstock often grafted with newer types. Right, the Bashkir, a variety that is also hardy in frost. 

Philip Owen of the Russian food trade consultancy Volga Trader  concludes that in the short term for Russia, the business of importing apples is more lucrative than investing in import substitution. “At Russian interest rates, there are better investments than fruit trees that take 6 years to reach mature production levels. The smaller supermarkets seem willing to buy from pirates. In discussion with the bigger supermarkets I hear complaints about competition from smugglers while they must buy from sources that are above suspicion.”

“Apples from dachas are certainly grown without insecticides or trapping systems with [low] yields to match. However, in Russia commercial orchards interested in high yields inevitably use insecticides, unlike European Union growers. Russia’s imports for pesticide-free insect trapping systems are very low.  The local [pesticide-free] industry is almost non-existent.   EU apples will have much lower pesticide levels than Russian ones. However, the Serbian and Chinese growers who supply apples to Russia do use higher levels of pesticides than Russian growers, who accept low yields.”

“There are excellent orchards in Russia, although not many as the relative size of imports and domestic production suggests. The key to commercial success is storage capacity and a logistics cool [storage] chain. Neither the trees nor the supply chains can appear overnight.”

For the time being, about one-third of Russian grown apples are cultivated in the agricultural enterprises. The rest are grown by households for family consumption or sales from roadside stalls, and in informal outdoor markets during the season. Their quality is more variable than the commercial fruit, but their price has been pushed upward as the volume of imports returns to earlier levels.

What is happening, industry observers admit reluctantly, is that because of rising prices, fewer people can afford to eat apples, but more state money is going into commercial orchard production. That money disappears faster than new apples appear on the market at a price Russians can afford.

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