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Richest Russians Deprived of Luxury Foods by Putin’s Ban

Wealthy Muscovites will have to forgo favorite dishes such as Australian steak and sushi with Norwegian salmon and will pay more for substitutes because of President Vladimir Putin’s import ban. Photographer: Andrey Rudakov/Bloomberg
Wealthy Muscovites will have to forgo favorite dishes such as Australian steak and sushi with Norwegian salmon and will pay more for substitutes because of President Vladimir Putin’s import ban. Photographer: Andrey Rudakov/Bloomberg

Aug. 8 (Bloomberg) -- Let them eat blini.

Wealthy Muscovites will have to forgo favorite dishes such as Australian steak and sushi with Norwegian salmon and will pay more for substitutes because of President Vladimir Putin’s import ban.

Putin decreed that imports of meat, fish, vegetables, cheese and dairy products from the U.S., European Union, Norway, Canada and Australia be stopped, effective yesterday, and called to replace them with local products. The ban applies to countries that imposed sanctions against Russia for its annexation of Crimea.

“This is an extremely difficult situation for the restaurant market as about 50 percent of ingredients are imported,” said Elena Mazur, spokeswoman for OAO Rosinter Restaurants Holding. “The ban will boost prices until alternative suppliers are found.”

Russia imported $43 billion of food and agricultural products last year, according to government statistics. Items on the banned list accounted for about $25 billion of that total, according to Capital Economics Ltd. Some hard-to-replace products like Spanish ham, Italy’s Grana Padano cheese and sun-dried tomatoes may disappear from menus or be in short supply, according to Rosinter, Russia’s only publicly traded restaurant operator, with 370 restaurants.

Higher prices may lead customer numbers to decline further and restaurants will need to use “maximum creativity” to adapt, Mazur said. Consumers will be eating more domestic food products, such as blini, a traditional pancake.

Rosinter shares rose 4.4 percent to 56.40 rubles at 1:49 p.m. in Moscow after a 2.2 percent decline yesterday.

Worse Meat

“We will now be forced to buy a worse quality of meat at higher prices,” said Zalina Abdusalamova, chief executive officer of Moscow-based Kings Meat Co., which provides meat to Marriott, Radisson and Novotel hotels. Meat costs have already increased 50 percent this year, she said. “Russia doesn’t produce enough quality pork. Belarus is already feeding us, but it’s a little country and doesn’t have enough sausage for all of Russia.”

The Russian franchise operator of the Papa John’s pizza chain, which has 74 outlets, may freeze expansion plans as the import ban inflates costs, CEO Chris Wynne said by phone. He said the company has other options, such as switching to mozzarella from Argentina, which is 15 percent more expensive.

The restaurant operator will also seek local suppliers to replace sausage from the EU, Wynne said. Many meat companies in Russia depend on EU imports as the domestic cattle industry isn’t very developed, he said.

“Putin’s aim with these measures is to put pressure on the dollar and to try to stimulate domestic producers but it will hurt ordinary people in the meantime and there’s no guarantee it will work,” he said.

If histories of Soviet-era Russia are any guide, black markets proliferated in times of officially scarce goods -- and the elite with money always procured them and ate and drank well.

Not Strong Enough

Many ordinary Russians, meanwhile, shrugged off the ban or support it. “A food ban won’t affect us,” said Olga Safonova, 35, a teacher from Chelyabinsk. “I buy Russian cheese and grow vegetables in the garden.”

For Natalia Pavlenko, 55, a pensioner from Birobidzhan, Jewish Autonomous Region, Putin’s response to the West is too weak. She favors cutting off natural gas to any country on Putin’s list that uses it. “A food ban is not sufficient,” she said.

That’s not the opinion of owners of high-end restaurants and steakhouses, who say they’ll suffer the most from the import ban, along with Italian and Spanish eateries.

“We’ll have to switch from U.S. and Australian beef to Brazil and Argentina, though they don’t produce marbled beef,” said Sergey Mironov, head of RestConsult, a restaurant-advising firm, and co-owner of several restaurants in Moscow. “It’s unclear how we would deal without Parmesan, Philadelphia or mascarpone cheese which is used to make tiramisu, cheesecakes, or sushi rolls.”

Investors Wary

Investors don’t like the move. The Micex Index fell 0.1 percent at 11:52 a.m. today in Moscow, extending this year’s drop to 11 percent. The ruble weakened 0.6 percent to 36.4950 per dollar, its lowest since March when Putin annexed Ukraine’s Black Sea peninsula of Crimea.

The ban is likely to cause short-term prices to rise and could add about 0.5 percent to inflation this year and 1 percent in 2015, Natalia Orlova, Alfa Bank chief economist, said by phone. Total inflation is expected to be 7 percent this year, rising to 8 percent for 2015, she said.

Even a risk of rising food prices seems unlikely to hurt Putin’s support, which reached 87 percent this month, while Russians’ negative attitudes toward the U.S. climbed to 74 percent in July from 44 percent in January, according to Levada-Center data.

Still, that doesn’t mean some things won’t be missed. “I will suffer a lot without Italian dairy,” said Nelya Lazareva, a 45-year-old Muscovite.

(A previous version of this story corrected the gender of an executive in the eighth paragraph and spelling of Chelyabinsk in the 13th.)

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net; Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Thomas Mulier, Robert Valpuesta

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