Russia’s sugar industry has made an unparalleled and unexpected transformation from one of the world’s biggest sugar importers, relying on foreign sugar for up to 80 percent of its needs as recently as 2003, to a net exporter of sugar. Little has been documented about Russia’s rapid rise until today, when the American Sugar Alliance (ASA) released a report, “Russia’s Sugar Industry: Transformation with Government Intervention,” authored by sugar experts from the region.
The report, authored by Patrick H. Chatenay and Sergey Gudoshnikov, not only details how Russia engineered this sudden shift in sugar production, but why the government sought to regenerate its domestic sugar industry. Chatenay, based in the United Kingdom, is a renowned expert on the global sugar market and Gudoshnikov, a Russia native, was Senior Economist for the International Sugar Organization in London for 31 years.
Since its inception, the Russian Federation has placed a high priority on domestic food security. Reducing Russia’s dependence on foreign sugar took on increased urgency as long-time supplier Cuba’s sugar market collapsed. Russia was forced to rely on the uncertain, unreliable and volatile global sugar market, which is widely considered to be the most distorted commodity market in the world as rampant global subsidization has led to overproduction and predatory pricing.
That pricing drove Russia to control and limit subsidized imports and utilize direct and indirect subsidies to bolster its own inefficient sugar industry. The report released today by ASA found that over the past decade, the Russian government utilized a number of tactics to regenerate domestic production, including:
- Imposing variable import duties on raw sugar and a fixed import duty on white sugar
- Subsidizing operating costs, including subsidies for fertilizers and herbicides
- Subsidizing interest rates for investments in sugarbeet processing and storage
“In total between 2010 and 2017, the government injected an estimated $772 million of public funds into the industry to support a doubling of sugarbeet-processing capacity and beet sugar output,” the report states. The authors estimate the average annual value to the Russian sugarbeet industry of government import protections and direct subsidies during this period at $392 million per year.
By all accounts, Russia’s plan worked. Russia produced a surplus of sugar in excess of 1.6 million tons in 2020, prompting the government to take steps to support and facilitate sugar exports in order to offload its surplus onto the world market.
“This report sheds much needed light on the measures Russia has taken to spur domestic sugar production,” said Dr. Robert Johansson, ASA’s Associate Director of Economics and Policy Analysis and former Chief Economist at the U.S. Department of Agriculture. “Russia’s newfound role as a potential sugar exporter requires close monitoring, as its decisions moving forward will now carry additional ramifications for the over-subsidized global dump market for sugar. We take seriously the authors closing observation on the certainty of continued Russian involvement with the sugarbeet industry.”
“The world sugar market is riddled with direct and indirect subsidies,” added ASA’s Director of Economics and Policy Analysis, Jack Roney, “and little is known about the distorting government interventions in many countries’ sugar sectors. This study on Russia follows on the authoritative studies the ASA has commissioned in recent years, and shared with the U.S. Department of Agriculture and U.S. Trade Representative, on the sugar industries of Brazil, India, Thailand, and the European Union.” The Russia study, and past country studies, are available at the ASA website.
ASA shared this report in a letter to U.S. trade officials and asked for continued diligence in monitoring Russian intervention moving forward.