Lifting Russia sanctions won't be beneficial to all

DUBROVSKOYE — Russian businessman Oleg Sirota is such a big fan of Donald Trump that he's built a snowman of the new US president outside his factory.

It's an irony then that he fears Trump could spell his business' ruin.

Sirota is one of Russia's winners from international sanctions. A ban on Western food imports has made it possible for the former programmer to fulfil his dream of becoming a cheesemaker.

Sirota has become something of a darling in Russian media with his patriotic gestures, notably his wheel of cheese that is inscribed with Russian President Vladimir Putin's name. Sirota insists it must be collected in person.

Demand is so high that Sirota has a three-month waiting list for new customers and he plans to increase production 10 times over this year with new facilities and a hiring push — provided the warm words between his two political heroes, Trump and Putin, don't bring about an end to sanctions.

"I was backing Trump in my heart, but Hillary in my head," Sirota said. "If sanctions are canceled, this will all collapse."

Sanctions have reduced foreign competition in some sectors of the Russian economy, helping entrepreneurs like Sirota to expand rapidly to plug the gap. Often heavily in debt, many will struggle without sanctions, and some are considering whether to go public with their protests.

Sanctions were not mentioned directly during Trump's first phone call with Putin last Friday, though the Russian government said the two leaders discussed "restoring mutually beneficial trade and economic ties."

The US and the European Union slapped Russia with sanctions in 2014 when it annexed the Crimean peninsula from Ukraine and backed separatists in eastern Ukraine. The sanctions have focused on individuals close to Putin, as well as major companies in the energy, defense and banking sectors.

Russia responded with bans on fresh food imports from the US, EU and other Western countries. Since then, food prices in Russia have risen sharply, but the agriculture and fisheries sectors have performed strongly against the backdrop of much-reduced competition.

Sirota, who has borrowed large sums from banks and relatives, and taken government grants, predicts that the removal of a Russian ban on food imports would flood Russia with cheap milk imports, sweeping away fledgling businesses like his.

"It's like sending a small boy out to box a world champion," he said. "We need five or six years of sanctions, minimum, to break through. This shield has been protecting us and we need it to keep doing so."

Sirota sees himself as the proud heir to a Russian agricultural tradition devastated by war and revolution in the 20th century. He's strongly anti-globalization and backs Putin's signature foreign policy moves in Ukraine.

Now he and other farmers are considering taking to the streets.

"If there's serious talk of canceling the sanctions, we'll definitely appeal to Vladimir Putin for support. Maybe we'll even have protests in favor of keeping them because it's hugely detrimental for us," he said. If sanctions go, Sirota wants higher tariffs on imported products, asking "why can the Americans do it and we can't?"

In recent weeks, Russian officials have made conflicting statements on whether their "counter-sanctions" will stay. Prime Minister Dmitry Medvedev called on Russians to "shed the illusions" that sanctions against Russia would soon be lifted while Deputy Prime Minister Igor Shuvalov has said key government ministries should operate on the assumption that they will be.

Without providing details, Putin has said Russia would support farmers while admitting Russia's membership of the World Trade Organization, which sets the rules for global trade in a way that no one country is discriminated against, could leave the domestic agriculture sector vulnerable.

"For Putin, removing the sanctions, the Russian sanctions, would actually hurt several important constituencies within Russia," said analyst Dmitry Trenin, director of the Moscow Carnegie Center. "Maybe removing them too fast, too soon, is not what Putin would want."

The Russian food ban mostly affects European countries and is unlikely to be scrapped before the removal of EU sanctions, which were last extended in December for a six-month period.

"There is a very big chance that this was the last extension of the sanctions," said Hendrik Vos, a professor in international relations at Belgium's Ghent University, pointing to countries like Italy, Greece and Hungary which favor closer ties with Russia. "There are simply too many member states that also don't have an interest in extending sanctions."

Potential winners of any dropping of sanctions would likely include Russia's oil and gas industry, which would find it easier to access foreign financing and expertise. Retailers could also benefit from extra competition among suppliers, while consumers would welcome lower food prices.

Lorenzo Getti, an Italian who runs cafes and a restaurant consultancy in Moscow, has swapped Italian produce for products from Mexico or the unsanctioned mini-state of San Marino, as well as buying salami from Russian suppliers.

"Unfortunately it is not the same level as the Italian ones and it will not be for some years," he said of Russian-sourced salami.

In his cheese storeroom outside Moscow, Sirota muses on how the annexation of Crimea made his dreams come true, but reconciliation could kill them.

"Crimea is in the heart of every Russian," he said, pointing to a cheese colored dark red with Crimean wine, "and without Crimea none of this would have happened."