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Russia food ban hurts Moldova, bad omen for others

Tuesday - 8/12/2014, 12:44pm  ET

In this Friday, Aug. 8, 2014 photo, a farmer drives a tractor in an apple orchard in Debe, Poland. Polish farmers fear the consequences of the Russian ban on food products from the EU, as Poland is the worlds third largest apple exporter, with more than half of its production going to Russia before the ban. (AP Photo/Alik Keplicz)

VANESSA GERA
Associated Press

HARBOVAT, Moldova (AP) -- Farmer Sergiu Calmac watches as row upon row of juicy red apples once destined for Russia ripen, fall to the ground and start to rot.

Two weeks before Russia banned most food from the West, it placed a similar embargo on produce closer to home in Moldova, a small Eastern European country seeking deeper ties with the European Union.

Farmers here in one of the poorest corners of Europe are already feeling the pain, with some deciding not to harvest some of their fruit and vegetables at all this season. Calmac's predicament is one that farmers across Europe and beyond can expect to some degree after Russia expanded the circle of countries targeted by its food embargoes.

"A weaker person than me would lose his mind, seeing how his work and investment are being lost," said Calmac, a 60-year-old who has farmed for 26 years. "I have never had a situation like this."

In late July Russia banned foods from Moldova and Ukraine -- both former Soviet republics that the Kremlin wants to keep in its sphere of influence -- after they moved to deepen their political and economic ties with the EU. A ban on Polish fruits and vegetables soon followed as Warsaw called for sanctions against Moscow for its aggression in Ukraine. Last week Moscow took things further, banning most food imports from the West in retaliation for sanctions imposed as tensions mount over Ukraine.

The consequences of this geopolitical tit-for-tat are particularly painful in Moldova because it is already one of Europe's poorest countries. The average monthly salary is only $300 (225 euros) and 30 percent of its GDP comes from remittances sent home by the 600,000 Moldovans -- from a nation of 4 million -- working abroad.

Prime Minister Iurie Leanca criticized the embargo, calling it "a violation of the principles of economic cooperation between Moldova and Russia," and promised some compensation to fruit farmers "within the limits of possibility."

A largely agricultural country, Moldova depends heavily on its trade with Russia. Fruit was its largest export, with 90 percent of its apples sent there before the ban. The lost revenue from apples alone is expected to reach $50 million, or three-quarters of a percent of GDP. And while the government does not yet have an estimate for the overall loss, the situation will certainly be worse once other produce is factored in.

Amid the political tensions, Russia has also hinted that some 300,000 Moldovan workers in Russia may no longer be welcome.

The disruptions to Moldova's economy also come at an extremely delicate time politically. Moldova has a pro-Russian separatist break-away region, Trans-Dniester, that longs to be united with Russia and which has put its army on alert amid the tensions in Ukraine.

The country also faces elections in November expected to determine whether it stays on its pro-Western course or if politicians friendlier to Moscow take over. Wedged between EU member Romania and Ukraine, Moldova has an electorate deeply divided over whether to grow more aligned with the West or Russia. If voters blame their pro-Western government for any new economic pain, that could shift the balance with lasting consequences.

"Should the economic effects be felt in Moldova with this embargo, not only would pro-Moscow parties use this to their advantage to try to keep Moldova in Moscow's orbit, but it would also have the effect of derailing or delaying Moldova's aspirations to be part of the European Union," said Stephen Nix, the director of the Eurasia program with the International Republican Institute, a pro-democracy organization based in Washington.

In an interview at his sprawling orchard in Harbovat, a village in southern Moldova, Calmac had only vague criticism for the country's leaders.

"I realize that international relations in our region are complicated but the government could have put more effort into this," he said.

Instead, he is most concerned about how he will pay his 200 employees and repay 4 million Moldovan lei ($290,000) that he owes to pesticide companies. He is hoping the companies will allow him to postpone his payments because repaying them on time seems unrealistic given the new market prices. Moldovan apples usually sell for $0.50 a kilogram. Now he stands to earn only $0.04 a kilogram from the juice-making factories that have become his only buyer. He expects to lose 3.5 million lei ($255,000), which was 75 percent of his 2013 profit.

Calmac, also the head of a local agricultural cooperative, said matters would be even worse had its members not worked to diversify their production beyond just fruit and vegetables destined for Russia. They also grow cereal and sunflowers and together run a small canning plant where they process green peas and tomato paste.

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