European seeds manufacturers association Euroseeds sent a letter to Russian Prime Minister Alexey Mishustin warning about the risks the Russian localisation rules, scheduled to come into force in the country from September 1, pose to local operations.
Under the new rules, foreign manufacturers need to establish a joint venture with a local market player to continue working in Russia, in which the share of non-Russian businesses should be limited to 49%. In addition, foreign companies must comply with strict localisation rules, investing in R&D, production, and marketing on Russian soil. The Russian government claimed that the system is needed to fortify Russian food security.
Euroseeds claimed that its members “have been committed to the Russian market for decades,” investing in research, production, refinement, marketing, and the development of supply conditions, which have “contributed to the food security.” The localisation rules also threaten members’ business in Russia, including due to the lack of guarantees for the observance of breeders’ rights and restrictions on the circulation of seeds.
There is no risk of a seed deficit on the Russian market, the Russian Agricultural Ministry said in response to the letter. Many major foreign companies have already expressed readiness to work by the new rules, the Ministry added. Under the Russian food security doctrine, Russia will see the share of localised seeds in agriculture growing to 75% by 2030.
I don’t fully understand how the authorities want to force Western companies to land in Russia
Evgeny Ivanov, senior expert of the Russian Institute of agricultural market studies IKAR
The very desire to localise seed production in Russia is quite natural, Alexander Korbut, former vice president of the Russian Grain Union, told the Russian publication Agroinvestor, adding that not all requirements the authorities plan to introduce make sense.
“In the first place, this is about the joint ventures in which the one who essentially brings new breeding achievements and technologies finds himself in a dependent position. Naturally, no one will like it, and this may have negative consequences,” Korbut said. In addition, the proposed localisation scheme could hurt the competitive environment.
Evgeny Ivanov, senior expert of the Russian Institute of agricultural market studies IKAR also claimed that if the government put too much pressure on the task, it risks triggering a shortage of effective seeds on the market, in the first place, sugar beet, sunflower, rapeseed, corn, and most vegetables.
“If European companies have done practically nothing in Russia for 30 years, then who said they will do it in the coming months and years? Especially in the era of geopolitical confrontations. I don’t fully understand how the authorities want to force Western companies to land in Russia,” Ivanov added.