Russia: Russia raising import taxes on Scotch whisky, other spirits from ‘unfriendly’ countries

Russia is raising import taxes on Scotch whisky as well as other spirits from countries that it deems ‘unfriendly’, The Drinks Business reported on July 4.

The news in The Times claims that the Kremlin is due to double its import taxes on spirits, including those from the UK, as early as August.

It is making the move due to sanctions against the state by Western countries, and although it hasn’t been officially confirmed, the move would still hit sales of Scotch whisky hard.

Despite the war in Ukraine, whisky is still being exported to Russia from Scottish ports. Last year, Scotch whisky to the value of almost £100m was exported, including through Latvia.

Despite being one of the EU’s smallest states, with a population of 2 million, Baltic country Latvia, alongside Lithuania, has become one of the biggest suppliers of whisky into Russia.

According to The Times, the tariff rises are a way to “counter foreign sanctions” and also to raise money for the state, with rates set at 20% of the value of spirits, at a minimum of €3 a litre.

“These measures will be felt by the foreign companies while stimulating domestic production”, a spokesperson told Russian media.

A spokeswoman for the Scotch Whisky Association said: “Since the conflict began, direct exports to Russia have decreased by 54 per cent, and shipments to indirect routes to market have also decreased significantly.

“The industry fully complies with UK sanctions on Russia, so the impact of any Russian action through tariffs is limited.”

The news follows Russia considering an imposition of 200% duty on wine imports from NATO states in order to support its own wine sector.

In July 2023, the government already increased import duties on wines from ‘unfriendly’ countries – from 12.5% to 20% until 2024, while such an increase is probably considered as insufficient by some state officials and local winemakers.

Currently most of Russian wines are very expensive, which is also due to the lack of their mass production within the country, as the industry is very young.

Analysts also expect the imposition of 200% duties will result in the growth of prices for Russian wine by up to 30%.

In addition, it nationalised the largest winemaker in the country, Kuban Vino, in April. The RBC news website reported that the winemaker, which produced 95.5 million bottles of wine in 2023, was nationalised following its links to a billionaire, Yury Antipov, who was arrested and assets seized earlier this year.

Antipov was seen by the Russian state as undermining national interests by transferring assets to countries that are “unfriendly” to Russia, following the commencement of the war in Ukraine in 2022.

He had set up the winemaker in the 1990s with his business partner Alexander Aristov.

It was one of four food and drink businesses previously owned by the agricultural firm Ariant which have been nationalised.

In the time before 24 February 2022, Russia’s drinks sector was one of the fastest growing segments in the entire Russian food and beverages’ market with the annual growth rates up to 15% in some market categories.

But the beginning of Russian-Ukranian war put an end for hopes of the further growth of the industry, at least at the same rates.

The most negative news for producers has been an imposition of a ban on the exports of Russian drinks, and primarily spirits, to Western market, as a result of 5th package of sanctions of the EU. Many firms had significantly increased their supplies to the EU previously, the UK and even the US markets in recent years.

While some of their supplies are still ongoing, according to Russian producers, there is a high possibility that they will be also suspended, as sanctions’ pressure continues to tighten.

08 July, 2024