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. Last Updated: 07/27/2016

All Quiet On Vodka Front, Say Exporters

Despite strong protests from the European Union against perceived Russian discrimination of vodka imports from the EU, both European and Russian exporters said a new decree on prices amounted to little more than a tempest in a shot glass.

Under a wide-ranging plan on vodka prices introduced to boost state revenue collection, the minimum retail price of a liter of imported vodka was set last week at 40,000 rubles (about $8.50).

Industry officials said the scheme of a minimum price was unusual, but that consumers could still buy the spirit in Russia for less than in Europe.

"Of course it is discriminating against European vodka," said Aleksej Leppanen, deputy manager for business development in Russia at Primalco, an exporter in Helsinki.

"But as regards the more expensive branded products we think it will have no effect," he said. "For now we don't think it will affect Finlandia, our main brand."

In shops and kiosks near Savyolovsky Station in northern Moscow, a liter of Finlandia on Monday retailed at between 70,000 and 85,000 rubles ($14.50 to 17.60), roughly twice the new minimum price.

"This should have no impact on trading relations, because all leading Western brands, for example Smirnoff and Absolut, were always at least twice as expensive [as the new minimum price]," said Lev Batov, vice president of Soyuzplodoimport, Russia's leading vodka exporter.

Soyuzplodoimport, with such brands as Stolichnaya and Moskovskaya, faces no quotas or fixed price floors in trade with the EU, but is suffering from steep foreign taxes that "considerably reduce our competitiveness," Batov said.

In Denmark, for example, authorities slap a tax of about $11 plus a 25 percent value-added-tax on each half-liter bottle of 43 percent proof Russian vodka, said Sune Scherfig of Svanholm Vinimport in Denmark. That makes a bottle the importer buys for $3.40 sell in stores for $29 to $33.

Actual EU import duties on Russian vodka are about 95 cents in most European countries, said Magnus Lemberg, head of the import department for strong alcohol at Alco in Helsinki, although states apply a variety of local taxes to alcohol products.

One European diplomatic source said the EU is worried not so much by the effect the Russian move will have on prices as by its discriminatory application.

Vodka produced in Russia and the Commonwealth of Independent States has a new minimum price of 18,400 rubles a liter, although initial enforcement and compliance with the regulation last week was spotty.

Leppanen of Finland's Primalco said the Russian move is likely to mostly target cheap unbranded vodka imports from Ukraine and Belarus now found in kiosks for rock-bottom prices.

Russian import tariffs on average amount to 14 percent to 15 percent, largely comparable to European rates, Interfax reported last month, quoting sources in the Russian Foreign Trade Ministry.