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. Last Updated: 07/27/2016

Gordeyev Rattles Trade Saber

Russia threatened on Thursday to retaliate against proposed European Union grain import quotas and duties with tit-for-tat tariffs targeted against EU meat producers.

"I think we should implement customs and tariff measures on meat ... imports," Agriculture Minister Alexei Gordeyev told a news conference.

In a bid to stem a tide of cheap Russian and Ukrainian wheat from entering the EU and undercutting internal prices, the European Commission has proposed worldwide tariff quotas at reduced rates of duty -- a response to repeated requests from producers for protection against Black Sea imports.

The proposed quota covering soft and durum wheat would allow in 2.3 million metric tons with duties of 42 euros and 17 euros a ton, respectively. Exports duties beyond the quota would rise.

Gordeyev said the scale of Russian retaliation should be appropriate.

"We are ... always promising further liberalization, while they defend themselves against products from abroad by all possible means," Gordeyev said.

Later, European Trade Commissioner Pascal Lamy played down the threat of a trade war, saying in Copenhagen that Moscow's shipments to Europe under the proposed scheme were unlikely to fall.

"Russia is an important trade partner of the EU ... but I don't see any reason why Russian exports should be reduced," Lamy told reporters. "The question is the right calculation of quotas and tariffs in this grain trade."

The EU is currently negotiating with partners in the World Trade Organization, of which Russia is not a member, to change the system of grain imports and introduce quotas. Wheat import duties are currently set at zero but some EU states, particularly France, have complained they are being undercut by cheap eastern European grain.

Lamy declined to comment directly on Gordeyev's threat.

Although the talks are taking place within the WTO, all grain exporters would be affected by EU changes.

Analysts said EU quotas would hurt both Ukraine and Russia, who are enjoying bumper crop years.

Andrei Sizov of Russia's leading agricultural analysts SovEcon, said Russia and Ukraine exported around 5 million tons of grain to European states last season, when EU imports almost tripled to around 10 million tons compared with previous seasons. Ukraine plans to export Russia plans to boost exports by half to around 8 million tons of grain in the 2002/03 season, while Ukraine plans to export about 12 million tons of grain, up from 9.2 million tons last year.