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Bye-bye, Moscow mule? Nations ban Russian vodka

US, EU, G-7 allies to end normal trade relations with Russia, ban imports of vodka and caviar

President Joe Biden on Friday took further steps to squeeze Russia’s economy for the invasion of Ukraine. Those measures include a ban on imports of vodka — leaving it to others to rename the popular Moscow mule or White Russian cocktails.

Biden issued an executive order prohibiting the importation of Russian seafood, spirits/vodka and nonindustrial diamonds, as well as the export to Russia and Belarus of luxury items such as high-end watches, vehicles, apparel, alcohol, jewelry and other goods preferred by Russian elites. European allies and G-7 nations said they would follow suit. 

The U.S. export controls on luxury goods previously only applied to North Korea.

More significantly, the White House, along with European and G-7 leaders, said they will take action to strip Russia of its most-favored-nation trade status. The countries will need their respective legislatures to approve the change but are expected to quickly do so. Revoking permanent normal trade relations will allow tariffs to be significantly increased on goods imported from Russia. Higher trade barriers will make it more difficult for Russian companies to do business with half the global economy.

The allies also said they are working to deny Russia access to financing from multilateral lending institutions such as the International Monetary Fund and the World Bank. In addition, they tightened guidance to prevent the use of digital currency as a way of evading restrictions on money transfers and are proposing a ban on future investment in Russia’s energy sector, including technology transfers.

The European Union also announced it will prohibit the import of key goods in the iron and steel sector from Russia.

The moves are intended to deny the Russian leadership material support to sustain its aggression against Ukraine and hold Putin’s inner circle accountable.

“We stand ready to impose further restrictions on exports and imports of key goods and technologies on the Russian Federation, which aim at denying Russia revenues and at ensuring that our citizens are not underwriting President Putin’s war, consistent with national processes,” G-7 leaders said in a joint statement. “We note that international companies are already withdrawing from the Russian market. We will make sure that the elites, proxies and oligarchs that support President Putin’s war are deprived of their access to luxury goods and assets. The elites who sustain Putin’s war machine should no longer be able to reap the gains of this system, squandering the resources of the Russian people.”

The import and export bans announced Friday are largely symbolic compared to the decision earlier this week to block oil and energy products, which account for 60% of the $26 billion in annual imports from Russia, and a series of other sanctions designed to isolate Russia from the global financial system and economy. The White House said the import ban will deny Russia more than $1 billion in annual revenues and that the restrictions on luxury exports covers about $550 million worth of goods. 

Russia only accounts for 1.7% of total vodka imports by volume, with a total value of $18.5 million, according U.S. government data compiled by the Distilled Spirits Council. The largest exporters of vodka to the U.S. are France, the Netherlands, Sweden and Latvia.

Several U.S. states have already banned sales of Russian vodka. Virginia, where alcohol is sold in state-run stores, has removed seven Russian brands — Beluga, Hammer & Sickle, Imperia, Mamont, Organika, Russian Standard, and ZYR — from the shelves.

Vodka brands Stolichnaya and Smirnoff have Russian-themed monikers but are made in other countries.

Raising European trade barriers will bite Russia more. Bilateral trade between the EU and Russia is 10 times larger than between the U.S. and Russia.

The U.S. and European allies have also closed their airports and airspace to Russian aircraft, disconnected a number of Russian banks from the SWIFT messaging system banks use to transfer funds and enable customers to make payments, and frozen assets of designated persons close to the Putin regime.

“The American people are united. The world is united. And we stand with the people of Ukraine. We will not let autocrats and would-be emperors dictate the direction of the world,” Biden said in an address to the nation.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals from the American Society of Business Publication Editors for government coverage and news analysis, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at ekulisch@freightwaves.com