The move, announced by Prime Minister Vladimir Putin on Thursday, pushed international prices of wheat to the highest level since the 2007-08 global food crisis. They jumped by more than 12 percent in European commodity markets.
The wholesale and retail prices rose just as drastically in Armenia where one 50-kilogram sack of flour cost between 9,500 and 10,000 ($27.4) on Friday. The rise did not immediately push up bread prices. They are nonetheless expected to be adjusted accordingly in the coming days.
“Three days ago I bought first-class flour for 8,500 drams [per sack,]” said Rafik Sahakian, the owner of a small bakery in Yerevan. “It costs 9,500 drams today. What is going to happen next?”
Sahakian told RFE/RL’s Armenian service that he will have no choice but to raise the bread price.
Bread prices in the country already rose by roughly 20 percent late last month. The Armenian government blamed that on a significant decrease in global wheat output expected this autumn.
Imported wheat, most of it coming from Russia, meets nearly two-thirds of Armenia’s domestic demand estimated at roughly 600,000 metric tons per annum. The bulk of those imports are controlled by two companies belonging to government-linked wealthy businessmen.
One of them, Samvel Aleksanian, attributed the latest price hike to the Russian export ban and its knock-on effects on world food markets. “I would love to keep the flour price unchanged, but the market is dictating its terms,” Aleksanian told News.am.
Government critics dismiss such explanations, arguing the importers are still selling wheat and flour which they purchased earlier this year or last fall at much lower prices. They say the de facto monopolization of the local wheat market is the main reason for the increased cost if what is a key staple foodstuff in Armenia.
“The Armenian society is captive to a handful of individuals,” Bagrat Asatrian, an opposition-linked economist, told a news conference. “We are obliged to pay them as much money as they need for being happy.”
The government says the best way to guard against price fluctuations in international markets is to ease Armenia’s heavy dependence on wheat imports. It approved last month a five-year plans of actions which officials said will boost domestic wheat output to over 350,000 tons by 2013.
The program puts the emphasis on use of new, more productive sorts of seeds to be imported from Russia or grown by local agricultural firms.