Russian tycoon invests in apples and potatoes

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Russian tycoon invests in apples and potatoes

Dmitry Arzhanov planning to pump hundreds of millions of dollars into developing domestic sources of supply

Russian tycoon invests in apples and potatoes

Dmitry Arzhanov (Photo: TNS Energo)

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Russian electricity and farming tycoon Dmitry Arzhanov has told the Reuters Russia Investment Summit that he plans to invest in apple and potato production, a direct response to Moscow’s embargo on food imports from Europe, the US, Canada and Australia.

The ban, which was introduced in August 2014 in retaliation against EU sanctions that were imposed following the conflict in Ukraine, has apparently led to new opportunities for domestic producers, but few have been able to capitalise as prices rise for items including fresh produce sold in the Russian market.

Arzhanov’s company AFG National, which has traditionally concentrated on producing rice and grain, is now planning to establish 300ha of apple orchards by 2016.

In seven years time, Arzhanov reportedly told the summit, around 2,500ha will be under cultivation, producing an estimated 125,000 tonnes.

That figure represents around 10 per cent of the volume of apples that were imported from Poland prior to the ban.

Elsewhere, AFG National is said to be lining up a US$600m investment package to create what Reuters referred to as “a vegetable complex” that can produce 500,000 tonnes of washed potatoes per annum – equating to a quarter of Russian market demand – within the next five years.

“Russia's government, faced with economic sanctions and the worst crisis in its relations with the West since the Cold War, has pushed the concept of ‘import substitution’ - domestic firms stepping in to fill the gap left by imports,” the Reuters report continued.

“That has worked in some sectors, but food producers, for years sidelined by powerful foreign competitors, have struggled to increase production quickly, people in the industry say.”

Arzhanov, who also co-owns the retail electricity supplier TNS Energo Group, said his investments in both apples and potatoes would be safe regardless of whether or not the embargo was lifted in the near future.

He also predicted that an extended ban lasting for the next two years would result in a downturn in investment within the Polish apple industry.

Click here to read more stories from the Reuters Russia Investment Summit.

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