Ukraine and Russia on the threshold of a new trade war
7 APR 2014, 14:38
Text: Olga Samofalova
The deterioration of relations between Russia and Ukraine threatens a new trade war. On the prohibition of the Ukrainian side to sell Russian chocolates and cheeses Moscow responded balanced measures and banned the import of Ukrainian dairy products. It initially losing the war for Kiev, so he’d better stop before it’s too late.
Last week, the state consumer inspection of Ukraine was withdrawn from sale and banned the import of Russian candy factories “Red October”, “rot Front”, “Russian chocolate” and concern “Babaevskiy”. The ban also touched on the cheese “President” of the plant “Lactalis-Istra” and canned fish of enterprises “vichyunay Rus” and “Roskon” because of their “non-compliance with Ukrainian legislation”.
On Monday, Rospotrebnadzor suspended the import of dairy products of six Ukrainian producers due to the revealed violations, in particular counterfeiting, according to the Agency.
In the current situation the actions of the Ukrainian authorities against Russian goods look more political. First, the initiator of the test of Russian goods, as reported by Ukrainian media, was the leader of the faction “Svoboda” in the Verkhovna Rada Oleg Tyagnibok. Secondly, the identified Gospotrebnadzor Ukraine violations of two laws – the safety and quality of food and consumer protection – hiding the absence of the Russian merchandise labeling in Ukrainian language. The quality of Russian goods no complaints, was not charged, which was confirmed by the Rosselkhoznadzor of the Russian Federation.
In addition, the Russian authorities indicated that the confiscation and the ban on Russian goods occurred without laboratory tests, and manufacturers and control bodies of Russia had not been told about it beforehand. All these procedures are required by the international rules, in particular WTO.
In turn, the Rosselkhoznadzor had already warned Ukraine that introduces enhanced laboratory control of the delivered goods and that the Ukrainian products have to comply with veterinary and sanitary requirements of Russia and the Customs Union (in may 2013, Ukraine signed a Memorandum on cooperation with the customs Union).
The Rosselkhoznadzor the audit found specific violations of the quality of Ukrainian cheese. In particular, cheese production of the Ukrainian enterprise “ROS”, branch of “Okhtyrka cheese factory”, “Pyriatyn cheese factory” does not meet the requirements of technical regulations on milk and dairy products on fatty acid composition. Cheese “Pyryatynsky syrokombinat” still did not meet the requirements of the regulations on the mass fraction of protein, fat and moisture.
In the Ukrainian cheese “Zolotonosha butter-making plant” and “Tehnoprom” also revealed the discrepancy between regulations of the Russian Federation. In the black list and the products of the Ukrainian factory “Gadyachsyr”.
The quality of Ukrainian dairy products were claims repeatedly. The national Union of milk producers explained the problem to the fact that on the background of falling milk production volume of cheese production in Ukraine is growing. Where seroprotective take raw materials? The answer is obvious if you pay attention to another fact: Ukraine has become the world’s largest importer of palm oil. Therefore there is a risk that the Ukrainian cheeses do not milk. The Russian technical regulations limits the use of vegetable fats in cheese-making, whereas in Ukraine such rules.
Russia, as always, warned that if violations are detected, the import will be restricted. And it was as on the import of milk and meat products. Therefore, it is expected that inspections of Ukrainian meat products can also identify abnormalities and lead to the import ban in Russia. Under threat, in particular, the import of Ukrainian sausages “Eliteks”. They have departments under scrutiny.
It may seem that a candy war with Ukraine is a logical reaction to the recent arrest of accounts of the Lipetsk factory of the Ukrainian company Roshen (businessman Petro Poroshenko, who can compete for the presidency in Ukraine). Because of this, the Lipetsk factory was forced to suspend work.
However, the problems that Ukrainian companies began long before the seizure of power in Ukraine this year and the deterioration of relations with Russia. The arrest of Roshen’s accounts is associated with the case in 2011, when the Moscow confectionery factory “rot Front” the first time filed a lawsuit against Roshen, which produces and sells candy “Swallow songstress” similar name with candies “Swallow”.
“Rot Front” first demanded 30 million rubles for illegal use of the brand that was granted by the Arbitration of the Lipetsk region. And in 2012 was re-filed suit with increased claims to the Ukrainian manufacturers to 212 million rubles, which was also granted by the court. However, the factory Roshen in Lipetsk the debt is not paid, and therefore the bailiff has seized the Bank account of a confectionery factory.
Ukraine is more profitable to stay
Trade wars, including dairy and candy between Russia and Ukraine are not uncommon. The implications for Ukraine are always more sensitive. At least because the Russian economy is almost six times more Ukrainian: Ukraine’s GDP in 2013 is estimated at 337 billion dollars, Russia’s GDP is 2 trillion dollars.
Secondly, Ukraine a trading plan is more dependent on Russia than Vice versa. According to the international Bleyzer Foundation, Ukraine sells the goods to Russia for 25% of its GDP, while Russia supplies to Ukraine its products only 5-7%, where the lion’s share of energy. According to the portal of foreign trade of the Russian Federation, Russia remains the main trading partner of Ukraine, while the main trading partner for Russia is the EU (49% of Russian trade turnover), China, Japan, USA and Republic of Korea. For the CIS countries in 2012 accounted for only 14.1% of turnover.
“In 2013 the trade turnover between the two countries has fallen by 25% in comparison with 2012. I think that the Russian economy has virtually not noticed”, – says the analyst of IFC Markets Dmitry Lukashov.
Ukraine is a small export-oriented economy, and agricultural exports have historically held a significant share in the export structure of the country. Now the Ukrainian export of food and agricultural raw materials to Russia three times more Russian imports of this commodity group, indicates Lukashov. The share of Ukrainian products in export to Russia is only about 10%. Russia buys in Ukraine are mainly hardware, engineering products, metals and minerals. In the current environment, when the Ukrainian economy is in preddefoltnom state, the reduction of export profits even some dairy producers significantly larger.
Unlike Russia, the Ukrainian producers are less likely to find a replacement for the Russian buyer. Belarus has its milk a lot, and it is actively exported to Russia. The European market, even if they wanted to eat Ukrainian cheese will not be buying it. To put the Ukrainian dairy products to Europe now is simply unrealistic, as it does not meet the standards of the EU. This has already been repeatedly said in the Union of dairy enterprises of Ukraine.
Moreover, the EU will not buy Ukrainian cheese, even if Ukrainian plants will be transferred under European standards. Western countries are only interested in purchase of Ukrainian grain, corn, soybeans and other agricultural commodities, whereas the agricultural processing prefer to exercise in the European Union. “The export of raw materials and the sale made of his goods to other countries is a basic Foundation for the existence of the Western economy. Everyone knows about the wonderful Swiss chocolate, as well as the fact that cocoa does not grow in Switzerland,” says Dmitry Lukashov.
To inflict a significant blow to Russia Kiev can refuse only if the Russian oil and gas, which, for obvious reasons, Ukraine will not go. This country is death.
What other food products from Ukraine, not banned, for Russia it will be only a small pinprick, from which after a short time, not even a trace will remain. Belarusians, for example, will be particularly pleased to pick up a share of Ukrainian suppliers of dairy products. While trade restrictions from Moscow to Kiev is fraught with ultimately even bankruptcy manufacturers.
While Russia has much more scope for trade restrictions and prohibitions and smaller without loss to themselves. Whereas in the hands of Ukraine on trade bans related. Kiev is worth to recall August 2013, when Russia for a few days actually stopped the trade with Ukraine, showing how her neighbor is economically dependent on her. The Federation of employers of Ukraine, if the situation at customs was not resolved, the loss of Ukrainian companies could reach $ 2.5 billion in six months, that is $ 5 billion per year. It is not a little frightened Ukrainian exporters and the country’s leadership: addressing the issue has reached the highest level.
So if Kiev does not stop and the first round will be followed by a continuation of trade restrictions, all of which can lead to disastrous consequences for the economy. Although it would seem, much much worse. But the big question is whether they want to pay for this “uncle” of the EU? To pay for Ukraine purchased gas to Europe, for example, is in no hurry.