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Monday, November 20, 2017

In meat and dairy war with Russia, Lukashenko is doomed to lose


Moscow and Minsk continue to seek a way out of the impasse: the oil and gas conflict between them was quickly supplemented by the meat and dairy, and Lukashenka expressed readiness to translate it into the “hot stage”, starting the persecution of the Rosselkhoznadzor. But this confrontation Minsk will inevitably lose: statistics relentless – dependence of Belarusian food from Russia is close to absolute.

Strained relations with Russia, President of Belarus Alexander Lukashenko creates huge risks for some of the leading industries of the Belarusian economy, critically dependent on exports to the Russian Federation. Particularly vulnerable is the food industry, which is in principle not able to shift to alternative markets (especially the EU), if the Russian side will continue to impose restrictions on the import of Belarusian products. The damage from the first restrictions under the pretext of their inconsistency with the norms of the EAEU is already estimated at millions of dollars.

Beef is not the system

“The main lobbyist of the interests of Belarus in the economy, the President Lukashenko. And this is a constant risk factor for Belarusian producers”

As already wrote the newspaper VIEW, last week the Rosselkhoznadzor imposed temporary restrictions on supply of beef and beef by-products from several enterprises of the Minsk region suspected of re-export from Ukraine. The Ministry has expressed “deep concern” about the inconsistency of Belarusian products to the Russian legislation on quality and safety. This is not quibbling: prohibited to import meat contained traces of relabeling. In addition, according to statistics of the Rosselkhoznadzor information system “Argus”, the import of beef from Belarus to Russia in the past year increased from 132 to 153 thousand tons and exactly the same volume (about 20 thousand tons) of Belarusian enterprises increased imports of beef from Ukraine.

The Belarusian side responded to these “sanctions” in the usual style, well-known history with Uralkali, when economic dispute immediately joined the power structure. First, Alexander Lukashenko proposed to initiate a criminal case against the head of the Rosselkhoznadzor Sergey Dankvert, after which the interior Ministry announced plans to conduct a check on signs of crimes under article 249 of the Belarusian criminal code (“Discrediting business reputation of a competitor”). According to the interior Ministry, only in the Minsk region 96 farms, which limited the supply, suffered losses of nearly $ 2.5 million. In response, the Rosselkhoznadzor has canceled a planned inspection of the enterprises in Belarus due to “possible provocative actions on the part of Minsk.”

But soon after the “accident” was followed by “rollback”: the Belarusian side asked for the President to start tracking imported into Russia of food products from the border crossing point to implement an information system “mercury” and the same “Argus”. Now the regional veterinary authorities will be able to make a decision on the admission of Belarusian products to the market only after verifying information on the movement of consignment across the border.

But the re-export of Ukrainian meat is not the only Russian claims to the Belarusian side. With the beginning of the year when sampling at the border has been detected a mismatch “brotherly” of food standards and the requirements of the EAEC. In particular, in meat of some poultry farms have been discovered, pathogenic microorganisms, including Salmonella, was discovered and invalid use cases Belarusian producers of milk powder. In total in January, it was noted more than 40 attempts to import consignments of Belarusian milk and meat products not complying with the regulations. Therefore, as reported by RIA “Novosti” with reference to the press-Secretary of the Rosselkhoznadzor Julia in a few words, the import of beef from Belarus to Russia can be suspended in principle.

Competition increased sharpness

“In fact, no segment of the economy of Belarus is not ready to possible restrictions on the importation of its products in Russia in the sense of a rapid reorientation to other markets”, – says head of the sector of Belarus, Moldova and Ukraine, Centre for post-Soviet studies NOR IMEMO name of Yevgeny Primakov Elena Kuzmina – known Russian expert on the CIS economies. This follows directly from the statistics of imports of Belarusian goods in Russia by the end of 2015 (final data for last year are not yet available, but according to Kuzmina, Russia’s share in Belarusian exports during that time has not changed much).

First place in the volume of exports to Russia from Belarus is dairy products. According to the WTO, Russia have 100%, the price is 1,785 billion. Almost the same share of 97.1% of the total 655,1 million dollars and the export of beef, although at a cost, it is only in fourth place.

Redirect your meat and dairy products through other channels for Belarusians is practically impossible. “Export diversification for Belarusian producers is important, but other markets are full, the access is difficult. The food market is one of the most highly competitive in the European Union – the overproduction of food,” says the political scientist, associate Professor, MGIMO Kirill Koktysh. And in the case of exports to the EU of Belarusian mechanical engineering products are unlikely to make room Germany is the undisputed European leader in this segment.

However, in the case of engineering the dependence of Belarus on Russia can not be called total. In 2015 of the total volume of Belarusian exports of vehicles and components (primarily we are talking about heavy trucks and agricultural machinery) to Russia accounted for 65,8% or 1,032 billion. In the export of equipment and mechanical devices of the Russian share was 75.6% or $ 817,9 million. “But the Belarusian mechanical engineering – however, as Russian companies are not always able to compete on the world market, – says Kuzmin. In the framework of the Eurasian Union, its products are protected by higher export duties. This contributes to the preservation industries, and sales of engineering products in the markets of the EEU at a reasonable price, but the quality of Belarusian equipment in General does not allow to enter the European or any other market.”

All about Lukashenko

The deterioration of Russian-Belarusian relations are now closely watched by many domestic companies. “Russian milk producers much more is not issue, cancel or not mutual sanctions with the West, and how the conflict will develop with Belarus is the largest supplier of dairy products to the Russian market. If there will be restrictions, of course, this will lead to higher prices in Russia, but also to increase profitability in the dairy industry and related sectors”, – says head of the analytical center “Sovekon” Andrei Sizov.

However, the problems of the Russian dairy producers can be viewed from the other side. Some time after the introduction of the anti-Western counter-sanctions Russia is in fact opened for Belarusian milk “green light”: signed by both parties forecast balance sheet for 2015 it was assumed that Belarus will be able to increase exports of dairy products from 26.5% to 4 million tons. At the same time, the Russian authorities ‘ statements about the priority support for the dairy industry (in particular, on the development of dairy farms) is not too justified – last year, milk production in the country declined.

“The Russian producers of dairy products may be unhappy with the presence of Belarusian goods, but the Russian dairy industry is subsidized in the framework of the program of import substitution. So the discontent of the Russian manufacturers, probably, is related to the quality of management at specific enterprises. Belarusian producers don’t need to go looking for happiness on the other side, because they already have their place in the Russian market legally and prove their competitiveness,” – says Koktysh.

According to experts, the current aggravation of relations between Moscow and Minsk is the usual bargaining, a similar story happens for the first time. “Each side has their own truth, their own reasoning, and I think the summit will provide an opportunity to find a solution. Neither Russia nor Belarus is not questioning the fundamental principles in their relations, and this means that business disputes will be resolved – predicts Koktysh. – Restrictions that have been imposed by the Rosselkhoznadzor, will be challenged by the Belarusian party, and any other restrictions imposed by Russia, most likely, will not. The intergovernmental agreement gives ample scope for conflict resolution. Russia, as before, will remain the main external market for the Belarusian producers. It has always been, and it is unlikely that anything will change.”

At the same time, it is clear that the current conflict with the Belarusian SEL not the last. Largely it depends on the political component: the solution of those questions which are quite capable of business (e.g. sector associations) in Belarus is engaged exclusively in the state. The main lobbyist of the interests of Belarus in the economy, the President Lukashenko, reminds Elena Kuzmina. And this is a constant risk factor for Belarusian producers.

source

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