Sugar Comes Next After Gas
By Elena Novozhilova
Belorusskie Novosty
The customs clearance of Belarusian sugar heading for Russia was suspended on December 29, Ivan Danchenko, head of the Belarusian State Food Industry Concern (Belgospishcheprom), revealed at a news conference in Minsk on Wednesday.
Belgospishcheprom Chair has “an impression that by exercising total control, Russian custom officers are fulfilling someone’s order”. In his opinion, “the FCS is pleasing a small group of Russian businessmen, who are trying to put Belarusian sugar import under control and to establish a monopoly in Russia,” said Ivan Danchenko in his interview to BELTA.
Saying that the situation when Belarusian sugar is classed as contraband is very “humiliating” and “very unacceptable”, Danchenko also stated about the Russian government having to make an appropriate decision.
In fact, the sugar problem is something that can be compared with the gas conflict. On 2 January, First Vice Prime Minister Vladimir Semashko said that “we were given some signals earlier (including from the Russian Prime Minister) about the gas problem being the key to all other problems even the situation with sugar.”
During the informal meeting between Sidorsky and Fradkov in Moscow straight after the exhausting negotiations about gas, the head of the Russia government promised deal with every painful area in Belarusian-Russian economic relations soon after the Christmas holidays.
It was something that Belarusian Prime Minister Sergey Sidorsky was talking about on his coming back from Moscow. He said that the issue with Belarusian gas supplied to Russia will be dealt with in January next year. “We agreed about the decision when Belarusian sugar will be present in Russian market in quantities sufficient for uninterrupted work of Belarusian manufacturers,” stated the head of the Belarusian government. “We formalised this agreement with Mikhail Yefimovich in appropriate instructions that I will hand them over to the government today. We must pass all the decisions in January and to inform our Heads of States then,” said Sidorsky.
At the same time, the Head of State himself mentioned this love agreement as he threatened Russia with “adequate actions”. “100 million tonnes of Russian goods keep going to and fro across Belarus. This is a huge turnover, and we wouldn’t want to take any actions,” hinted Alexander Lukashenko. “We agreed the both sides are to untangle to problem within this week, and it should be finished,” said the President to the government as he spoke about his meeting with Vladimir Putin on 10 November in Moscow.
Here are some backgrounds of the situation. Suspecting Belarus in unfair competition, Russia reinforced import regulations for Belarusian sugar back in the beginning of 2006, by redirecting all Belarusian suppliers of sugar to two border crossing points first, and then only one located on the west from Moscow – Troekurovskoye. Sugar was also put on the risk list – something that can be imported without paying customs duties because of the origin of goods test was not required any more.
The Russian side insisted that Belarusians were caught in providing inaccurate details about country of origin for sugar and consequently importing sugar to Russia duty free. Unlike other countries, Belarus was granted the right to import the excess of sugar as long it is produced from domestic sugar beet duty free. The system had been working fine until Russia had 1.5 times more sugar imported from Belarus than was produced in Belarus by the statistics.
Russian experts estimate the Russian budget is losing 15.3 million dollars from 45 thousand tonnes of sugar imported to Russia duty free. On average Belarusian sugar is 50 dollars cheaper per tonne because by supporting national sugar manufacturers, the Belarusian government is in fact subsidising sugar exports to Russia despite an agreement between both countries not to use indirect subsidising in trade.
The Russian Union of Sugar Manufacturers (Soyuzrossakhar) stated to Belorusskie Novosty that the cost of raw sugar material is more that 500 dollars per tonne, while Belarusian sugar comes to Russian market at 480 dollars per tonne. Russian sugar manufacturers say that because of illegal or half legal imports of Belarusian sugar, they have lost more than half a billion dollars for the past three years, which made the whole industry the only one not making profit within the Russian Ministry of Provisions.
As requested by Soyuzrossakhar, last autumn, German Gref’s Ministry carried out a special investigation which confirmed the fact of dumping from Belarus, and now the Russian government had to say their word – abolish the duty free imports for Belarusian sugar.
The outcome can be different. First, 100 dollars per 1 thousand cubic metres of gas eliminate many questions; second, Russian sugar market is very dependant from imports – in 2005, Russian companies produced only 43% of the nationally required amount. Belarus holds 8% of the Russian sugar market which gives the Belarusian side enough grounds to state about not being a threat to Russia.
Moreover, the Belarusian officials say that sugar coming to Russia from Belarus is produced from 100% domestic sugar beet.
On the other side, the FCS says that thousand tonnes of sugar raw materials bypasses Russian customs, and fuels unofficial trade. The FCS also reckons that another problem in sugar business is negligence and corruption among customs officers.
In the meanwhile, Belarusian manufacturers are incurring loses. Belgospishcheprom Director Ivan Danchenko says that sugar export to Russia dropped by 50%. The most loses came in the last three months of the last year, when new sugar beet crops went into production. Altogether, Belarusian manufacturers supplied only 37 thousand tonnes of sugar produced from new crops. Only because of the untimely customs formalities and transport hold-ups, Belarusian manufacturers lost about 2 million dollars.
There was even the Belarusian Sugar Company founded by four Belarusian sugar factories to assist sugar exports to Russia. “It acts within the Russian legislation, and pays Russian taxes,” stated the Belgospishcheprom Director. However, he said that since the very beginning on 1 September, the company faced severe pressure from the Russian Sugar Manufacturers Union.
The Belarusian Sugar Company holds contracts to supply 350 thousand tonnes of sugar to Russian regions, but because of the introduced restrictions, it will be impossible to fulfil, pointed out Ivan Danchenko. He also said that in the course of the annually drawn up Union State budget, Belarus was asked to reduce the supplies of sugar by 100 thousand tonnes. “This miniscule amount of export is affecting Belarusian economy rather than Russian, which imports sugar anyway. Wouldn’t it be better to import more form the union partner – Belarus,” said Danchenko to BELTA.