A story of Belarus and Russian food embargo: Commercial success

What really stands behind this Belarusian commercial success: the hard work of domestic producers or the inventiveness of local smugglers? Igar Gubarevich is trying to find it out.

The Belarusian success story in becoming the primary beneficiary of the Russian food embargo has been a complex mixture of hard work, honest entrepreneurship and cunning scheming. Belarus became the primary beneficiary of the food embargo, which Russia imposed against Western nations in August 2014. In January – May 2015, Belarus supplied 916.4 thousand tons of embargoed products to Russia, a 53.5% increase over the same period in 2014.

Two weeks after Russia introduced its food embargo, Howard Solomon, the minister counselor at the US Embassy in Moscow, tweeted: "Last night, I tasted the Belarusian salmon. It reminds me of the one from Norway, but more expensive. I'll taste the Belarusian parmesan next."

Exploring the Klondike

Belarusian farmers, entrepreneurs and officials moved fast to take advantage of this windfall. The next day after the introduction of the embargo, Leanid Marynich, the Belarusian first deputy minister of agriculture, assured Russia of Belarus' willingness to "substitute Western countries for many food positions" calling this lucrative opportunity a "Klondike".

Immediately, several European companies wanted to invest in transforming agricultural products in Belarus. Officials from Latvia, Lithuania and Poland – Belarus' EU neighbours who are affected by the embargo – came to Minsk to discuss the opportunities for joint processing and exporting of dairy products.

In August 2015, President Lukashenka gave his blessing to this cooperation in his very direct style: "We must stir and seize the moment to make money... We have not made any commitments [towards the Russians] about our domestic market. We can import products from around the world. We must load, process and sell [them]. "

However, these ambitious projects turned out to be difficult to implement, at least in a legitimate and transparent manner that the officials promised. The production capacity of meat processing and dairy plants quickly became saturated. In addition, any radical increase in the export of food products might cause a deficit in the domestic market.

Lukashenka had to recognise the complexity of the situation at a government meeting at the end of 2014: "Even if we wanted to, we cannot import more meat and milk today for the transformation that we brought from the West [before], because we do not have any spare capacity."

Smuggling beats transformation

However, these difficulties never stopped Belarusian entrepreneurs. Many of them engaged in outright smuggling trying to bypass sanctions on a scale, which can hardly exist without the tacit consent of top-ranking officials. The open border between Belarus and Russia has definitely facilitated these projects.

A week after the introduction of the embargo, the Russian Federal Service for Veterinary and Phytosanitary Surveillance (Rosselhoznadzor) reported the first attempt to bypass the embargo from the territory of Belarus. Russian inspectors stopped a lorry with 19 tons of Ecuadoran peaches and nectarines accompanied by forged phytosanitary certificates issued in Belarus.

Initially, Rosselhoznadzor tried to solve the problems of smuggling "in family", without much publicity. However, the negotiations failed and by the end of September 2014 the patience of the Russians ran out. Rosselhoznadzor began reporting on the attempts of Belarusian businesses to circumvent the embargo on an almost daily basis.

The web site of Rosselhoznadzor has been running what resembles a battle-field situation reporting about attempts to import products "of unknown origin" without certificates or food coming from embargoed countries and accompanied by Belarusian certificates. Thirty tonnes of potatoes, twenty tonnes of tomatoes, forty tonnes of pork, eighteen tonnes of grapefruits, two tonnes of beef ... However, the true scale of contraband certainly exceed these figures, given the extent of corruption in Russia.

In November 2014, Rosselhoznadzor started a trade war with Belarus by banning imports of meat and dairy products from twenty-three Belarusian producers. Moscow also prohibited the transit of Western food products to Kazakhstan through the Belarusian and Russian border. Belarus and Russia de facto reinstalled customs controls on their common border. In retaliation, Minsk forced Russian trucks to spend long hours waiting at border crossing points.

This brief trade war ended in December 2014 when Russia gradually recalled its import ban. Nevertheless, resourceful Belarusian entrepreneurs have not abandoned their efforts to supply the neighbouring country with European products re-labelled "Made in Belarus". In January - March 2015, Rosselhoznadzor identified nearly 200 falsified phytosanitary certificates, which accompanied imports from Belarus.

Contradictory statistics

Belarusian attempts to substitute the Western food imports to Russia have brought uneven results. While for some positions there has been a spectacular increase in supplies, the most ambitious plans have failed to come true.

In September 2014, an official of the Belarusian Ministry of Economy announced the country' intention to increase its food exports to Russia by $300m in 2014. In fact, the Belarusian supplies of food products to Russia increased only by 0.9%, which represented a growth of about $42m.

In January – April 2015, according to Russian statistics, Belarus increased its share in Russia's imports of fresh and chilled beef from 76% to 90% compared to the same period of the previous year and cheese from 26% to 76%. However, in tonnes and dollars these exports grew very modestly. Belarus was more successful in its exports of apples, milk, cream, dried and salted fish to Russia.

Last year, Belarus bought an additional 208 tonnes of apples from the EU and Moldova. Again, most of the fruit the country most likely re-exported to Russia, as its export to this country grew by 198 tonnes representing a 142% increase.

Alongside with the direct re-packing and re-labeling, other transformations also took place. In 2014, Belarus increased its imports of fresh fish by 7.1 tonnes, mostly from Norway. The bulk of this surplus underwent transformation in Belarusian plants and went to Russia, as Belarusian exports of dried, salted and smoked fish grew by 6.2 tonnes.

On 5 August, the Belarusian minister in charge agriculture and food Leanid Zajac claimed that the Russian decision to destroy confiscated Western products never affected Belarus and refuted all accusations of possible contraband. "We will ensure that our products continue to enter the Russian market without any interruption and that there would be not one iota of doubt in our products' country of origin and quality", he said.

The Belarusian success story in becoming the primary beneficiary of the Russian food embargo has been a complex mixture of hard work, honest entrepreneurship and cunning scheming. But even with this combination Belarus gained less from the Russian embargo that it had initially hoped.

Originally published at BelarusDigest