How Belarus exports sanctions products to Russia

The allied state continues to increase food supplies to Russia.
On a dark August night, Russian border guards ambushed a newly discovered contraband route in the Smolensk region near the settlement of Gusino. A five-kilometer road was built to bypass the border crossing point on the Belarusian-Russian border. The first raid brought a solid catch. On the night of August 8-9, border guards detained nine trucks with fresh apples, peaches, plums and cherries from Poland weighing about 175 tons. The whole cargo was subsequently transferred to the Rosselkhoznadzor for destruction.

The search for smuggling involved not only border guards. The territories bordering Belarus are patrolled by interdepartmental mobile groups of customs officers, border guards, police and inspectors of Rosselkhoznadzor. Such detachments began to work in the border areas of Russia in 2014 to put a barrier on the way of products falling under the food embargo. In the summer of 2014, Russian authorities banned the importation of fish, dairy products, meat products, fruit and vegetables from countries that joined anti-Russian sanctions, the European Union, the United States, Canada and Australia. But the prohibited products went to Russia through the territory of Belarus. After all, both countries are members of the Customs Union, and there was no control of the goods at the border.

So, in January Rosselkhoznadzor reported on the detention of a truck with a load of Chinese cabbage and apples. This was a typical example of contraband: at first glance, the driver had documents for the goods in order, according to phytosanitary certificates, vegetables and fruits were grown in Belarus. But right behind the door of the carcass on boxes with apples there were labels indicating that all the products had been manufactured in Poland, one of the raid members recalled. The load was sent by the lazy people in the hope to smuggle them to Russia, he sneered. Another risky way to introduce prohibited products into Russia is to do this with "cover goods", such as mineral water, green peas, sugar, kvass, wallpaper paste. The documents will be drawn up on them, but with minimal control of the cargo, the deception will unfold. Over 10 months of last year, more than 1,544 tons of such products were detained in border areas with Belarus, Rosselkhoznadzor reported. These methods were popular in the first year after the embargo, but after the emergence of mobile groups and the introduction of a rule on the destruction of sanctions products, they were out of fashion. Violators have become more cunning, now it is difficult to prove the illegal origin of products. In Belarus, the whole industry is working to turn a sanctionable product into a legal product, Vedomosti's interlocutor said. For three years the country has dramatically increased the supply of products to Russia: milk and dairy products - by one third, meat - almost a half times, apples, pears and quinces - more than doubled.

The Belarusian authorities deny the charges. "Belarus does not paste stickers for sanctions products, but recycles imported raw materials," the president of the republic, Alexander Lukashenko, stated categorically in February. In his view, the product of processing is sold on the domestic market. Lukashenko sharply criticized Russia's attempts to control Belarusian exports and even offered to open a criminal case against the head of Rosselkhoznadzor Sergey Dankvert for obstructing the supply of Belarusian food to Russia in violation of international law. There are cases of gluing and falsification of waybills on sanctions products in Belarus, the president admitted, but it's "miserable, not even half a percent, it's hundredths of a percent." And we are fighting this." According to his version, Russian customs officers and other officials take part in the fraud. Looking at the statistics of foreign trade, Vedomosti found out that the problem is somewhat more than President Lukashenko believes.

Disappearing imports

Deliveries of plant products from Belarus in 2016 increased sharply: carrots 2.6 times, apples 1.5 times, and Beijing cabbage 3.3 times, according to customs statistics. It is impossible to find out exactly what caused this phenomenon, Rosselkhoznadzor inspectors have no ideas: in February the department canceled the planned inspection of enterprises in Belarus. The visit just had to explain the growth of exports. "Rosselkhoznadzor was forced to take a similar decision in connection with the current fears of a number of inspectors in possible provocative actions from the Belarusian side," the report said on the Rosselkhoznadzor website said.

Using its powers, Rosselkhoznadzor for the last three years repeatedly suspended import of a number of Belarusian enterprises, making claims to its quality. But vegetables and fruits from all over Europe, Ukrainian cheese products, Norwegian fish, Belgian pears are still traveling through Belarus. The scale of the problem is very clearly seen in the example of Polish apples. The largest European producer, Poland, before the sanctions was the leader in export of apples to Russia. Our country was its the largest export market. For example, in 2013 Poland, according to the International Trade Center of the United Nations, provided 55% of Russian exports of apples, shipping to Russia 751 000 tons. After the introduction of sanctions, exports crashed.

Polish apples returned to Russia, exports were restored in almost pre-sanction volume, wrote in March the Polish newspaper Dziennik Gazeta Prawna. For obvious reasons, the Federal Customs Service does not register such volumes. According to it, the export of apples from Belarus, although it increased sharply compared to 2015, but still did not reach the level of 200,000 tons. But the supply of Polish apples to Belarus increased almost fourfold: from the previous 153,000 tons to almost 550,000 tons According to the results of 2016, the statistical services of Belarus do not give exact data on apple consumption, but judging by them, the total consumption of fruits in the republic did not change sharply during this time, as well as the harvest.

What's going on? And why the control of cargo on the Russian border area and the threat of destruction of the detected sanctioning goods stopped frightening suppliers of sanctions products?

Double certificate

More and more popular is another way: double certification. In 2016, cases of double certification of products entering Russia - when certificates with different country of origin - real and fictitious - were issued for the same product compared to 2015, Rosselkhoznadzor representative Yulia Melano told Vedomosti. Vegetables and fruits are an impersonal product whose country of origin is very difficult to identify even in a laboratory study, warns Dmitry Vostrikov, director of development of the association of producers and suppliers of food products "Rusprodsoyuz".

For example, a year ago it was found out that according to the certificates of Moldova issued in Transdniestria, Belarus could get 20 000 tons of apples. Law enforcement authorities of the country accused the phytosanitary service of Moldova of corrupting the issuance of certificates for products that are not known to be Moldovan. As a result of the investigation it became clear that the participants of the scheme from Transnistria sent certificates to Lithuania, Polish apples arrived there, and from there they entered Belarus with new documents. The cost of certificates per one truck in 20 tons was $800-1000. The acquirer of several batches of apples was Beltamozhservis, owned by the State Customs Service of the Republic.

Belarus only in 2016 legalized to supply to Russia not less than 250 000 tons of apples and pears from countries falling under the Russian embargo, Dankvert said. He explained: 24 African countries, which were listed as suppliers of this number of apples and pears to Belarus, confirmed that they did not ship the fruit to Belarus at all, so the fruits allegedly come from these countries are the legalization of the sanctions, Dankvert told Interfax . According to him, apples with fake phytosanitary certificates of Guinea, Mali, Burkina Faso, Benin, Liberia and others went through Belarus. A year earlier, Morocco, Tunisia, South Africa, Israel, Bosnia and Herzegovina, Macedonia, Serbia, Brazil, Chile, Ecuador were popular. But as soon as Rosselkhoznadzor has limited the number of checkpoints through which it is possible to import products from these countries, it began to enter Russia through Belarus from the countries of tropical Asia and the Middle East - and with these certificates.

Last year, according to official statistics, Belarus imported 744,000 tons of apples and pears, produced another 140,000 tons, exported only 210,000 tons, and almost all to Russia, Dankvert reported. It turns out that every resident of the country, including babies, had to eat more than 70 kg of apples per year, he was surprised. Belarus does not disclose data on the consumption of apples and pears, but according to the statistical service, the average per capita consumption of all fruits and berries is less than this figure. The scheme of fruit movement through Poland in 2016 has not changed, only the documentary registration of products has changed, the president of the National Fruit and Vegetable Union Sergey Korolev believes. Suppliers send cargo through Belarus, use Serbian or Moldovan certificates. Therefore, in Russia everything looks decent.

On the shelves of network retail stores, Polish apples, like other sanctions products, cannot be seen. "Dixie" between September and April, sold apples from Russian and Serbia in proportion 50/50, from April to August - from Russia and the countries of the Southern Hemisphere (Chile, Argentina, South Africa), says the representative of the network. The share of Russian products in all product categories increased, in apples - by 20%, he notes. In "Victoria" the share of domestic products has been steadily growing for the last two years, the representative of the network notes.

Apples in Poland are cheap, which allows companies that supply products from Belarus to Russia to earn extra money. The average cost of apples, according to Belstat, in the domestic market in 2016 was $1.74 per 1 kg. In Russia it is even lower - about $1.4. Large Polish producers ship apples at 0.2-0.4 euros per 1 kg.

Dairy rivers

Belarus, of course, has become the main beneficiary and product embargo on dairy products - 85% of imports fall on this country, the Executive Director of the National Union of Milk Producers (Soyuzmoloko) Artem Belov states. According to his estimate, the delivery of dairy products from this country to Russia from 2014 to 2016 grew by 1.5 times to 6.5 million tons, while Belarus produces about 7.2 million tons. The Belarusian and Russian customs statistics do not coincide, he warns (indeed, according to these data, less than 1 million tons of dairy products were supplied to Russia). It looks like Russia is buying up the bulk of dairy products in Belarus, but obviously there is a re-export from European countries, Belov is sure. In Europe, milk is so cheaper that it is advantageous for Belarus to import it, process it and send it to Russia, where dairy products are expensive, Belov thinks. Belarus buys milk from Belarusian producers in the Baltic states and Poland, the top manager of the Russian company knows.

Also, Belarusian enterprises are actively processing European fish that fell under the Russian embargo. It is no accident that Belarus almost 7 times increased the import of frozen fish from Norway. And, judging by the statistics of the UN, the whole increase was reworked and then sent to Russia.

The largest European suppliers of fish in Russia instead of Norway are the Faroe Islands and Greenland, which have not joined the sanctions. But they can not compensate for the volumes of Norwegian fish that have left the market, that is why all Russian companies are actively increasing their market share, says Sergey Sennikov, deputy director of one of the largest fish producers in the country, Narebo.

The product embargo has given price advantages to Russian producers - for example, apples and pears, as the costs of importers have increased due to changes in established supply chains, but it is premature to talk about import substitution, as the industry requires long money and infrastructure support - subsidies for the construction of storage facilities, etc., Vostrikov from Rusprodsoyuz believes.

Sanctions without laws

The history of the fight against the re-export of sanctions food from Belarus could not develop differently, one of the former generals of customs service shares with Vedomosti. After the imposition of the embargo, the country's legislation was not adapted, and for effective counteraction to illegal imports, we need a ban and responsibility for the turnover of "sanctions products", the establishment of trade rules with the Customs Union partners that do not support the sanctions regime, he explains.

Belarus re-exports apples to Russia, but only from countries which didn't adopt the sanctions, the prime minister of the republic, Andrey Kobyakov, assured. "If Rosselkhoznadzor then has problems, that somebody has forged documents, God forbid, then, of course, it is necessary to ensure the criminal prosecution of those persons who are engaged in this case. Believe me, the overwhelming majority of these people should be sought not in the Republic of Belarus, but where they then consume and sell these products," Kobyakov said in response to the accusations.

It may seem that the main result of countertransactions was the geographical redistribution of food supplies: instead of some countries, others came and there was a  rise in food prices, and very significant. The boom for import substitution is yet to be seen. There's no explosive production growth in Russia. Chief BCS economist Vladimir Tikhomirov states that the obvious effect of the food embargo was the growth of inflation. But by mid-2015 it had already become invisible and is now out. He cites data from the Ministry of Economic Development, according to which in 2014, with a total product inflation at the end of the year at 15.4%, the counter-sanctions contributed 3.8 percentage points. A much greater effect on the depreciation of the ruble as a whole had a fall in oil prices.

The effect of the embargo on the dynamics of the economy as a whole Tikhomirov estimates as barely noticeable given the small share of agriculture and food industry in Russia's GDP. In the reporting of the companies of the industry, the inflow of investments into the modernization of production is seen, and taking into account the fact that the investment processes take 3-5 years, one can conclude that the positive effect of the influence on the industry is stretched in time and has not been fully implemented yet, he adds. .

Professor of the Higher School of Economics Yevgeny Gontmakher warns that the current "greenhouse" conditions for domestic food producers and agrarians will lead to the fact that they will be uncompetitive when opening a market. But there is no mechanism for increasing competition now.