Ukraine may introduce protectionist duties against Belarusian goods

Belarus refused to buy Ukrainian beer and could pay for that

Photo: Ukrainian photo

Belarusian producers may fall into disgrace before the Ukrainian government. “At the moment, duties on certain Belarusian goods are being discussed. Their list is being drawn up,” Minister of Economic Development and Trade Pavlo Sheremeta told Capital.

An interdepartmental commission is working on this issue in the ministry. Its members may propose response measures to the introduction by Belarus of licensing of beer and confectionery exports at uncompetitive prices. Besides food manufacturers, the commission also includes representatives of companies involved in the chemical industry and tire manufacturers. “Manufacturers appealed to the Ministry of Economic Development and Trade with a request to facilitate cancellation or alteration of licensing conditions on the part of Belarus,” said Director for Legal and Corporate Relations at SUN InBev Ukraine Denys Khrenov.

Impossible conditions

Belarus introduced licensing of beer import for six months from May 1 till October 31, 2014 and Ukrainian sweets from May 16. The main condition for obtaining a license is an increase in the minimum retail price by importers by several times. Ukraine’s main brewers (Obolon, Carlsberg Ukraine, SUN InBev Ukraine) agreed to the new conditions of supplies to Belarus. The companies are trying to minimize their losses.

Director of Corporate Communications at Obolon Oksana Pyrozhok says a part of the shipment did not pass through the border due to unexpected introduction of licensing and was held up in temporary storing warehouses. As a result, every manufacturer was obligated to sign an agreement with the state-owned concern BelGosPishcheProm to be issued a license. However, it was not only the price, but also quotas that were specified in the agreement. “For instance, the export volume for the period of licensing from May to October for our company is 890,000 dal. This is practically half the amount of the planned volumes for the year,” says Pyrozhok. In May-October 2013, Obolon supplied 1.4 mn dal of beer to the Belarusian market, says Pyrozhok.

Confectionery manufacturers did not make concessions for Belarus. “Ukrainian manufacturers are being forced to set prices 50-100% higher than the prices of the same products made in Belarus,” says President of the UkrKondProm Association Oleksandr Baldynyuk, adding that for this reason the supplies of goods to Belarus were suspended. Starting from July 10 Belarus also limited the import of potatoes from Ukraine.

Possible sanctions

The Ukrainian government has not yet made a decision on retaliatory actions against Belarusian products. “We are still discussing and trying to find a solution,” said Sheremeta. According to information of the Ministry of Revenue and Duties, the Ukrainian market is a priority for Belarusian manufacturers of potash fertilizers (our country accounted for 94% of the total foreign supplies in the amount of US $68.16 mn last year), milk (55% - UAH $3.98 mn), butter (approximately 15%, US $9 mn), salt (55% - US $2.53 mn), beer (27% - US $13.17 mn), smoked and salted fish (47% - US $3.6 mn).

Minsk may reconsider the licensing conditions if the Ukrainian government takes a tough response action, says Baldynyuk. “Otherwise, we will not reach an agreement,” he assured. Belarusian suppliers do not fear limitations by Ukraine. “There is always a possibility to re-orient to the Russian market. It is currently closed for Ukrainian cheese and dairy products,” says manager of Belarusian supplier of dairy products Babushkina Krynka, who requested anonymity. Meanwhile, Director of CEC Ukraine, a consulting company, Oleksandr Lengauer believes the introduction of duties on import of buses and trucks manufactured at the Minsk Automobile Plant will be the most painful step. Local market players could take the place of Belarusian companies. “Our manufacturers will only benefit from lower volumes of Belarusian milk products on the Ukrainian market,” Lengauer noted. Domestic companies will thus be able to compensate for the losses due to the reduction of supplies to Russia, eastern regions and Crimea. A similar situation has been observed on the beer market.