CONTENT PREVIEW
Country Risk

Belarus-Russia dairy trade dispute indicates Moscow's intention to use regulatory barriers against EEU member states

28 February 2018

Key Points

  • The dairy trade dispute between Belarus and Russia undermines trade freedom within the Eurasian Economic Union (EEU); Russia, the largest economy in the trade bloc, is imposing restrictions to benefit its domestic producers.
  • This specific trade dispute is likely to be aimed at reducing the volume of food contraband of EU products reaching the Russian market mislabelled as made in Belarus.
  • If this and similar trade disputes within the EEU continue, this will likely lower the efficiency of the trade bloc and its attractiveness to new entrants.

Event

On 26 February 2018, Russia’s agricultural and food sector regulator, Rosselkhoznadzor, said that the ban on imports of milk and dairy products from Belarus to Russia would become effective from 6 March.

On 22 February 2018, Rosselkhoznadzor announced the introduction of the ban on dairy exports from Belarus, allegedly triggered by product quality concerns about Belarusian dairy exports, from 26 February.

An employee controls the production of dairy products at the Babushkina Krynka dairy factory in Mahileu, some 200 km east of Minsk on 1 June 2017. (SERGEI GAPON/AFP/Getty Images #695788752)An employee controls the production of dairy products at the Babushkina Krynka dairy factory in Mahileu, some 200 km east of Minsk on 1 June 2017. (SERGEI GAPON/AFP/Getty Images #695788752)

Both Belarus and Russia are members of the Eurasian Economic Union (EEU), founded in 2015, alongside with Armenia, Kazakhstan and Kyrgyzstan, where trade between the member states should be unrestricted. It was established as a Russian-centred alternative to the European Union (EU) for the post-Soviet states, and is similarly based on unrestricted movement of goods, services, capital and labour. Russia is the dominant economy in the EEU, representing 87% of the combined GDP.

According to official data, in 2017 Belarus exported USD4.9-billion-worth of food and agricultural products, which makes this sector the second largest export industry in Belarus behind refined oil products (USD5.3 billion exported in 2017). Belarusian dairy exports (such as cheese, milk, butter, and yoghurt) reached USD2.1 billion in 2017. Russia is Belarus' largest export market, taking more than 70% of food exports.

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