Russia Strikes Back at Belarus in New Trade War

Belarus Map

(RIA Novosti – MOSCOW/MINSK, August 29, 2013) ­ Russia hit back at two mainstays of the Belarusian economy this week after Minsk arrested the head of Russia’s largest fertilizer company, imposing cuts on oil exports and threatening food imports in moves that it insists have no connection to the arrest.

Russian oil pipeline monopoly Transneft announced plans Wednesday to cut oil supplies to Belarus by 400,000 metric tons for September, slashing 20 percent of Belarus’ total monthly oil imports. Transneft officials claimed the company had to reduce the oil supplies as it needs to replace 700 km (440 mi) of old pipelines.

“This is for technical and technological reasons ­ the idea was proposed back in March,” Transneft’s vice president Mikhail Barkov told Vedomosti. “It’s meaningless to look for any kind of manipulation of Belarus from Transneft’s side.”

The move came as a surprise to Belarus, however. Its state-owned oil company Belneftekhim only received official notification of Transneft’s “corrected” delivery plan a full day after the announcement, the company’s press secretary Marina Kostyuchenko told RIA Novosti.

Belarus relies entirely on Russian oil to supply its two major refineries.

In a further move Wednesday, Russia’s chief sanitary inspector Gennady Onishchenko criticized the quality of Belarusian milk products and cast doubt upon their safety for Russian consumers.

A statement on the website of his agency, Rospotrebnadzor, claimed 72 of 240 Belarusian milk products sampled failed to meet quality and safety requirements in a recent lab test. It claimed the pass rate for some specific products were even worse, with 39 out of 83 butter samples failing to pass inspection.

“These facts indicated a weakening of control in the Republic of Belarus for the quality and safety of food products,” the statement said.

Though Onishchenko has not announced a ban or import restrictions in response to the findings, the announcement is an ominous sign for Belarusian food exports to the Russian market. Russia consumed nearly half (46.7 percent) of Belarus’ dairy exports last year according to the Russian national milk union Soyuzmoloka, and its products remain popular with Russian consumers.

Onishchenko denied the timing of his comments was linked to the Uralkali incident, although he made similar criticisms of Ukrainian confectionary earlier this month prior to a trade war with Kiev, and has also attacked Georgian and Moldavian produce in previous years during times of tension with those nations.

The dispute is also reminiscent of another “milk war” between the two nations in 2009, when Russia briefly banned its neighbor’s milk products at the time of another diplomatic row.

The milk and oil measures came just days after Vladislav Baumgertner, the CEO of Russian potash fertilizer firm Uralkali was detained in Minsk and charged with abuse of power. Belarusian officials claim his arrest is the real motive for Russia’s actions.

Baumgertner remains in detention in Belarus, but has filed an appeal for his release.

Uralkali pulled out of a cartel it operated with Belarusian potash producer Belaruskali in July, accusing its former partner of selling some of its output outside that cartel.

The pull-out caused prices for potash, one of Minsk’s most vital exports, to crash, and the value of Belaruskali to plunge. Uralkali held talks to buy a stake in the company last year, which collapsed after Belarus’ President Alexander Lukashenko said Minsk would not sell a controlling stake, and priced the company far above analysts’ estimates of its market value.

The two nations have a long history of quarreling over economic matters. Russia, keen to prop up one of its last political allies, has in effect subsidized the Belarusian economy with cheap oil and gas and loans, but Moscow appears to be increasingly impatient with what it sees as Belarus abusing that largesse.