Belarus loses hundreds of millions of dollars due to milk sanctions

Russia’s sanctions will be rather painful for Belarus. Though supplies to the Russian market are only 4–5% of the Belarusian dairy export, the economy of Belarus may lose hundreds of millions of dollars.

Economist Leanid Zlotnikau told this in an interview to the Charter’97 press center.

“Gross losses are expected in the short term,” the expert says. “We’ll face overstocking. The losses may be hundreds of millions of dollars. We’ll have to sell dairy products at lower cost. If consider the problem in global context, dairy products export to Russian was unprofitable. Only the Minsk region lost 64 billion rubles in the first quarter this year. We sell butter to Russia at $2.8 per kilogram, though its prime cost is $4.8. We well at a sacrifice. So in the long-run period, it’s more profitable for us to produce less dairy and meat products.”

According to Leanid Zlotnikau, it’s too early for Belarus to enter the world food export market.

“There only remains for us to state that we’ve come, guys. We can’t avoid it, so we have to get through it. I’ve written many articles about unprofitable export of milk and meat products. Former minister of agriculture Leanid Rusak admitted this problem too. He was resigned in 2008 after he had told the media about loss-making export of agricultural products. Now, with the same business model, when the state dictates everything, the export remains unprofitable. Entering the world market without agricultural reforms brings losses for the country. We must change the prime cost. Freedom of business and private property must be developed. We need reforms not only in the agricultural sector. That's it. It’s only the tip of the iceberg what’s the media talk about. We have problems not only in trade with milk and meat, but also with MAZ and BELAZ plants. The problems have escalated in the whole economy.”

At the same time, Russia won’t suffer much from the ban on import of the Belarusian dairy products. As Izvestia daily reports, dairies suffer from production overage in summer and even declined sale prices. Another case will be if the embargo lasts till autumn, when lack of genuine milk can be expected. In this case producers can increase prices, as they will have fewer competitors. The economic sanctions may influence only hard cheese production, as it depends on Belarusian products on one fifth. But Russia can overcome this by avoiding production in the country and supplies from the Baltic states and Ukraine.