The investigation has been instigated by the Russian Sugar Producers` Union, which stated that most sugar producers were operating in the red because of Belarussian sugar supplies: the raw sugar production cost is $500 per tonne, while the Belarussian sugar enters the Russian market at $480 per tonne. The investigation may result in introducing a compensation duty set at $149/t. This may spur sugar prices in Russia by at least 10%. Presently, Belarussian sugar is supplied to Russia duty free. However, no import duties are set for sugar produced in Belarus from own sugar beet. In 2004, Belarus used its sugar beet to produce only 300,000 tonnes of sugar, while its sugar imports totalled 423,000 tonnes, meaning that part of sugar is produced from raw materials supplied from other countries.
The Russian sugar market has an annual capacity of 5.0 to 5.5 million tonnes (about $3.0b). In 2004, 2.25m tonnes were produced from sugar beets and 2.6m tonnes from imported raw materials and a further 623,000 tonnes were brought into Russia, with 80% from Belarus.