Helping to guarantee Russia’s food security, Minsk increases its value to Kremlin
Amid escalation between the Kremlin and the West, Belarus is aspiring to reinforce her role in international trade by supplying Belarusian goods on the Russian market to replace western suppliers which fell under Russia’s sanctions. If Belarus increases her exports to Russia, Belarus’ domestic market might be hit by food deficit and economic imbalance will increase. Meanwhile, Belarus is anticipating skimming the cream off potential grey re-exports of goods to the Customs Union market.
Russia’s President Vladimir Putin phoned President Lukashenko to inform him about the economic sanctions introduced by Russia against some goods from countries which had imposed sanctions on Russian organisations and citizens.
The Belarusian leadership was upbeat about the sanctions introduced by the Kremlin against imports of some foodstuffs from the EU, USA, Australia, Canada and Norway. Belarus is aspiring to replace some of the imports from these countries with Belarusian products. Belarus’ First Deputy Minister of Agriculture and Foodstuffs Leonid Marinich said: “For us, this is the Klondike. We are willing to replace food supplies from Western countries”.
The Kremlin is also counting on Belarus’ assistance in fighting against potential food supply deficit, since some of the goods from the ‘sanctions list’ had a lion’s share on the Russian market. For instance, meat production in Russia covered only 70% of the domestic market demand. Belarus’ Agriculture Minister Leonid Zayats said he had already scheduled a meeting with Rosselkhoznadzor Head Sergey Dankvert “to discuss issues related to the supply of Belarusian products to the Russian market”.
In January – May 2014 beef and dairy exports from Belarus to Russia fell by 17.2% and 2.6% accordingly, compared with the same period in 2013. Some experts are expressing doubts that Belarusian agriculture will be able to replace foodstuffs from countries that have come under Russian sanctions. They say that Belarus will be unable to swiftly increase her production of goods from the ‘sanctions list’, such as dairy products, pork, beef, vegetables and fruits.
Interestingly, Belarus herself imports significant volumes of some of these foodstuffs from the EU. Most likely, the Kremlin will turn a blind eye to grey re-exports of foodstuffs from Belarus, especially, if Russia is hit by a deficit. In addition, Belarusian retailers might be prompted to replace Belarusian products exported to Russia with imported goods from the EU.
It is worth noting that Belarus has already been hit by pork deficit. For example, on May 1st, 2014, the number of pigs in Belarus decreased by 19.5% compared with 2013. President Lukashenko personally reacted to the situation and demanded pig livestock to be restored by the year-end.
All in all, Belarus has upped her importance in the Kremlin’s eyes as a guarantor of Russia’s food security. Belarus may also become a switch dealer who supplies scarce EU-made goods to the Russian market. If tension between Moscow and Western capitals escalates, Minsk will also become more valuable to Russia as a military ally.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.