Lukashenka’s Moldova Visit Raises Hopes for Temporary Solution to Russia’s Agricultural Ban

After the Russian Federation banned, in July 2014, the import of a large list of Moldovan agricultural products, Moldovan businesses have continually looked for solutions. In particular, Belarus has become one of the identified commercial vents for these barred Moldovan exports. Moldova’s Prime Minister Iurie Leanca revealed, at the end of September, that the country’s exports to Belarus in the first seven months of 2014 have increased by some 36 percent, in comparison with the similar period last year (trm.md, September 25).

The necessity to find a market for the agricultural exports that Russia refused to accept just a few months before the November 30 parliamentary elections pushed Moldova’s leadership to invite Belarusian President Alyaksandr Lukashenka on an official visit to Chisinau. The visit, which was conducted during September 24–25, proved to be quite fruitful and constructive, according to Moldovan officials (adevarul.md, September 25) and local experts (publica.md, September 25).

During Lukashenka’s trip, both sides signed a number of documents, including a 2015–2017 bilateral consultation plan between the foreign ministries of the two states. In addition, a cooperation agreement between the two countries’ boards of commerce and industry was established, while the city halls of the national capitals of Chisinau and Minsk signed a cooperation plan for 2015–2016 (presedinte.md, September 24). The two governments also signed trade deals worth an estimated $20 million, which included the export of ceramic products to Belarus, as well as the import of Belarusian agricultural machinery for local businesses and unassembled trolleybuses for the Moldovan capital.

The Belarusian president proposed to examine strategies for increasing the existing bilateral trade balance of about $360 million a year to $1 billion a year in the near future. To achieve this, Lukashenka suggested creating joint ventures in the areas of manufacturing, pharmaceuticals and petrochemicals (pan.md, September 25). The Moldovan side, however, was most interested in increasing its exports of agricultural products to Belarus for further processing and re-export to other markets, especially Russia. For instance, one of the most famous Moldovan wine brands, the Cricova winery, reached an agreement to open a bottling factory inside Belarus (agora.md, September 29). This enterprise will allow the creation of a legal means for Moldovan wines to re-enter the Russian market, since its products will have Belarusian documents of origin.

It appears the swiftly organized official visit was perceived by both sides as largely beneficial. In this regard, Belarus can offer Moldova an entry into the Russian markets, should Moscow continue to ban Moldovan products. In return, Belarus is interested in exploring Moldova’s preferential access to the European Union market. Belarusian experts believe that President Lukashenka was aiming to address his own country’s economic problems by extending the base of potential buyers for Belarusian products, which, allegedly, are currently not selling well internationally (RIA Novosti, September 25).

Data shows that Belarus has significantly increased imports of goods and their production material that Russia used to purchase from European countries but had consequently banned after the embargo war with the EU began (tks.ru, September 18). Belarus intends to exploit this European trade crisis to its benefit and play the role of a trading substitute for the Russian Federation. It is doing so by importing the banned products, processing them and then selling them on the Russian market. Some Belarusian companies are also attempting to profit by re-exporting products after simply replacing their labels—but these entities face the highest risks of becoming penalized by the Russian authorities.

This is fuelling some skepticism about Belarus’s ability to serve as a transit hub for Moldovan agricultural products into the Russian market, since Russia thoroughly monitors its imports. For instance, in early August, Russian customs agents stopped an attempt to bring into Russia 20 tons of Moldovan apples, which had Belarusian documents of origin (agora.md, August 27).

Such incidents suggest that Russian customs officials have considerable capacity to identify foreign products entering Russia under Belarusian labels. However, considering that not all Moldovan exports entering Russia through Belarus are routinely stopped, this could imply a tacit permission by the Russian authorities. A number of reasons may explain this behavior on the part of Moscow.

First, the Russian minister of economy, Alexei Ulyukaev, has accepted that the mutual sanctions with the West have resulted in a significant increase in prices on food products in Russia (rambler.ru, October 2). If unchecked, this issue could lead to increasing social problems. But by allowing in Belarusian re-exports, Russia partially diminishes this problem. At the same time, Russia is able to preserve face internationally, as it does not have to give in to Western sanctions and instead can continue to send strong, obstinate signals.

Second, by allowing Moldova to strengthen its economic ties with Belarus and even develop common production bases, Russia solidifies the ability of the Customs Union (economic bloc currently including Russia, Belarus and Kazakhstan) to continue to influence Chisinau. Essentially, such a policy can diminish the rate of Moldova economic drift toward the European Union, and prevent the total dwindling of economic ties among the former Soviet republics.

Finally, such re-exporting allows Belarus to compensate for the losses it may incur following the establishment of Western sanctions on the Russian oil industry. The Belarusian economy is substantially subsidized via different oil export schemes (hartyja97, September 24). But Russian negotiators might trade the food products re-exporting rights in exchange for Minsk’s concessions on oil exports. If true, such reasoning would somewhat undermine the claims that President Lukashenka is trying to distance himself from President Vladimir Putin, after Russia’s annexation of Crimea, in the attempt to improve his international image.

Whatever the reasons are, Moldova’s incumbent government is clearly trying to obtain Belarusian help to alleviate, at least temporarily, the negative effects of the Russian ban on the Moldovan agricultural sector. And the need to prevent the growth of social tensions ahead of the November 30 parliamentary elections appears to be directing Chisinau’s policy in this regard (tol.org, September 1).