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  Russia‘s sanctions against Lithuania: economy affects political outcomes

Auđra Radzevičiűtë-Kornelija Bradaitë
2013 11 04

This autumn Lithuania has been twice hit by Russia: the cargoes transported by Lithuanian carriers got stuck at Russian customs posts, whereas the exporters of dairy products have been informed that Russian sanitation services claimed to have found substances dangerous to health in milk, cheese, curd and other Lithuanian-made dairy products.

In response to the above, three versions have been discussed in Lithuania, namely: Moscow‘s political pressure on Lithuania which has taken over the presidency of the EU Council (besides, the Eastern Partnership Summit will also take place in Lithuania (Vilnius) in November); the attempt to influence Lithuania’s attitude toward Gazprom; and rough protection of the domestic market including the violation of international commitments. Each of the above versions is possible or may be subject to criticism.  

Economic pressure as a political instrument

The Eastern Partnership is an EU policy aimed at developing cooperation with the Eastern partners, supporting the ongoing reforms and bringing the Eastern neighbours closer to the European Union. Russia is not happy about this policy, whereas Lithuania demonstrates an active support of this process. But is it realistic for Moscow to turn the Eastern Partnership process back, especially after having increased controls of carriers and claimed on the contaminated Lithuanian curd? Or can Moscow expect that Ukraine will not sign an association agreement with the EU? 

Most likely Russia‘s actions are directed not against Vilnius, but against Brussels. The economist Ţygimantas Mauricas supports this idea: „It is a real challenge for the EU. If the EU falls apart, this would be a sign to the states like Ukraine or Caucasian countries that it is not worth joining the union which is unable to protect the interests of its members“. And vice versa: if the EU responds adequately and backs up a new policy with a common voice, new members of the EU could stop being afraid of the Eastern neighbours and pursue free trade with the West.

Has the EU passed the exam? One could argue concerning the speed of response but the results are obvious: during the official visit to Brussels, President Dalia Grybauskaitë thanked the EU leaders for the support and quick reaction in resolving the issue of trade restrictions. The European Commission applied to the WTO concerning these restrictions; on Friday this issue was considered at a meeting of the WTO Council for Trade. The President underlined that such trade restrictions, apparently politically motivated, are unlawful and contravene the principles of the WTO. Moreover, unjustified trade barriers applied to one of the EU member states infringe the principles of equal economic cooperation between the EU and Russia.

Just economics?

According to the website kaliningrad.ru, Dmitry Chemakin, the Minister of Industry and Trade of the Kaliningrad region, didn’t hide that increased customs controls at the Lithuanian borders could be replicated; according to the recent information the restrictions affected not only the Ukrainian confectionary producers but also the importers of other countries. The Polish, Estonians and Latvians have already received „signals of anxiety“ concerning the imposed strict customs clearance procedures.

According to the statements on the Lithuanian public space, the scenario of „choking“ the Lithuanian carriers and milk producers could have been developed outside the Kremlin. In this country the economic interests of different stakeholders can be regulated by attracting relevant institutions. Yet, there are many „buts“.  

Lithuania’s former Permanent Representative to the WTO Raimondas Aliđauskas wrote that „import duties were reduced by using the Customs Union as a shield; carriers from Lithuania, its EU neighbours and Turkey were accused for smuggling and were pushed out of the Russian market; „huge amounts“ of pesticides, antibiotics and other hazardous substances were found in fruits, vegetables, meat and dairy products exported from Europe to Russia. [...] A more detailed analysis of Russia’s Chief Sanitary Inspector Gennady Onishchenko’s statements on the found dangerous substances, and major or minor disagreements of the official Moscow and other states revealed quite interesting regularities. 

It was Onishchenko who claimed that wine from Georgia and canned fish products from Latvia might be detrimental to human health (including frozen poultry). When in November 2011 two Russian pilots were detained in Tadzhikistan and accused for smuggling, Onishchenko soon „found“ that many of the Tadzhik nationals arriving to Russia were HIV/TBC carriers.

In 2012 Lithuania‘s export to Russia amounted to LTL 15 billion (nearly 19 percent of the total country‘s export), whereas dairy products delivered from Lithuania accounted for only 1,4 percent of the market of these products in Russia. For Russians the volumes of this import are insignificant, but not for Lithuania; and when this is an economically important issue, political implications are inevitable.

According to Giedrius Baguđinskas, Director of the Lithuanian Food Exporters’ Association, „if Russia continues to impose restrictions, we will lose part of the Russian market. In some sectors Lithuania accounts for several percent of the total import to Russia and is ahead of the states like Poland or Germany.“ He said the Russians want to receive production in due time, but the price of production increases because of truck delays at customs posts, and the time of product realisation reduces. This determines a search for an alternative production.   

It is worth listening to Giedrius Baguđinskas words: a rapid growth of exports of Lithuanian food products to Russia was determined not only by the efficient work of our undertakings – Lithuania has filled the niche which was left (under compulsion) by Germany, Poland, Spain and Belarus. Even the United States, one of the largest poultry suppliers to Russia, has encountered trade restrictions.   

The conclusion could be as follows: Russian market might be a good source of income, but all your input and efforts might come to naught or fail in one minute. And hardly can the understanding of a mystic „business culture“ help here, nor a suggestion to learn from Finland‘s ability to get out of a scrape so as not to affect dignity and earn money. But in the 21th century Russia is not the only country where politics effects the economy.    

We can only expect that resignation of the „almighty“ Gennady Onishchenko from the post will at least temporarily help solve economic/political problems of Lithuanian-Russian relations.

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