EU pushes Serbia to hold fire on export boost to Russia

By bne IntelliNews August 25, 2014

Clare Nuttall in Bucharest -

 

Serbia has again become caught in the middle of the diplomatic and trade war between Russia and the EU. As Russia opens its market to Serbian cheesemakers, the EU candidate state has agreed under pressure from Brussels to refrain from active support for local producers aiming to replace EU suppliers on the Russian market. 

Prime Minister Aleksandar Vucic said on August 22 that Belgrade will respect the will of the EU and will not introduce any new subsidies for exports to Russia, but that Serbia will also not join western sanctions against Russia. Vucic also confirmed that he had received an aide-memoire from the head of the EU Delegation to Serbia, Oscar Benedict, asking Serbia to not to offer support for new trading activities, a Serbian government statement says. 

"We won't stop production or exports, but we won't introduce new subsidies either. We will behave in line with the recommendation we received, but we will not introduce sanctions against Russia,” Vucic told a press conference, according to B92. "Our strategic path is the path to the EU, …[but] we must preserve good, friendly relations with Russia," Vucic added. 

In retaliation for the raft of sanctions placed on Russian individuals and companies over Moscow's role in the Ukraine crisis, Russia announced a ban on a wide range of food products from the EU, Australia, Canada, Norway, the US and several other countries on August 7. The ban will remain in place for one year. 

Pushing for candidacy, Albania and Montenegro have opted to join EU sanctions. That leaves Serbia and neighbouring Macedonia among the only European countries in a position to take advantage of the ban. However, on August 15, the EU’s foreign affairs council called on candidate countries, which include Serbia, to "refrain from measures which are aimed at exploiting new trading opportunities” arising from the Russian ban. 

While Brussels cannot order candidate states to comply, given Serbia’s eagerness to join it can bring pressure to bear on Belgrade. The EU is also a more important market for Serbia than is Russia, accounting for nine times more of its exports. Russia received only around 7.2% of Serbian exports in 2013, although an increase has been recorded this year. The potential for Belgrade to boost exports is also limited due to the impact of this year's flooding on the agricultural sector. 

Scouting for supplies

Still, Moscow has been targeting Serbia, along with other countries from Asia, the Middle East and Latin America, to make up the shortfall, and Serbia has indicated it would be keen to play ball. The Serbian Chamber of Commerce has already opened a coordination centre to support companies exporting to Russia, with Trade Minister Rasim Ljajic forecasting the country could boost agricultural exports to $300m or more  by the end of 2014, according to Voice of Serbia.

On August 23, Russia’s state sanitary agency Rosselkhoznadzor said that it has lifted its ban on dairy exports for two Serbian firms, which had previously been barred for breaches of food regulations. Two days earlier, Russian Agriculture Minister Nikolai Fyodorov announced Serbia was ready to increase cheese exports to Russia, and indicated that Moscow would be opening up the market to between 10 and 30 Serbian suppliers. 

“We will be ready to allow delivery of dairy products from Serbia if the country’s veterinary service is ready to provide guarantees,” Fyodorov said after a meeting with Serbian counterpart Snezana Bogosavljevic-Boskovic, Itar-Tass reports. “We are talking about huge milk-processing plants that intend to deliver their products, primarily cheese, to the Russian market." 

According to Rosselkhoznadzor head Sergey Dankvert, as of mid August, talks had taken place with 16 countries with a view to increasing food imports. This included a delegation sent to Ankara. “Turkey is a major supplier of food and agricultural produce to Russia. It is ready to increase its food exports to Russia if necessary,” Turkish Economy Minister Nihat Zeybekci said in an interview with the Russian newswire. 

Turkey exported $1.18bn worth of agricultural products to Russia in 2013, of which almost three quarters was fruit and vegetables. However this was just 6.9% of Turkey’s total agricultural exports of $17bn. 

Several CIS countries, including Azerbaijan and Kazakhstan, are also looking to increase exports to Russia. The chairman of Kazakhstan's National Chamber of Entrepreneurs Ablay Myrzakhmetov has said Kazakh producers could increase exports of milk and dairy products, meat, cooking oil and confectionery, bne reported. However, Ivan Sauer, chairman of Kazakhstan's Meat and Dairy Union, said on August 11 that a large scale outflow of Kazakh dairy products to Russia is not expected since local producers already have customers within the country. 

Food exports were on the agenda at a round of talks between Russian and Azeri officials in Moscow on August 20, Azernews reports. However, like Serbia, while Azerbaijan has a growing agricultural sector it does not yet produce sufficient fruit, for example, to meet domestic demand. 

Meanwhile, Moscow has insisted it will stamp out efforts by western suppliers to circumvent the ban, for example by labelling EU products as Serbian or Turkish. On August 24, a Rosselkhoznadzor spokesman called on the Turkish authorities to clamp down

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