For more than a month there has been a ban on the export of dairy products from Armenia to Russia. In Russia, this decision was justified by “the use of Iranian raw materials in Armenian products, the import of which into the Russian Federation is prohibited.”

Although Rosselkhoznadzor checks revealed this problem only in the products of two Armenian producers, the import of dairy products of all exporters is prohibited, and for an indefinite period.

Farmers also suffer losses

The Igit company does not use Iranian raw materials in its production, but as a result of the ban, it lost the opportunity to export to the Russian Federation. According to the manager of the company Aram Kroyan, mainly cheese was exported to Russia, 30-40 tons per month.

Due to the ban, which has lasted more than a month, the company has had to look for additional premises to store finished products. In addition, the company has reduced the volume of purchases of dairy products from farmers.

The company’s only hope is that the ban will be lifted in the near future and it will be possible to export products to Russia again.

“If the export ban is not lifted as soon as possible, the farmers will suffer first of all. The fact is that with the beginning of the spring season the volume of milk produced has increased and companies are forced to reduce the volume of purchases. If the ban drags on, manufacturing companies will have to look for new sales markets, as well as think about layoffs, and possibly closing production facilities,” Kroyan says.

The problem is being discussed at the state level and negotiations are underway between the Food Safety Inspectorate of Armenia and Rosselkhoznadzor. After a bilateral meeting on April 17, the Armenian side said: “Both sides have demonstrated a constructive approach and agreed to resolve the issue in stages.”

A Russian statement said: “Flaws in the supervision system have allowed Armenian companies to export products made from raw materials from Iranian enterprises that are not allowed to trade with Russia. As a result, in 2022 Armenia increased oil supplies by ten times. Such schemes disrupt the competitive environment not only in the Russian market, but also introduce an imbalance in the economic activity of the EAEU.”

The Eurasian Economic Union operates under the leadership of Russia and includes Armenia, Belarus, Kazakhstan and Kyrgyzstan. The organization provides its members with freedom of movement of labor, goods, services and capital. Armenia joined the EAEU in 2015.

Is the ban a lever for political pressure?

The difference in the content of these two messages reinforced the opinion of experts that it was not about economic or food security, but about politics.

“As a rule, the parties agree in advance with each other that the transmitted messages have the same content. Various statements testify to a serious conflict in relations between the Republic of Armenia and the Russian Federation,” economist Nairi Sargsyan says.

In her opinion, the ban is due to tense relations between Armenia and Russia due to the change in Armenia’s foreign policy vector towards the West:

“States use different tools to restore, correct or maintain relations. We can consider the ban as one of such tools.

Russia, having sufficient stocks of dairy products, allows imports solely for the purpose of strengthening political and other influence on Armenia. In order to maintain superiority in the countries of its sphere of influence, including Armenia, the Russian Federation distributes some kind of carrot. In this case, the carrot is a permit for the export of dairy products from Armenia to Russia.”

“There were no alarms”

Food law specialist David Pipoyan does not find the decision of Rosselkhoznadzor to ban the export of Armenian dairy products surprising. He considers the problem from a professional point of view and taking into account the many problems in the manufacturing sector:

“If we look at the trends in the development of the sphere, we will notice a regression in almost all aspects of food safety. Prior to the Rosselkhoznadzor, the Investigative Journalists Club of Armenia carried out sectoral expertise of Armenian dairy products. The Food Safety Inspectorate has followed the trail of violations identified by journalists and found various violations in many manufacturers. But no conclusions were made after these alarming signals, let alone action.”

Pipoyan emphasizes that the supervision of food production needs radical changes, but “there is no political will to solve the problems of the sphere.”

Compared to recent years, the volume of exports, in particular of butter, has increased significantly. According to the Ministry of Economy, if in 2021 only 170 tons were exported to Russia, and in 2022 more than 3,000.

“I think in Russia they noticed that there was a sharp change in volumes, which is an important indicator for assessing risks. They realized that the volume of production in Armenia could not increase so dramatically. For this reason, they had doubts about the use of raw materials imported from third countries. Therefore, we decided to check whether proper control is carried out. The message of the Rosselkhoznadzor contains a clear message about the lack of confidence of the Russian Federation in the work of the inspection body of Armenia.”

“If Russia hears what it wants, the ban will be lifted very soon”

Pipoyan does not exclude a political background to Russia’s decision.

“There may be a political context, but if your production does not meet the quality criteria, no one is obliged to turn a blind eye to this,.”

Economist Narek Sargsyan believes that Russia is not announcing a specific date for lifting the ban, as it awaits an answer to the question of whether Armenia remains in its sphere of influence. The decision of the Russian Federation, in his opinion, is directly related to which foreign policy vector Armenia will choose:

“If Russia hears what it wants, the ban will be lifted very soon. And if not, then I think other areas may also be subject to sanctions, in particular the manufacturing industry.”

Risks of a prolonged ban on exports to Russia

According to experts, if the ban drags on for three to six months, Armenian producers will face serious problems.

“For the domestic market, the number of active dairy producers is actually too large. They didn’t open to satisfy the local market. And since Armenia has not diversified export markets, including for dairy products, we face a very serious danger. It is possible that in the long term it will be possible to organize itself, review production volumes, and diversify markets. But in the short term, I think the country will have serious problems,” economist Narek Sargsyan says.

Food law specialist David Pipoyan hopes that the problem will be resolved in the near future.

Regardless of the development of events, experts consider it abnormal that 45 percent of exports from Armenia go to Russia. They argue that it is necessary to think about the diversification of markets, otherwise Armenia will continue to depend on the Russian Federation.

“You can never be completely dependent on any country, either in terms of exports or imports. But we are well aware that there are many obstacles to entering other markets, starting with the prices of local products. It is very important for Armenia to enter the market with high purchasing power,” Pipoyan says.

In any case, Pipoyan considers compliance with food safety standards to be paramount:

“First of all, it is necessary to respect the rights of citizens and consumers of our country, as well as the countries where we export our products, and not to ignore safety issues.”

Source : Jam News Aug 15th 2023