KEY ARTICLES

THE EAEU: FOOD SECURITY AND IMPORT SUBSTITUTION

ЕАEU: today and tomorrow Journal № 2 (16) 2022
– How acute is the issue of food securi­ty in the EAEU countries today? What goods go to Russia through the Union partners and to what extent?

– By food security we mean the physi­cal availability of goods, namely, food security. From this point of view, the situation in our countries is generally favorable. For such key types of food as grain, meat and dairy products, po­tatoes, eggs, almost all the countries of the "five" provide the population at a high level through their own pro­duction.

If we consider the issue at the context of the countries, the highest indicators of self-sufficiency have been achieved in Belarus (94%) and Russia (90%). Fol­lowing are Kazakhstan (83%) and Kyr­gyzstan (81%). In Armenia, the level of self-sufficiency is 73%. Such differences are due to the socio-economic condi­tions, specialization, technical and tech­nological level of development of the agro-industrial complex of the EAEU states.

However, in the conditions of force majeure, as it is today, the established interaction between countries is some­times disrupted. Primarily, they try to provide for themselves by restricting other countries access to certain prod­ucts. Therefore, the EEC strives to adopt the concept of collective food security. The first step has already been taken – key approaches to cooperation between countries on food security issues are en­shrined in the general principles and approaches to ensuring food security approved by the premiers of the EAEU countries. And now we need to take the second step and adopt the final docu­ment.

The main supplier of agricultural products and food to Russia today is Belarus. In 2021, its share in domestic supplies was 81%. These are mainly meat and dairy products. Armenia provided about 9% of the food purchased by Rus­sia within the Union last year. These are mainly fruits and vegetables, as well as alcoholic and non-alcoholic bever­ages. Kazakhstan provided more than 8% of the volume of supplies of all the EAEU member states in 2021 by supply­ing dairy products, grain and products made with this substance to Russian consumer. Kyrgyzstan, with a share of just over 2%, also exports fruits and veg­etables to Russia.

– Should we expect a deficit in some product range?

– This year we can expect a small deficit in sugar, about 200 thousand tons. But, according to the latest data on the course of spring field work, almost more than 90% of sugar beet has already been sown. In addition, the natural and climatic conditions are now favorable enough to sow in the required volume. And while the low level of self-sufficiency in fruits and berries will remain.

– Which fruits and berries are expected to be particularly deficient?


– To a greater extent, this applies to exotic fruits – citrus fruits, kiwis, ba­nanas. Generally, the Union meets the needs of the market by about half. We import the rest from third countries. At the same time, the countries of the Union plan to increase the production of fruits and berries and, accordingly, the level of self-sufficiency. Most of the fruits and berries come to us from Asia, Africa, South America, so I don't think there can be any problem in this matter.

– Will their prices rise, or will it be pos­sible to control the issue at the EAEU level?


– Inflationary processes, will definitely affect everything, including this type of product. In this matter, much de­pends on the exchange rates of nation­al, European, Asian currencies, as well as logistics costs.

– Are there any problems with the sup­ply of food at the check points through the borders now?


– The logistical problem is relevant today for all countries. And now it is especially acute at the international automobile checkpoint (IAC) Verhniy Lars on the border between Russia and Georgia. A lot of goods flow through this checkpoint: Armenian, Georgian, Azerbaijani, Turkish, European. Hun­dreds of trucks loaded with various goods are standing in multi-kilometer queues at the border, which leads to collapse. Products simply deteriorate before reaching the EAEU countries. Now the agricultural season and the harvest of fruits, berries, vegetables be­gins, so this situation will lead to great difficulties for agricultural producers. The problem needs to be solved as soon as possible. It is obvious that, primarily, it is necessary to optimize the work at checkpoints, expand them, because ob­jectively cargo flows in Verhniy Lars are very dense. And currently there is sim­ply no alternative to this land crossing in this region. As far as I know, coun­tries are now dealing with this very difficult problem.

– How will parallel import affect the electronics market? How can large supplies go through the EAEU coun­tries, and what kind of products can it be?


– This is a rather difficult question. Over the past few years, enterprises that pro­duce microelectronics have become more active in our union. This year we have already held two large meetings on this topic in Belarus and Armenia – how to develop integration processes so that countries can help each other, co­operate, and eventually get a synergistic effect from this integration in terms of microelectronics production. Of course, there is a lot to be done, and this issue, of course, will not be resolved quickly. However, our entrepreneurs working in this industry are quite optimistic about the future in terms of the opportunities opening up for them.


– And yet – will we be able to partially replace microelectronics import? And for which products?


– Perhaps we can do it partially. But I would not say that there will be a com­plete replacement. At least it's not a quick process. It is much easier to solve the issue of import substitution for large-sized household appliances. Belarusian and Russian manufacturers will be able to do this.
It's harder in the context of micro­electronics. Now five countries domi­nate – they occupy 85% of the microelec­tronics market. These are Taiwan, Korea, Japan, China, USA. All other countries together occupy 15% of the market, in­cluding Europe.

– And have we lost contact with Tai­wan now?


– No, our relations with this country are not lost. I'm not saying there's no way to import from there. But a lot of difficulties appeared.

– The difficulties with logistics, for example?


– Yes, logistical, as well as the difficulties of the movement of financial flows, dif­ficulties in making payments for goods, and so on. Therefore, while this process is being set up, a certain time will pass.



– Are there any new IT and telecom cooperations with countries friendly to the Russian Federation today?


– Today, the issues of organizing com­puting capacities in our countries are be­ing worked out. Particularly, the offices of ICT companies are now being opened in Armenia and several projects have already been launched to create modern IT parks with computing capacities with the participation of partners from the EAEU countries. There is a large request for the launch of new data processing centers (DPC) in Kazakhstan, Kyrgyz­stan and Armenia.

– In the field of what aviation industry projects does the cooperation with the EAEU countries increase? For exam­ple, are there any agreements on the production of Superjet, MS-21, IL-114, IL-96, LMS-901 aircrafts?


– As part of the roadmap for the devel­opment of civil aviation for 2022–2023, we are working with a number of coun­tries. There are already proposals fromthe United Aircraft Corporation, from the Irkut Corporation to produce a component base for MS-21 aircraft. It is proposed to produce an extensive list of components for all manufacturers of the EAEU countries in order to import everything that is possible today on the territory of the Union. The propos­al from the Russian Federation was re­ceived by all the EAEU countries. Now the countries are working with these lists, the process has entered an active phase. However, the full list of specific components and parts has not been de­termined yet.

– At the end of last year, the Ural Works of Civil Aviation sold 20% of its subsidiary "Baikal-Engineering" to a company from Kazakhstan. The goal is the production of the Baikal aircraft. What exactly are the details of this liner planned to be produced in Kazakhstan? Will Baikal planes be assembled there completely?


– The Russian and Kazakh sides have a specific agreement on the establishment of a cooperative enterprise. The relevant legal issues are being resolved now.

– It was also reported that Uzbekistan intends to organize a full-scale assem­bly of Lada at the ADM Jizzakh plant. What models will be assembled there, and will they be imported to Russian Federation?


– At the ADM Jizzakh plant, located in the Jizzakh Free Economic Zone, large-node assembly (SKD) of Lada cars (Vesta, XRay, Largus) has been carried out since October 2021.
The assembly process has adjusted with all the requirements of AvtoVAZ for equipment, technological processes and quality. The personnel involved in the project have received the necessary training. Now the issue of organizing the production of a full cycle, which involves welding and painting of bodies, is being worked out. According to the in­formation of the Ministry of Investment and Foreign Trade of Uzbekistan, work is currently underway at ADM Jizzakh on the construction and equipment of new production facilities for the organi­zation of the production process of Lada Vesta and Lada XRay models.

The production of Lada cars in Uz­bekistan is mainly carried out for the local market. Uzbek assembly makes AvtoVAZ products more accessible to local buyers, also taking into consid­eration credit programs and trade-in.

– What other joint projects in the auto industry are currently being consid­ered at the level of the EAEU coun­tries?


– The issues of the production of elec­tric vehicles at the KamAZ plant were considered at the EEC platform. The issues of removing customs duties on electric vehicles were also discussed quite vigorously. Cooperative projects in the Union should be financed on pref­erential terms due to the specifics of the risk profile of such projects. And we are currently developing new mechanisms and formats to ensure that the Eurasian Development Bank and other financial institutions are more involved in this financing. Interest rates are now quite high, and it is very difficult to imple­ment EAEU cooperative projects with­out preferential financing.

– What pharmaceutical products are planned to be produced in the EAEU countries friendly to the Russian Fed­eration as a substitute for import?


– The priority task today is to deter­mine the list of drugs that need to be produced on the territory of the union states. The active phase of this work be­gan during the pandemic. Currently, the industrial block is submitting for consideration by the Union bodies the procedure for forming such list. The list itself is planned to be approved at the level of the EEC Council by the end of this year.
We believe that first of all, this list will include the most demanded posi­tions in such critical groups as vegetotro­phic and antimicrobial drugs, analge­sics, hormones, as well as most drugs from the vital and essential drugs (VED) lists and similar lists of the Union coun­tries. At the same time, work is under­way to determine the available capaci­ties and production sites where import substitution is possible.

The result of this work will be the opportunity to carry out targeted ac­tions to build specific cooperative chains for the production of certain drugs, the need for which will be the most urgent. We actively interact with both govern­ment agencies and business on these issues.



From an interview with the Izvestia newspaper dated June 2, 2022