Buryatia is on the brink of a “meat battle”

In mid-April 2024, the Russian Ministry of Economic Development announced that it was planning to sign a temporary free trade agreement with Mongolia. The parties to the agreement will be Mongolia and the EAEU (the Eurasian Economic Union, which includes RUSSIA and a number of former Soviet Union countries). Despite the fact that Mongolia produces relatively few goods, it may well compete with a number of producers in Buryatia.

Waiting for MEAT

Recently, Russian-Mongolian relations have been gaining momentum. Buryatia is interested in supplying meat, sheep and goat wool for a textile mill and is ready to EXPORT grain, fertilizers, seeds, and engineering equipment.

Of greatest interest is the export of meat. Compared to Buryatia, there is an incredible amount of livestock on the adjacent Mongolian side. There is much more of it there than people (more than 60 million heads of cattle against 3.4 million people). And Buryatia is currently noticeably lacking meat to meet its needs.

- The republic's self-sufficiency in meat is 74%. In 2022, the republic's self-sufficiency in meat was 70.2%. For comparison, in the Irkutsk region, self-sufficiency was 62.9%, in the Zabaikalsky Krai - 62.5%, - the deputy chairman of the government noted to "Number One" -Minister of Agriculture of Buryatia Galsan Dareev.

According to the Minister, the goal is to achieve 100% self-sufficiency in meat by 2030.

Returning to the future free trade agreement with Mongolia, we note that the movement towards concluding a trade agreement began in 2020. At that time, a joint research group began working on this issue. Now it has completed its work and announced the advisability of concluding a temporary agreement. "During this period, the possible effects of trade liberalization, as well as various approaches to deepening trade and economic relations between the EAEU and Mongolia, were analyzed in detail," the Russian Ministry of Economic Development quoted one of its officials.

Even earlier, in 2015, a memorandum of cooperation was signed between Russia and Mongolia.

"Mongolia is a strategically important partner for Russia. It became the first state with which the Eurasian Economic Commission signed a memorandum of cooperation in 2015. Since then, a working group has been in operation, within the framework of which pressing issues of expanding economic ties between the Russian Federation and Mongolia are discussed. We consider Mongolia a key partner in Asia. We would like our cooperation plan until 2025 to provide for new achievements, new opportunities for expanding trade, economic, cooperative, investment relations," said Sergey Glazyev, Minister for Integration and Macroeconomics of the Eurasian Economic Commission.

It is absolutely unclear what effects in trade between the huge EAEU and the small three-million Mongolia have been analyzed for several years. In addition, the group completed its work at the height of sanctions against Russia.

The Ministry of Economic Development noted that it is now planned that "the decision to begin negotiations will be made by the heads of state during a meeting of the Supreme Eurasian Economic Council on May 8, 2024."

How long will the potential temporary agreement be valid? We think several years from the date of its conclusion: the number of years it has been analyzed is the same amount of time it will be valid. However, for Mongolia, even this option will obviously be a breakthrough.

Not to lose the livestock battle

Galsan Dareev reported that Buryatia's annual meat requirement is 60.4 thousand tons.

- The missing volume - 18 thousand tons - is imported into the republic from outside its borders, including from Mongolia. Meat imported from Mongolia is often used as raw material for meat processing plants. The import of such meat in the republic is mainly carried out by OOO Buryatmyasprom, accredited for the import of meat raw materials. This year, the company plans to import about 5 thousand tons of beef, - the minister said.

Today, Mongolian meat is imported into the republic under quotas that the federal authoritiesdistributed between the regions. Against this background, Buryat livestock farming is showing good growth rates. According to the Minister of Agriculture, last year the production of livestock for slaughter in live weight amounted to 77.7 thousand tons, which is 10.2% higher than the 2022 level. But what will happen if Buryatia is really opened to imported Mongolian meat products without quotas and at zero customs duties?

The country is, of course, fraternal, but the economic interests of meat producers may conflict. Will Buryat villagers, being unable to sell meat, begin to reduce the number of, for example, cattle? If it comes to this, then we can clearly forget about meat self-sufficiency by 2030.

- Usually, the price of meat imported from Mongolia is slightly less compared to Russian prices. However, in 2024, due to the dzud (a natural disaster in cattle-breeding regions, during which livestock is unable to find food under the snow cover), a lot of cattle died. According to some estimates, up to 7 million heads. As a result, there was a deficit of beef on the domestic market of Mongolia and its price exceeds prices in Buryatia, - noted Galsan Dareev.

Speaking about prices, the minister also pointed out that if supply significantly exceeds demand, the price of meat will decrease.

- Meat is a perishable product. Significant refrigeration capacity is required for its long-term storage, compliance with the requirements of Rospotrebnadzor, ROSSELKHOZNADZOR , there are other factors, - the HEAD of the republic's agricultural department also said.

In general, we have formed the opinion that the relevant ministry thinks that even if the Russian authorities exempt Mongolian meat from quotas and duties, nothing terrible should happen to Buryat meat producers.

It is also necessary to keep in mind that the Mongolian side has a reputation as a territory where dangerous cattle diseases are widespread. If it flares up, the veterinary service will quickly cut off meat supplies from there. Therefore, the livestock breeders of Buryatia have a chance to survive in the meat battle with the Mongols. If not to win, then at least not to lose too much.

However, if the meat segment is interpreted more broadly - with stewed meat, boiled sausage, etc., then there is no doubt that these types of Mongolian products will also actively try to break into the shelves of Russian stores. First of all, in the neighboring Irkutsk Region, Buryatia, Zabaikalsky Krai, Tuva and Altai.

Duty-free export is in question

- As soon as you transport goods to the Russian side, their price increases by 40% due to duties, - complained a Mongolian trader at one of the fairs of goods from Mongolia, which are held from time to time in Ulan-Ude.

It is unclear what the 40% fees are, perhaps the trader, explaining in Russian, which is not his native language, mixed up the numbers or combined several mandatory fees under the word "duties". However, in general, any seller from Mongolia will say that Russian fees are depressing exports from his country to Russia.

According to the free trade agreement that is planned with Mongolia, the latter will clearly receive more economic benefits than Russia (or other EAEU countries).

Russia can hardly be called very interested in trade with Mongolia. In reality, Russians do not have an urgent need for Mongolian goods. If it were otherwise, there would have been no barriers long ago. Mongolia has a huge negative balance in trade with Russia - the state buys much more goods from Russians than it sells to them. Thus, in the total trade turnover, Mongolia's exports amounted to 5% last year. Previously - 3%.

The Mongols have been knocking on Moscow's door for decades, raising the issue of the fees Russia imposes on their goods. But there has been no major breakthrough. It was like a person knocking on a door of an empty house - no matter how many years you knock, no one will open the door.

But against the backdrop of major sanctions imposed on Russia by a number of countries, information about progress has begun to appear.

Recently, a number of federal media outlets reported that Mongolia and Russia had signed an agreement on duty-free export without quotas for 375 types of Mongolian products. These items include meat products, cashmere and other wool products, as well as leather and leather goods. But if everything is clear about the upcoming agreement between Mongolia and the EAEU, then what is being discussed here?

The Buryat Customs Service, where "Number One" turned for clarification, knows nothing about any agreement. If the relevant department is not aware of it, then it is even more unclear to us what 375 goods are being discussed. However, acting head of the Buryat Customs Ivan Burlaka confirmed that he is aware of what the media are writing about the development of a mechanism for duty-free trade between Russia and Mongolia.

- We believe that the signing of such an agreement will contribute to the growth of import of Mongolian goods, since they will become more competitive due to the zeroing of import customs duties and lower prices, - said Ivan Burlaka.

Thus, an unusual phenomenon is taking place in the Mongolian direction, and, most likely, the fewer contacts Russia has in the Western world, the stronger the friendship with countries such as Mongolia will develop.