Sugar continues to vex Estonia, Latvia

  • 2005-04-20
  • Staff and wire reports
RIGA - Sugar continued to haunt Estonia and Latvia the past week, as the two countries scrambled to come up with ways not to pay what appeared to be inevitable fines for having amassed excess sugar on the eve of accession to the European Union last May.

Estonian Agriculture Minister Ester Tuiksoo sent a letter to Agriculture Commissioner Mari-anne Fischer Boel explaining that the amount of excess sugar in company warehouses has grown to 48,927 tons, some 20,337 tons more than original estimates. The additional sugar was uncovered during audits by the Tax and Customs Board.

Still, this is a far cry from the European Commission's original claims that Estonia had amassed some 92,000 tons of excess sugar, including sugar in private cupboards and pantries, prior to accession.

"Considering the sensitivity of the issue, Estonia wants to reduce the risk of inaccurate establishment of the excess sugar reserves. I hope that the probe that was carried out with utmost care will contribute to achieving that aim," Tuiksoo wrote in her letter to Boel.

The minister underscored Estonia's view that household consumption should not be taken into account in defining the excess sugar reserve, as families did not speculate on purchasing and selling sugar.

The fine for each excess ton of sugar is 450 euros, and Estonian officials estimate that the country faces a potential fine of 46 million euros. Estonia, unlike Latvia and Lithuania, does not have its own sugar-beet production and sugar refining capabilities. As a result , the country relies exclusively on imports to meet consumer demand. It cannot excluded that importers, knowing that sugar prices would increase after EU membership, stockpiled large quantities of cheap Ukrainian and Russian sugar to speculate on the price difference. EU law forbids this practice.

Meanwhile, Latvian media reported this week that the European Commission might show leniency in fining negligent governments, including Latvia.

The daily Diena reported April 18 that the commission intended to give five countries facing sugar fines 's Latvia, Estonia, Cyprus, Malta and Slovakia 's more time, until November, to get rid of their excess sugar stocks. The paper wrote that the countries may either process the sugar into cattle feed, alcohol or export it with subsidies.

The disposal must be reported to the Commission by March 2006, and only then sanctions can be discussed, Diena wrote.

The paper also reported that Fisher Boel would specify which country had how much excess sugar on May 31, though originally she had intended to do so as early as this week.

Earlier this month, it was reported that the commission was accusing Latvia of amassing 13,000 tons of surplus sugar, far less than Estonia but still an unexpected blow to the government. Citing unofficial sources, Diena reported, however, that Latvian officials had managed to convince the commission that its excess sugar stock was less than the initial estimate and amounted to some 9,500 tons. At worst, this would translate into a fine of 3.3 millions lats (4.7 million euros), the paper wrote.

Latvian Agriculture Minister Martins Roze, who met with Fisher Boel in Brussels on April 13, was quoted as saying that punitive sanctions against Latvia would be among the lowest applied to new EU member states.

"Part of the blame for sugar stock in Latvia, that may qualify as the excess stock, should go to the Latvian common foreign policy 's the country attempted joining both the World Trade Organization and the EU at a time," explained Roze. If Latvia last year had not granted extra sugar import licenses to several companies, it would have violated WTO rules.

The commissioner said that Latvia "was not a problem" for the EU, compared with other countries that have accumulated much larger sugar stocks before accession and without paying taxes, the Agricul-ture Ministry reported.

In calculating sugar stocks, the commission reportedly used a special formula based on imports and exports over the last three years. This in particular is a bone of contention with Roze.

"I do not deny that the companies had been cheating on their sugar purchases but definitely not on the scale estimated by the European Commission," he said previously. He explained that the formula "is not right" since it did not reflect development of the agricultural market. "For example, soft drink production market consuming large amounts of sugar has grown rapidly in Latvia in recent years," he said.

Roze said if the commission decision is "outright unjust," and Latvia is required to pay large fines, the country would turn to the European Court of Justice.