Sugar speculation may cost Estonia dearly

  • 2004-02-05
  • By Aleksei Gunter
TALLINN - It is only natural that Baltic consumers, looking into the prism of their EU future and seeing a spectrum of inflation, would feel inclined to hoard food staples on the eve of accession.

Likewise, it is equally understandable that import firms, gazing into the same prism and seeing a once-in-a-lifetime opportunity to score big profits, would use the opportunity to bring staples into the country on the cheap in the hope of reselling them at higher prices to EU countries after membership become reality May 1.
The problem is that while the former is legal, the latter isn't.
Yet this is precisely what several Estonian companies have been up to in recent months, and to head off the possibility of sanctions, the government last week agreed that by April 30 Estonian companies would have to remove excessive sugar stock from the market and that violators would be fined.
Government experts fear that Estonia will not be able to avoid a fine that is currently under consideration by the European Commission for having accrued excessive stock of goods. It could amount to as much as 250 million kroons (16 million euros), experts say, though the EC will announce its final decision at the end of April.
For many Estonians, the idea of getting hit with a fine for doing something as basic as storing months' - if not years' - worth of salt, soap, toilet paper and sugar seems odd, if not unfair. Such habits are the conditioning of life in a war and a Soviet state-planned economy where the most basic goods were scarce and lines to acquire them were long. Even in winter one can often see senior citizens buying three of four kilograms of sugar in supermarkets or carting off a 25-kilogram sack of sugar in a wheelbarrow at the open-air market.
Indeed, the "sugar issue" was skillfully played by Estonian Euroskeptics during their campaign against EU accession last year, when they warned of skyrocketing prices for the one thing that can satisfy a nation with a serious sweet-tooth.
Their arguments were given a measure of credence two weeks ago when Kalev, the country's leading confectionery, announced a 10-percent price hike due to the rising cost of sugar.
Currently sugar costs some 0.35 euros per kilogram in Estonia, whereas in the EU it is up to three times more expensive. The most expensive sugar in the EU, according to an Agra-Europe survey, is in Denmark, Sweden and Portugal.
And there is little doubt that Estonian exporters would like to use their geographical proximity to a couple of those countries to sell cheap Ukrainian sugar once the Baltic country becomes a member of the EU.
Estonia's Minister of Agriculture Tiit Tammsaar says Estonia will need to measure storage capacity as of May 1. The official bill will be considered by the government on Feb. 12 and will reach Parliament later this month.
According to EU requirements, there are several removal options: sell the sugar to consumers, process it into fodder or fuel or export it into a non-EU country without financial support.
According to Tammsaar, there are four goods that qualify as "sensitive" for Estonia: a milk powder equivalent used in fodder, regular milk powder, butter and sugar. This means that by May Estonian firms may have stockpiled too much of those goods and that the government was susceptible to a fine.
But sugar is the most pressing. Last year local companies imported over 103,000 tons of sugar -which makes 74 kilograms of sugar per every resident of Estonia.
"Excessive stock reserve will be calculated according to the declared stock information from the storage owner from the last four years," said Tammsaar. Every case will be handled with individual approach and the ministry inspectors will take into account the work activities of every company that needs to store sugar and other "sensitive" products, he added.
The minister emphasized, however, that the obligatory removal would be aimed at businesses out to make a windfall and not consumers.