Substitution without competition: why Kyrgyzstan switched to Russian wheat

Russia has become the main supplier of grain to Kyrgyzstan due to lower prices than Kazakhstan, but experts do not consider this competition for markets between the EAEU member countries.

In recent years, grain imports to Kyrgyzstan have undergone changes. If in the recent past almost all wheat was supplied to the country from Kazakhstan, now it is from Russia. What are the reasons for what happened and is it possible to talk about the competition of the member countries of the Eurasian Economic Union (EAEU) with each other, Sputnik figured out.

Russia and Kazakhstan are the main suppliers of grain to Kyrgyzstan. The vast majority of grain supplied there by these countries is wheat. Barley and corn in comparison with it occupy not so significant shares in the supply.

According to International Trade Statistics, in 2017-2019, the share of Kazakhstan in wheat imports to Kyrgyzstan ranged from 93 to 99 percent. In 2020, the Russian Federation and Kazakhstan supplied almost equal amounts, which may be due to restrictive quotas from Astana during the pandemic.

In 2021, according to the information of the National Statistical Committee of the Kyrgyz Republic, Russia overtook Kazakhstan in terms of supplies to Kyrgyzstan: 57 percent from the Russian Federation and 43 percent from Kazakhstan. The main volume of wheat has been purchased from Russia since September 2021. This was explained by the fact that grain prices in Kazakhstan are 20-25 percent higher. So, from January to April 2022, the share of the Russian Federation was about 96 percent, and for the same period in 2023 - about 97 percent.

Reasons for change

Kazakhstan lost the fight to Russian producers for the grain market in Kyrgyzstan due to state regulation of prices and the rules of the EAEU on a single tariff for the transportation of grain, former vice-president of the Russian Grain Union Alexander Korbut told Sputnik.

According to him, in the Russian Federation, farmers determine the cost themselves, and in Kazakhstan - the state, which does not allow you to quickly respond to changes in market prices.

     "Kazakhstan keeps fairly high benchmarks for grain prices. At the same time, I admit that such measures are justified for them, because this is a vital support for Kazakhstani agricultural producers," the expert noted.

According to him, there is also a rule in Kazakhstan, according to which the tariffs for rail transportation from Russia through this country to Uzbekistan, Turkmenistan and Afghanistan are several times higher than for their suppliers. In the case of deliveries to Kyrgyzstan, the tariffs should be the same as for Kazakh shippers, since the country is part of the EAEU, the former vice president of the Russian Grain Union explained.

“Kazakhstan kept high tariffs for the transit of Russian resources through its territory. We have long sought to make the tariffs the same: both the transit of Russian products through Kazakhstan and the transit of Kazakhstani products through Russia,” President of the Russian Grain Union Arkady Zlochevsky told Sputnik.

Alexander Korbut also noted the high professionalism of Russian exporters, their active, attractive trade policy for buyers, as well as their willingness to take risks. According to him, this allowed Russian grain to take a significant place in the Iranian market and dominate in Azerbaijan.

There is no competition between Russia and Kazakhstan

The current situation did not prevent Kazakhstan from achieving in 2022 the highest exports of grain and flour in grain equivalent in the entire history of independence - 13.2 million tons.

     "The global food market is a system of communicating vessels. And there is no competition on it. If you lost one market, the market of Kyrgyzstan, and the Kyrgyz bought Russian grain, then Kazakhstan will sell it somewhere else," the director of the Institute of Socio-Economic Studies explained to a Sputnik correspondent. research, doctor of economic sciences Alexey Zubets.

If we talk about the struggle for the Central Asian market, in fact, this is a matter of discounts that Russian manufacturers can provide, for example, because they have sales problems associated with sanctions, he said.

"Kazakhstan has no such problems, so it can sell grain without discounts on the international market. And Russia is forced to provide discounts," the expert added.

Kyrgyzstan, as a low-income country, focuses on cheaper supplies, he specified.

"Therefore, I would not say that there is competition. There is a question of price, logistics and sanctions," Alexei Zubets concluded.