Cheesy War

| Kyiv Post
The ban means that Ukraine may lose up to $300 million in income, or 60-70 percent of the annual revenue from cheese exports, said Tetyana Telezhko , an analyst from Dragon Capital.

DUBNO, Rivne Oblast – After years of political sparring over gas, Russia and Ukraine have again gone to war – this time over cheese.

Earlier this year, Russia banned imports from seven Ukrainian cheese makers, citing low quality, a move that could cost the country millions of dollars.

Political analysts say the standoff could be designed to pressure Ukraine into joining a Moscow-led Customs Union of former Soviet republics and discourage it from a free trade agreement with the European Union.

Up to 85 percent of Ukraine’s exported cheese is shipped to Russia.

The ban means that Ukraine may lose up to $300 million in income, or 60-70 percent of the annual revenue from cheese exports, said Tetyana Telezhko, an analyst from Dragon Capital.

Russia’s chief health inspector Gennadiy Onishchenko does not miss an opportunity to say in public that Ukrainian dairy products often fail to comply with Russian safety requirements.

“The sale of 32 tons of cheese has been suspended on the Russian territory,” Onishchenko said in March. Up to 120 tons of Ukrainian cheese were seized on the border.

A special commission was deployed to Ukraine on March 26, which checked one dairy producer and found no irregularities, Interfax agency reported.

Ukrainian producers say Russia’s accusations are fictitious. “This situation has nothing to do with cheese. Neither the statements nor the figures are real,” said Iryna Grekova, a representative of KOMO-IMPEX, a major Russian distributor of KOMO cheese, one of the seven brands banned.

Gennadiy Onishchenko

“For Russia, banning is a way to put pressure on Ukraine and make it enter the Customs Union,” said Maria Kolisnyk, an agricultural expert with the AAA Consulting agency.

But that does not mean that there is no quality issue involved.

Few Ukrainian producers have international standard certificates, making their products difficult to sell abroad.

The European Center for Disease Control made a series of inspections in Ukraine in 2009, and concluded that most dairy products do not meet European standards.

“The European market is closed for us. We do not have proper certificates,” said Roman Sydoryk, external economic relations manager at Dubnomoloko Dairy, which makes cheese under the KOMO trademark.

The dairy is a major Ukrainian exporter of cheese.

The Dubnomoloko factory produces about 1,350 tons of cheese per month.

About 60 percent of it goes to Russia and about 10 percent to other former Soviet republics.

This producer uses top-notch modern French equipment and fermentation to make the cheese, which they eagerly demonstrated to the Kyiv Post during a visit to the factory in Dubno earlier this month.

Raw materials are the biggest headache for dairy makers.

Ukraine has a severe shortage of quality milk, about 80 percent of which comes from regular villagers, while the rest is produced by larger farms.

In Europe, almost all milk used in dairy making comes from large farms.

“It’s very hard to control the quality of milk produced on dairy farms, when most of them are located in remote districts and people typically own a couple of cows,” says Oleksandr Verzhyhovsky, a food-quality expert at Ukrainian Agribusiness Club Association.

Russia’s main argument against the Ukrainian cheese is the use of palm oil.

Russia’s charges are unreasonable -

Oleksandr Humburg, deputy head of the quality board at Dubnomoloko

This makes it cheaper to produce, but reduces its quality, while the ingredient is sometimes not listed on the label. Under Ukraine’s laws, a product containing palm oil or other non-dairy ingredients has to be labeled as a “cheese product” and not “cheese.”

Oleksandr Humburg, deputy head of the quality board at Dubnomoloko, said Russia’s charges are unreasonable.

He said Dubnomoloko produces cheese products for Kazakhstan only, where purchasing power is lower and thus the demand for cheaper food is greater.

He said such cheese products make up only 3 percent of the factory’s total output.

“Moreover, we use a certain combination of vegetable oils, not palm oil, and the process of making the cheese product is strictly separated from the one of making cheese,” he said. On the day that a cheese product is made, no other types of cheese are produced at the factory, Humburg said.

KOMO’s cheese products are available from wholesalers in Kazakhstan for 1,010 tenge ($7), but the dairy representatives claim the factory has not made any for half a year.

Yet there may be more to the cheese than meets the eye – or the label.

On the day that the Kyiv Post visited the dairy, there was a bucket of potassium nitrate, a common food additive, visible.

The staff explained that it’s used in small quantities in some of the cheeses.

Known internationally as E252, it is often added to cheeses and meat products to inhibit the development of micro-flora. But in KOMO’s case, the additive doesn’t show up on the label, potentially making the firm an easy target in bilateral trade wars.

Kyiv Post staff writer Anastasia Forina can be reached at [email protected]