March 12, 2015

By Alena Sakhonchik, consultant in the World Bank’s Development Economics Unit, Global Indicators Group. The views and opinions expressed in this article are those of the author alone and do not reflect the position of the affiliated organization.

During the past year of continuous crisis in Ukraine, Minsk has portrayed itself as a mediating “peacemaker,” bringing together representatives from the West, Russia, and Ukraine for diplomatic talks aimed at finding a solution to the conflict. In practice, however, Minsk’s role has come down to nothing more than providing a physical stage for the negotiating process. Belarus has not been positioned to play any substantial role in the outcomes of the peace talks, while the overhaul of the government in Kyiv in the fall 2014 was officially treated as an exclusively internal affair of the Ukrainian people by the Ministry of Foreign Affairs of Belarus.[i] Nevertheless, according to the Ambassador of Belarus in Kiev Valentin Velichko, Belarus continues to support the territorial integrity and sovereignty of Ukraine, ruling out any option of potential federalization.[ii]

It would be an underestimation, however, to say that Minsk has been neutral to the conflict and the precarious status of the Donbass. The mass mobilization of reservists in Belarus, supported by new amendments to its policy of martial law that came into force on February 1, 2015, suggests the insecurity Belarus must feel about the situation to the south of its borders. According to the updated document, in addition to the open annexation of Belarusian territory, Belarus will now consider it an open act of aggression if another state sends armed groups, irregular forces or units of regular troops to its territory.[iii] These amendments are a clear reference to recent events in Ukraine, showing that Minsk has drawn a clear lesson from the conflict.

Despite increased contact between Minsk and the West, the Ukrainian conflict does not offer much as a medium to improve their relations. In theory, Belarus’s organizing a physical space for Western officials to discuss a way out of the crisis could create a step-by-step improvement in ties, yet Belarusian authorities have exhibited no intention toward that end. In his exclusive interview with the Russia 1 TV channel, Belarusian President Aleksandr Lukashenko said he did not expect or hope for any positive progress in relations with the West as a result of the peace talks held in Minsk in February 2015.[iv]

Moscow and Minsk in Security Cooperation

The mass mobilization of reservists also raises the question of whether the Belarusian military may be dragged into a conflict in Ukraine by virtue of external necessity, as well as by a shared concern with Moscow about NATO’s eastward expansion. This is not a groundless concern, given the historically high level of security cooperation between Belarus and Russia. Under the framework of its membership in the Collective Security Treaty Organization (CSTO), Belarus could participate in peacekeeping operations with the approval of the Council of the CSTO.[v]Such a peacekeeping force could be deployed on the territory of CSTO member-states and beyond.

On the other hand, the question of Belarus’s membership in the CSTO has never been legally considered or ratified by the state’s Parliament, which does not obligate the Belarusian military to enter Ukraine under the aegis of the organization’s peacekeeping forces. In practice, things might turn out differently given the extensive financial role the Kremlin has traditionally played in supporting the Belarusian army and upholding its security sector. As of now, most of the weapons for the Belarusian army are produced in Russia.[vi]

When it comes to defense cooperation, Belarus is a significant strategic partner for Russia. The Kremlin is currently planning the placement of strategically important plants for the military-industrial complex on Belarusian territory, including an airbase in the city of Bobruisk in 2015. Meanwhile, Belarusian authorities have been actively involved in the joint patrol of airspace within the framework of the Air and Defense unified forces with Russia, and are participating in the strengthening of the CSTO.[vii] Expect the year 2015 to be loaded with joint military exercises and training of the Armed Forces of both countries under the umbrella of the so-called “Shield of the Union.”[viii]

Given its high level of defense cooperation with Moscow, Belarus plays a unique dual role by providing both a stage for peacemaking negotiations and a setting for military training exercises. And while in the latest conflict Minsk has been trying to maneuver between the West, Ukraine, and Russia without favoring any one particular side, entering into an open confrontation with the Kremlin is more than likely to remain off Lukashenko’s agenda.

The Ruble as Both Lifeline and Liability

Security cooperation is not the only factor in Minsk’s continued political orientation toward Russia. The political crisis in Ukraine and the subsequent collapse of the ruble reaffirmed the extent to which Belarus relies on the Russian economy. The National Bank of the Republic of Belarus had to quickly react to the currency panic in neighboring Russia by introducing a 30% tax on the purchase of cash and non-cash foreign currency by individuals and legal entities.[ix] While the tax was withdrawn by January 2015, it indirectly translated into an equivalent rise in the exchange rate and further depreciation of the Belarusian ruble. This resulted in a rising rate of inflation that reached approximately 16% by the end of 2014, and is expected to stabilize at 18% in 2015.[x] Moreover, due to the currency crisis in Russia and the resulting devaluation of the Belarusian ruble, Belarus’s gold reserves declined by $194 million in January 2015 and currently total about $5 billion.[xi]

The drop in the Russian ruble nevertheless had one positive outcome for Belarus: it created favorable conditions for the import of hydrocarbons. As EU countries have significantly reduced their consumption of Russian gas, Belarus will import hydrocarbons from Russia at a substantial discount. Minsk paid $168 per thousand cubic meters under its previous contract with Russia, that price has fallen to $154-$155 per thousand cubic meters in the new agreement for 2015-2017.[xii] Moreover, the country’s currency reserves may have been depleted to a much greater degree by the beginning of 2015 if Moscow had not agreed to allow Belarus to keep $1.5 billion in export duties from Russia’s oil products.[xiii] Russia also continues to provide the largest share of foreign direct investment in Belarus, which reached a total of $578 million by January 2014 according to the most recent data.[xiv] The latest gas discounts have only reinforced Minsk’s existing reliance on Russia as an economic lifeline.

Failed Promise of the Eurasian Economic Union

Russia’s role in the economy of Belarus has been especially apparent within the framework of the Eurasian Economic Union (EEU). Belarus is the second smallest economy in the EEU (after the newly-admitted Armenia) but demonstrates the largest reliance on Russian markets.[xv] Russia’s share in Belarus’s total external trade turnover constitutes around 49%.[xvi] According to the Customs Committee of the Republic of Belarus, the total intra-union trade turnover between Russia and Belarus amounted to $34 billion in January-November 2014.[xvii] For comparison, the intra-union trade between Belarus and Kazakhstan amounted to only $1 billion.[xviii] The latest data also shows that mutual trade turnover between Russia and Belarus within the framework of the EEU declined by 5% by the end of 2014 due to simultaneous contraction in both imports and exports.[xix]

Due to the decrease in trade between Minsk and its traditional economic partner, Russia, the overall trade balance within the EEU came out negative for Belarus in 2014.[xx] This outcome sends a warning signal that the EEU is not fulfilling the purpose of its establishment. One of the key issues preventing a fully-fledged functioning of the EEU is the continued existence of various bans and restrictions imposed unilaterally and without consultation by the member states to protect their markets.[xxi] For example, Russia continues to ban a number of food imports from Belarus due to a persisting fear that the latter re-exports products from the EU. Meanwhile, a presidential order adopted by Lukashenko in 2014 requires that merchants who bring products from Russia and Kazakhstan to the territory of Belarus obtain special certificates on the origin of these products, thereby undermining the free movement of goods in what was meant to be a free-trade union.

Despite its demonstrated ability to keep Belarus afloat in economic terms, the EEU has not yet created a harmonious foundation for more inclusive and restriction-free integration. The lack of an officially established monitoring mechanism and the absence of concrete proposals from the Eurasian Economic Commission on the finalization of a legal framework are likely to result in continuous non-compliance by the member states. Moreover, Belarus very openly raises the issue of the Union’s compliance with the obligations set by the WTO, while remaining the EEU’s only member state that has not yet been admitted into the organization. Since the EEU framework was based on Russia’s accession commitments to the WTO, the alignment of the EEU as an economic entity with internationally established standards and Belarus’s own WTO membership negotiations will be largely determined by Russia’s fulfillment of its commitments.

Mid and Long-Term Prospects for Belarus

On January 1, 2015 Belarus took over the presidency of the EEU. Given the overall deteriorating economic situation in the country, Belarus is likely to be preoccupied with strengthening its own position within the Union. This is one of the main vectors driving Minsk’s foreign policy in the mid to long terms.[xxii] While improving relations with its neighbors on geopolitical matters would also seem to be a priority for Minsk, Belarus would rather opt out in favor of maintaining strong fraternal relations with Moscow, which historically has been its most important security partner, major export market, and largest investor.

Minsk’s domestic policy will develop around the anticipation of the upcoming presidential elections in fall 2015. While the list of potential candidates is not yet known, recent legislative changes clearly aim at preserving the current political regime. On February 8, 2015 a new level of censorship was established through amendments to the Law on Media, according to which all Belarusian sources of information operating in the country must re-register within the following year. Another new feature in the amended Law is the limitation on foreign-capital presence in newly established publications, as well as stronger supervision by government agencies entitled with the right to block websites for minor violations without a trial.[xxiii] Meanwhile, a new presidential order from December 2014 aims to not only uphold more strict labor discipline at various organizations and enterprises, but also to maintain stronger obedience among higher-level managers, who in turn may have a direct or indirect influence on the upcoming elections.[xxiv] In other words, newly implemented orders and amended laws once again reflect the preoccupation of the Belarusian authorities with the exclusion of any threats to the current political regime, while enhancing state control over different aspects of socio-economic life in the country.

Conclusion

Recent political and economic developments in Belarus show that significant strains are emerging in relations between Minsk and Moscow:

With Russia now being portrayed as an aggressor by Kiev and the West, Minsk’s new fear of intrusion by another state (as demonstrated by the new martial law amendments) reveals a cautious preparedness for a potential replication of the Ukraine scenario within Belarusian borders.

The Belarusian Parliament’s non-ratification of the country’s CSTO membership shows Minsk’s hesitant commitment to this Russian-led security organization.

The limited success of the EEU and non-compliance by its member states with their obligations raises the risk of trade disputes that may further complicates relations between Minsk and Moscow.

Despite these tensions, Minsk continues its dialogue with Moscow as the former’s primary financial supporter and main creditor in military and economic terms. The continuous alliance between the two countries creates an unlikely scenario for Belarus to change its foreign policy vector, even in light of the serious concerns raised by the Ukrainian crisis.

Notes

[i] “Interview of the Ambassador of Belarus to Ukraine Valentin Velichko to the Yearly Academic Journal Diplomatic Ukraine,” Ministry of Foreign Affairs of the Republic of Belarus, December 2014, http://mfa.gov.by/press/smi/f3f9d668c40b48a4.html.

[ii] Ibid.

[iii] “V novoi redaktsii izlozhen Zakon ‘O voennom polozhenii’” (New Amendments to the Law on Martial Policy), Jurisconsult, January 22, 2015, http://jurisconsult.by/news/show/13905/.

[iv] “Vesti v Subbotu” (News on Saturday), Rossiya 1, http://russia.tv/video/show/brand_id/5217/episode_id/106727.

[v] “Nuzhno li vvodit’ na Ukrainu mirotvorcheskie sily pod flagom ODKB: mneniia” (Viewpoints: Should Peacekeepers be Sent to Ukraine under the Banner of the CSTO?), IA Rex, May 7, 2014, http://www.iarex.ru/interviews/47619.html.

[vi] Sergei Ischenko, “Belorus, streliaiushchii ne khuzhe ‘Iskandera’” (Belorus, which Shoots no Worse than the ‘Iskander’), Svobodnaia Pressa, February 18, 2015, http://svpressa.ru/war21/article/113210/?rpop=1.

[vii] “Posol RF: Belorusskaia ploshchadka ochen’ udachna dlia peregovorov po Ukraine” (Russian Ambassador: Belarus is a Very Good Platform for Ukraine Talks), RIA Novosti , February 5, 2015, http://ria.ru/interview/20150205/1046034862.html.

[viii] “Anonsirovany rossiisko-belorusskie ucheniia ‘Shchit Soiuza 2015’” (Announcement of Russian-Belarusian ‘Shield of the Union 2015’ Drills) Vzgliad, December 1, 2014, http://vz.ru/news/2014/12/1/717900.html.

[ix] “Press Release: On Measures Taken by the Government and the National Bank with a View to Preventing Development of Negative Trends in the Financial Market,” National Bank of the Republic of Belarus, December 19, 2014, http://nbrb.by/Press/?nId=84&l=en.

[x] “Press Release: On the Expanded Membership of the Leadership of the National Bank of the Republic of Belarus,” National Bank of the Republic of Belarus, January 30, 2015, http://www.nbrb.by/Press/?nId=1120.

[xi] “Zolotovaliutnye rezervy za ianvar’ usokhli eshche na 335 mln dollarov” (Gold Reserves Contracted by another 335mln Dollars in January), TUT.BY, February 6, 2015, http://news.tut.by/economics/434608.html.

[xii] “Iz-za padeniia kursa rubia Belarus’ poluchit skidku na rossiiskii gaz” (Due to Drop in Ruble’s Value, Belarus will Receive Discount on Russian Gas), Business Gazeta, December 11, 2014, http://www.business gazeta.ru/article/121231/.

[xiii] See footnote 7.

[xiv] National Bank of the Republic of Belarus, http://www.nbrb.by/statistics/ForeignDirectInvestments/Abroad/countries.xls?v=2.

[xv] State Customs Committee of the Republic of Belarus, “Summary of Foreign Trade of the Republic of Belarus for January-November 2014,” http://gtk.gov.by/ru/stats/itogi_vnesh_torgovli2014/nov_2014.

[xvi] Ibid.

[xvii] National Statistics Office of the Republic of Belarus, “Information on Merchandise Exports and Imports in Trade with Customs Union and Common Economic Space Countries in 2014,” http://belstat.gov.by/ofitsialnaya-statistika/otrasli-statistiki/torgovlya/vneshnyaya-torgovlya_2/operativnye-dannye_5/analiticheskaya-informatsiya-o-vneshnetorgovom-sot/.

[xviii] Ibid.

[xix] Ibid.

[xx] Ibid.

[xxi] “Belarus’ predlozhila dorabotat’ spisok ‘ogranichenii i iz’iatii” (Belarus has Proposed to Finalize the ‘List of Limitations and Extractions’), TUT.BY, February 6, 2015, http://news.tut.by/economics/434596.html.

[xxii] Ibid.

[xxiii] Tatiana Soldatova-Tolstova,“Obzor Dekreta Prezidenta Respubliki Belarus’ ‘Ob usilenii trebovanii rukovodiashchim kadram i rabotnikam organizatsiy” (Overview of the Decree of the President of the Republic of Belarus ‘On Strengthening Requirements to Executives and Workers of Organizations’) , Otdel Kadrov, January 2015, http://otdelkadrov.by/number/2015/1/1201510/.

[xxiv] President of the Republic of Belarus, “Commentary to Ordinance No. 5 ‘On Strengthening Requirements to Executives and Workers of Organizations,” December 15, 2014, http://president.gov.by/en/news_en/view/commentary-to-ordinance-no-5-on-strengthening-requirements-to-executives-and-workers-of-organizations-10445/.