Trade Wars with Russia: from Sugar to Airlines

Last Monday, flights between Minsk and Moscow suddenly stopped. Russia has recalled the licence for flights to Russia from Belavia, the Belarusian national airline. The Belarusian side responded by cancelling the licences of the Russian companies. A new trade war between Belarus and Russia is brewing. 

Although the flights have resumed according to the temporary agreement, the conflict yet again reveals the tough methods Russia employs to promote its economic interests in Belarus. As Belarus's conflict with the West escalates, Lukashenka feels unsafe on the Eastern front where Moscow is taking advantage of his weakness. However, this and other trade wars do not mean that Russia will decide to "civilise" the Belarusian ruler any time soon. A weak and isolated Belarus is an easy prey for Russian economic advances. 
Unbekanntes Objekt
The Airlines Trade War
 
At the moment, the frequency of flights operated by the Belarusian and Russian air companies between two capitals is regulated on parity basis, four flights a day from each side. However, only slightly more than a half of the seats these flights are filled, which makes them unprofitable. Increasing the frequency of flights would certainly bring losses to Belavia.
​The Russian side is apparently eager to return the situation of the Soviet times when the Belarusians flew into the world through Moscow.​

The Russian side is apparently eager to return the situation of the Soviet times when the Belarusians flew into the world through Moscow. The Russian companies know that Belavia provides expensive fares and is not good at marketing its flights. It relies on Belarusian government support and effectively acts as a monopolist on the Belarusian market. 

The Russian companies are willing to conquer the new market by proposing cheaper tickets for Belarusians flying abroad via Moscow. However, at the moment they are constrained by the frequency of flights. Once this barrier is removed, they will be able to overtake the market and effectively drive Belavia into insolvency. 
 
The new trade war demonstrates that Lukashenka is not prepared to give up any assets to Russia, and even the confrontation with the West cannot change his mind. Lukashenka does not prefer Russia to Europe, and his conflicts with the outside world stem from pragmatic interests free of any ideology.
 
Wars for Gas, Milk and Sugar
 
The current "airlines war" is neither the biggest nor the most important trade war. The disputes over the exports of Belarusian goods to Russia and the transit of Russian gas and oil made many headlines across the world in the 2000s and were much more serious. There were also conflicts related to the export of agricultural products.  The trade wars with Russia are much more dangerous to his regime than all its troubles with the West. The nightmare of Russia closing borders to Belarus exports constantly haunts the Belarusian ruler.
The trade wars with Russia are much more dangerous to his regime than all its troubles with the West.
Last month, Moscow threatened to stop the Belarusian milk exports to Russia. This is not the first in the series of "milk wars". The Russian businesses have been eyeing the Belarusian dairy industry for a long time, and Lukashenka signed the first agreement on selling dairy branch enterprises to Russians in 2008. But as with many other agreements, he was in no hurry to deliver. 
 
A little milk war waged by Moscow the same year made him sell just one enterprise. The next conflict, in June 2009, was the biggest of all. Then, the Belarusian ruler publicly declared that Russia wants to take over the Belarusian dairy production. However, he lost the dispute and had to concede one more dairy fabric to Russia. Another milk war took place in 2010.
 
Belarus has also lost several sugar wars to Russia. In 2005, Russia accused Belarus of "dumping"  by selling cheap sugar made from the Cuban sugar cane. Moscow emphasised that the agreements on the Belarusian sugar exports applied only to the sugar products made of the local beets. The low-intensity dispute lasted for two years until in 2007 Belarus had to cut its exports. It was painful, as Belarus had taken up to 10 per cent of Russian sugar market by that time.
 
Just in November 2011, the Belarusian ruler promised that  "[a]fter establishment of the Single Economic Space milk, sugar and other trade wars [would] disappear.” The Customs Union between the two countries already prohibits trade barriers. However, the agreements between the post-Soviet nations tend to be less stable than similar agreements among the Western countries. 
Instead of resorting to courts or arbitration, the governments and corporations in the post-Soviet space tend to use whatever coercion tools they have: they turn off gas, shut down borders, etc.
This is why trade wars in this region are such a frequent occurrence: nobody trusts the letter of the law. Instead of resorting to courts or arbitration, the governments and corporations in the post-Soviet space tend to use whatever coercion tools they have: they turn off gas, shut down borders, etc.
 
Political analyst Alyaksandar Klaskouski has warned that Putin could "take Lukashenka by the throat demanding implementation of integration projects" that would begin with the creation of the single economic space and culminate in the establishment of the Eurasian Union. The Belarusian regime will be forced to open borders and undertake economic reforms, particularly in the wake of Russia's accession to the WTO.
 
No Business, Just Politics
 
Past trade wars between Russia and its neighbours prove that the sources of such conflicts lie beyond pure business interests. They are primarily linked to the political ambitions of the Russian government. This became obvious after Moscow initiated multiple conflicts with the post-Soviet nations over gas, banned Georgian wines, Latvian fish, and Ukrainian cheese. Just some days ago, in order to exert pressure on Baku as a Russian radar station on its territory is being negotiated, Russia threatened to restrict Azerbaijani exports of vegetables and fruits.
 
The Belavia affair is just one instance of the increasing danger to the future of Belarus as an economically viable nation. The country's relations with Russia are far less rosy than Lukashenka presents them. The Russian rulers and businesses are aware of Lukashenka's vulnerabilities. In conflict with the West, Lukashenka is all the more dependent on Russia.
The more political prisoners Lukashenka holds, the better for Moscow.

Lukashenka's troublesome relations with Moscow do not mean that Russia has finally decided to civilise the dictator. The Russian leadership merely wants to strengthen their control over the Belarus leader and are not going to change the absolutist features of his regime or stop his persecution of the opposition.

On the contrary, the more political prisoners Lukashenka holds, the better for Moscow. They make Russia look more democratic in the eyes of the West. They also increase Belarus' dependence on Moscow - as the democratic Western governments become even more reluctant to deal with his regime. This rule works not only for Belarus, but also for other autocratic regimes across the world - from Syria to Uzbekistan.

Siarhei Bohdan is an associate analyst at the Ostrogorski Centre.

Subscribe

If you enjoyed this article, subscribe to our bi-monthly newsletter

 

Follow BelarusDigest on social networks

Related stories
Orphus system Found a typo? Select spelling error with your mouse and press Ctrl + Enter