Belarus and Poland Determined to Improve Relations
On 22-23 March, Polish Minister of Foreign Affairs Witold Waszczykowski visited Belarus, as he explained, to normalise relations "without any pre-conditions". Prior to Waszczykowski's visit, Alexander Lukashenka had not yet confirmed whether he would meet with the Polish minister.
Despite the friendly atmosphere, the visit showed that the two countries still disagree on many issues, such as a small cross-border movements and human rights. It remains unlikely that significant changes will happen in these areas. However, both countries want to agree to disagree and make steps towards better relations.
The first visit to Minsk in years
The last visit of a Polish Minister of Foreign Affairs to Belarus took place in 2010, when Radoslaw Sikorski together with Guido Westerwelle visited Minsk just before the elections. During this period, Western ministers offered €3 bn in aid to the Belarusian economy, if Alexander Lukashenka would hold free elections. After the brutal dispersal, however, of demonstrators in the voting night, the temperature of relations sharply dropped.
On 22-23 March, the new Minister of Foreign Affairs of Poland Witold Waszczykowski came to Belarus to help foster better relations between the countries by meeting his Belarusian counterpart Uladzimir Makei and the Belarusian state leader Alexander Lukashenka.
It was unclear whether Waszczykowski would have a meeting with Alexander Lukashenka. At that time, the Belarusian state leader had a meeting with the Georgian Prime Minister.
Talking points: is there any room for improvements?
Belarusian-Polish negotiations dealt with a variety of topics, but it seems that none of them will see a significant progress in the near future.
Small border traffic. In 2010, Belarus and Poland signed a local border traffic agreement providing that the residents of the border regions will visit the neighbouring country without a visa, but with a special certificate. Until now, Belarusian authorities have yet to ratify the agreement.
Minsk primarily fears that more Belarusians will go to Poland for cheaper groceries further weakening the Belarusian economy. In 2016, Leanid Maltsau, head of the State Border Committee, stated that the "increased flow of people would paralyse the border."
In response, Waszczykowski brought to Belarus a project to increase transmission capacity of the Belarusian-Polish border. If Poland finds funds for modernisation of border crossings, Minsk officials will without reluctance accept it. But the introduction of local border traffic will still remain undesirable for economic reasons. Currently, small border traffic works with Latvia, with which Belarus has only a 172 km border, so not so many people can enjoy it.
Visa liberalisation. With the lack of negotiations on facilitation of visas between Belarusian authorities and the EU, Poland offers a reduction in visa prices from €60 to €35, an increase in the number of visa centres and expansion of biometric passports among Belarusians. In 2016, Poland has opened eight visa centres in Belarus, providing a glimpse into the steps Belarusian authorities are willing to take in allowing visa centers to grow in Belarus.
Economic cooperation. In 2015, trade in goods between Belarus and Poland dropped significantly despite the fact that Belarus re-exports Polish fruits and vegetables to Russia where European products remain under sanctions.
This summer Mateusz Morawiecki, Polish Deputy Prime Minister responsible for economic development, plans to come to Belarus. It seems, that during his visit, a Belarusian-Polish commission on economic cooperation will meet to find ways to increase trade between the two countries. Currently, Belarusian authorities send invitations to Polish businessmen to visit Belarus and invest in the country.
However, the prospects for the development of economic relations appear limited. The question is not only in the economic and political unattractiveness of Belarus, but the difficulties in dealing with Minsk officials. So far, Poland has failed to get permission of imports of pork. In 2014, Belarus forbid the importation of pork due to an African plague while still protecting the market from cheap Polish competitors.
Multilateral cooperation and security. During the visit, the Polish Minister of Foreign Affairs stated that "Poland may become a mediator in the cooperation between Belarus and the EU." But, it seems, that for the first time Waszczykowski stated that Belarus and Poland might participate together in the New Silk Road, an infrastructure project currently being developed by China to connect the transport systems of Eurasia.
Belarus already has good political relations and an opened credit line from China, but still fails to propose projects that would be interesting for the Chinese. In the case of cooperation with the EU, Belarus has rather limited desires and remains primarily focused on economic support.
Press releases after the meeting recall that Belarus and Poland also have raised security issues. Although both countries want to increase security in the region, they see different means to do so. Although Belarus refuses to host Russian military bases in Belarus, Poland is trying to increase NATO's presence in their country. This only increases the desire of Russia to have greater military capability in Belarus.
Human Rights and the Polish minority in Belarus. This issue still remains as a point of contention between both countries as Belarus continues to persecute its Polish minority. The Independent Union of Poles in Belarus lacks official registration and access to offices, which were bought partly by Polish money. At the same time, Polish authorities continue to support the independent media in Belarus and civil society such as Belsat TV. It seems that both sides remain reluctant to make concessions on this issue.
Making baby steps towards each other
Waszczykowski’s visit suggests that the old policies between Belarus and Poland will continue to hinder relations between the two countries. Moreover, Poland no longer sees political actors in Belarus, who can change the regime.
In 2015, the Centre for Eastern Studies (OSW), a Polish influential think tank, published a commentary that the Belarusian opposition fails “even to demonstrate to society that it could provide a genuine alternative to the present government”. Therefore, Poland keeps supporting Belarusian independent media, but limits contacts with the political opposition.
Belarus also needs Poland, as Foreign Minister of Belarus Uladzimir Makei expressed during the 22 March, "to diversify foreign relations." It appears that later this year, Makei will visit Warsaw.
Poland remains one of the avenues for Belarusian companies to enter the European market. On 21 March, Minsk Automobile Factory’s (MAZ) production opened in the Polish city of Plonsk. Also, Belarus remains interested in investments from Poland. For instance, Polish Ideabank remains one of the few foreign banks (not including Russian ones), working in Belarus.
Although the interests of the countries may be different today, both require a mode of cooperation for future relations.
Testing the Waters: High-Level EBRD Delegation Visits Belarus
The removal of sanctions against Belarus earlier this year has led to increased interest from institutional investors such as the European Bank for Reconstruction and Development (EBRD).
Alain Pilloux, Acting Vice President of this major development bank visited Belarus last week as a part of a delegation, which met with Belarusian officials, including the president, businesses, representatives of think tanks and other stakeholders.
EBRD officials expressed cautious optimism about the prospect of extending their cooperation to Belarusian authorities. In the past, their role in the country was limited to supporting the private sector and very limited contact with the government. With EBRD activities in Russia nearly frozen after the Ukraine crisis and instability in the Arab world, Belarus has good chances of attracting EBRD funding.
EBRD's troubled times
The EBRD was set up in 1991 to help the transition of the former socialist block countries. Although the focus of the bank’s work has traditionally been on Europe, the United States has the largest capital subscription and voting rights followed by the somewhat smaller shares held by Japan, Italy, Germany, the United Kingdom and France.
The EBRD expanded its activities in recent years to include Mongolia, Turkey, Greece and Cyprus as well as countries affected by the Arab Spring uprisings, such as Egypt, Morocco and Jordan.
In 2014, the majority of the bank’s shareholders decided to stop funding new projects in Russia, which used to be the main investment destination. The decision followed Western sanctions against Moscow over its role in the conflict in eastern Ukraine.
In 2014 the EBRD also suffered its first annual loss because its portfolio in Russia and Ukraine had tumbled (in 2015, the EBRD became profitable again). Political instability and corruption in the Arab world also affect its investment plans.
The removal of European sanctions against Belarus has created a better environment for the EBRD to extend its activities in the country.
With 74 projects, the EBRD already has significant experience in Belarus. So far most of the projects have focused on financial institutions and the corporate sector. The EBRD remains a major investor in Belarus. As of 1 June 2015 the Bank had invested nearly €1.8 bn.
Some of the recent projects which the EBRD has supported include a project to support women entrepreneurs in Belarus, a joint venture with Swiss company Stadler Rail AG and funding for facilities to develop the wood processing sector in Mahilioŭ and Smarhoń.
However, compared to other countries in the region, Belarus has failed to attract much EBRD funding. For instance, Moldova has received $313 per capita investments from the EBRD since 1991, Ukraine $271 and Belarus only managed to attract $187.
In Belarus, nearly all EBRD investments (94 per cent) went to the private sector, compared to a much lower level of investments that went to the private sector in Ukraine. Since 1996 the bank’s activities in Belarus have been limited by the country’s unsatisfactory progress in democratic and market-oriented transition.
The bank adopted a calibrated strategic approach to Belarus in 2009 and in its subsequent country strategy documents and focused primarily on the private sector. The Bank’s engagement in the public sector was calibrated against Belarus progress against certain political and economic benchmarks while the main focus remained on private sector development and entrepreneurial activity in the country.
EBRD's new approach to Belarus
Now the EBRD is working on a new country strategy for 2016-2020, which will be adopted in July 2016. The draft strategy proposes to focus on private sector development and public infrastructure to support the government reform agenda.
According to information which has become available to Belarus Digest, over the next few years the EBRD plans to continue stimulating economic competitiveness by supporting growth, efficiency and innovation in the private sector, both directly through debt and equity and indirectly through credit lines to the banking sector. The Bank also plans to promote the privatisation of state-owned companies.
As far as their work with the government is concerned, the bank plans to improve the sustainability and service quality of public infrastructure through policy and regulatory reforms and the introduction of commercial solutions.
Although the proposed strategy will continue to focus primarily on private sector development it will also provide for broader engagement by the Bank to support the Government's reform agenda.
Will the new approach work in Belarus?
The Bank officials at March meetings in Minsk expressed their willingness to extend cooperation with the Belarusian authorities as long as they show concrete steps to reform and stick to undertaken commitments. Although the Belarusian authorities fear any significant changes in the economy which may affect the political status quote, two main factors work in favour of reforms.
First, the dramatic fall in oil prices ended many profitable schemes, which usually involved processing oil products and selling them to the West. The Russian market, the main destination of Belarusian goods, has also suffered as a result of low oil prices and Western sanctions.
Second, the pro-reform camp within the government is growing stronger. Although many see Prime Minister Andrej Kabiakoŭ as a pro-Russian conservative, many influential figures in the National Bank, the Ministry of Economy and the Ministry of Finance have other views.
For example, the First Deputy Prime Minister and graduate of London Business School Vasil Maciušeŭski, as well as presidential economic advisor Kiryl Rudy, a former Fulbright fellow at the University of Chicago, recently became more influential and strongly advocate economic reforms.
With massive layoffs already starting to bite major Belarusian state enterprises, the authorities desperately need foreign investment. With no IMF loan in sight and cautious private investors, the EBRD could play an important role.
However, the political leadership of Belarus is not in a rush to implement reforms. They think they have time. After the crisis in Ukraine the public appetite for revolution is at its lowest for many years. But a growing number of officials seem to understand that Belarusian statehood itself depends on the viability of its economy.
Given the rapidly declining Russian economy, turning to the West seems like a logical response. However, this should not be mistaken for a geopolitical change of heart from the Belarusian leadership. Belarus' dependance on Russia is too strong for any radical moves.