Belarus Develops Strategic Deterrence Capacities, Downshifts Air Force
On 22 August the Belarusian the defence ministry announced the purchase of trainer and light ground-attack aircraft and transport helicopters to modernise its Air Force. At first glance this unimpressive deal seems to contradict Minsk's recently announced ambitious plans to develop strategic deterrence capacities.
Belarus's military equipment procurement policy, however, is less paradoxical than it seems. Speaking at a conference on 1 July Belarusian president Alexander Lukashenka explained that after studying the conflicts in Iraq, Syria and Ukraine Minsk chose mobile forces supported by firepower as the most effective in such conflicts. “Airplanes and tanks have little say in today's wars.”
Is Minsk really overhauling its army according to new challenges? Or is this just a trick to conceal the decline of the Belarusian military due to financial difficulties?
Strategic deterrence: Belarusian-style
On 22 August the Belarusian army officially deployed the Palanez multiple-launch rocket system (MLRS). In doing this, Minsk completed the full cycle of development of a new armament. According to Belarusian officials, it took about two years of intensive work from scratch. While Belarus admits to resorting to Chinese help in developing the Palanez, some experts suspect Ukrainian involvement as well.
Palanez has a declared firing range of 50-200 km, significantly more than the MLRS types the Belarusian military used until now. Addressing the personnel of the 336th Rocket Artillery Brigade in Asipovichy, which was the first to receive Palanez, the head of General Staff Aleh Belakoneu characterised the newly deployed arms as “an element of strategic deterrence.”
The Palanez MLRS is proof of conceptual innovation in Belarusian national security policy. The Military Doctrine, which came into effect on 20 July, articulates among its new terms the notion of “strategic deterrence.”
In pursuit of that aim, Minsk initially planned to obtain Iskander tactical ballistic missile systems from Russia. Moscow initially denied Minsk this equipment, but later proposed to deploy them to Belarus on the condition that they remain under Russian command. However, these terms were unacceptable to Belarus.
Besides the Palanez MLRS, Minsk might have more in the pipeline when it comes to strategic deterrence. For three years the Ukrainian Yuzhnoye State Design Office has been developing the Hrim Tactical Ballistic Missile System, funded by an undisclosed foreign country.
Some experts, such as Aleksandr Khramchikhin, suspect it to be Belarus. Indeed, circumstantial evidence seems to point to the fact that Belarus – possibly together with some third country – might be paying Ukraine for a brand-new missile system.
Air force: downshifting continues
On 22 August the Belta news agency published information from the Defence Ministry about procurement of new equipment for the Air Force. Minsk decided to purchase four more Yak-130 aircraft. In the next weeks, the Belarusian army also received Mi-8MTV-5 helicopters. Although Belta failed to specify exactly how many, in June 2015 the Russian Holding Vertolety Rossii announced a contract with Belarus on delivery of 12 Mi-8MTV-5s in 2016-2017 .
Explaining the procurement decision, the Defence Ministry insists that “air force and air defence troops are being perfected and improved based on global trends in development of forms and methods of troop deployment.” He once again praised the Yak-130 aircraft as “the newest” and “unparalleled in its class.”
These claims, however, are dubious. Both Mi-8 and Yak-130 are indicative of an ongoing trend of Belarusian Air Force downshifting. Instead of decommissioned Su-24 bombers and Su-27 heavy fighter jets, Minsk deploys Yak-130 subsonic advanced jet trainers and ground-attack aircraft. In the future it wants to replace Su-25 ground-attack aircraft with Yak-130, too.
Interestingly, the Yak-130 was developed as a result of a Russian-Italian joint project and the plane has a twin brother, the Alenia Aermacchi M-346 Master. Poland has recently deployed it, but unlike Belarus and the Yak-130 it does not try to present M-346 as anything more than it is – a trainer and light ground-attack aircraft unable to replace modern military aircraft such as Su-25 or Su-27.
A similar problem concerns the purchase of Mi-8 MTV-5. These multi-purpose military transport helicopters can be armed with weapons like those installed on the famous Mi-24 attack helicopters. They thus can become a kind of ersatz Mi-24, although they certainly do not measure up to the Mi-24's capacities.
At the moment the Belarusian army still operates several Mi-24 inherited from the Soviet armed forces. The machines are old but they constitute a significant part of the mobile firepower capacities of the Belarusian army. Minsk has never openly discussed plans to buy replacements in the form of newer modifications of the Mi-24. It now seems that the Belarusian army plans to use Mi-8MTV-5 for that purpose.
This means that in the foreseeable future the Belarusian Air Force will increasingly rely on Yak-130 and Mi-8 with various modifications. It also continues to use older Soviet-times MiG-29 fighter jets, hoping at some point to acquire new Su-30s from Russia.
Another indicator of the decision to rely on Yak-130 and Mi-8 emerged earlier this month. On 17 August the Belarusian military news agency Vayar reported that Belarusian defence industries are producing their own fuel for S-8M unguided aviation rockets. These rockets are installed only on Mi-8, Mi-24 and Yak-130.
Minsk is apparently focusing its R&D efforts on the most urgent needs of the national Air Force. Belarus can now refuel rockets itself and keep older ammunition in working order. Before, it had to ask for services of the Russian firm which has been producing them since Soviet times.
Radars as a response to the US missile defence system?
On 16 August the Belarusian Defence Ministry announced deployment of the first Protivnik-GE early warning surveillance radar. By 2020, Minsk plans to receive a total of seven Russian-made radars of this type. Ihar Nasibyants, commander of Radiotechnic Forces, told the Belta news agency that after deployment of these radars, Belarus would have “completed the establishment of the radiolocation intelligence component of a non-strategic missile defence system”.
In other words, the delivery of these radars to Belarus is a Russian answer to the US missile defence system in Europe. Moscow argues that NATO can use the latter system to attack Russia with cruise missiles. Noteably, the new radars Belarus plans to deploy are reportedly especially efficient in dealing with such threats.
Moscow discussed the possibility of deploying Iskander tactic ballistic missile systems in Belarus Read more
To counter the US missile defence system, Moscow discussed the possibility of deploying Iskander tactic ballistic missile systems in Belarus. However, Minsk resisted this move as they would have remained under Russian command. Thus, Minsk and Moscow have chosen to deploy new radars to react to the US missile defence system.
In sum, it would be wrong to describe the current transformation of the Belarusian armed forces as a decline. Minsk is reshaping its army in an organised manner in accordance with its financial resources, e.g., downshifting its air force.
Although procurement of equipment for the Belarusian military is in line with both the national security priorities of Belarus and the interests of its Russian ally, Belarusian leadership retains the final word. Hence, Minsk has deployed new radars from Russia and refuses to host a Russian airbase and Russian army missile units.
Testing the Limits of Investment Crisis – Belarus Economy Digest
On 25 August 2016 the National Statistic Committee of Belarus (Belstat) publicised new macroeconomic data for July, which showed that the economy is suffering from a lack of investment flows.
Meanwhile, according to the National Bank of Belarus the continuing decline of companies' profits threatens the financial stability of the country.
Finally, the CEO of "Great Stone" Hu Zheng tries to convince authorities of the profitability of the "Great Stone" industrial park, teaching Belarusians about high-level commercial science.
Economic Recession: Investment Drought
In January-July 2016 investment in fixed capital in Belarus has dropped by a fifth since the same period last year. Belarus has not witnessed such a decline in investment activity since the 1990s, a period of investment disaster in the economy.
2016 has brought a third straight year of investment drought, bringing the total amount of years of drought up to four over the last five years. Moreover, the process of investment "deforestation" is speeding up: from -5.9 per cent in 2014 up to 20.6 per cent right now (see Figure 1).
The main explanation lies in the economic structure of the Belarusian economy – the greatest "stake" still belongs to the state. It thus continues to play the leading role in the investment scenario. As a result, the decline in investment expenditures of public industries has pulled down the whole investment activity in the country.
The second reason concerns foreign investors: they spend money mainly on sectors with high domestic demand – finance, communications, retail trade, restaurants, and so on. With the reduction of the "life-giving" source of superprofits the additional commercial investments have also greatly diminished.
Finally, in order to help the National Bank reduce inflation, the government has committed itself to cut funding of state programmes by approximately BYN28tn this year and by BYN20tn the next one.
Therefore, given the significant dependence of investment programmes of state enterprises on state funding, the government’s hopes for an investment recovery in the following years seem dubious.
The Financial System: Destabilising Loss-Makers
According to Belarus's statistical agency Belstat, the profits of enterprises have decreased by a fifth in the first half of the year, while the number of loss-making companies has increased by a quarter compared to the same period last year. On 1 July 2016 the number of loss-makers reached 1,738 (or 22.8 per cent in total) and outperformed the corresponding figures of the previous year by 24.8 per cent.
On 28 July 2016 representatives of the National Bank said that the situation with loss-makers is even more complicated, as over the last several years, in order to expand production, a large share of enterprises took out more loans without an adequate assessment of their ability to pay them back.
Correspondingly, in the first half of the year the amount of troubled assets in Belarusian banks doubled, thus increasing the risk of financial instability in the country.
Moreover, according to the National Bank, due to the devaluation of the national currency the debt burden (formed mostly by foreign currency liabilities) of the enterprises has increased significantly over the past two years.
As a result, the positive effect of the devaluation on price competitiveness of Belarusian exporters has been cancelled out. In January-July 2016 exports fell by more than a fifth in comparison with the same period last year.
Trade Policy: Low-ball from the Great Wall
On 5 June 2012 President Aliaksandr Lukashenka signed a decree on the creation of the Belarusian-Chinese industrial park "Great Stone," aimed at attracting over 100 companies from China and Europe. However, to this day only eight residents have agreed to participate, and only two of them have started the building process.
On 19 August 2016 the CEO of "Great Stone" Hu Zheng tried to dispel any uncertainty about the future of the project by claiming that the conditions for entering the project are too restrictive (the size of the company and its business area: electronics, pharmaceutics, R&D, engineering, biotechnology, fine chemistry, new materials, warehouse logistics), which restrains investors.
Hu Zheng has suggested that the criteria for residents must initially be relaxed and their areas of activity expanded. He gave several examples, including firms engaged in processing of raw materials on a tolling basis (for example, processing of stone or metal).
However, such "extraordinarily helpful" advice may turn the innovative project into a simple excuse to transfer the above mentioned enterprises with low added value (which are also potentially harmful to the environment) from China to Belarus.
Due to prohibitive tax benefits (10 years of "all inclusive" tax vacation plus a subsequent 10 years of half-priced tax bills) for the investors, acting on such advice could undermine the competitiveness of Belarusian enterprises, contribute to additional job losses of Belarusians and lead to even more severe budget problems.
In Belarus this is an unpopular position: the first Deputy General Director of the "Company for the development of the industrial park" Kirill Koroteyev has admitted that the primary aim of "Great Stone" is to attract only high-tech companies.
Thus, the government is still searching for additional sources of economic growth, preferring to bet on foreigners and forgetting about the entrepreneurial abilities of their own citizens. Meanwhile, investments continue to evaporate and additional fiscal risks threaten the financial stability of the country.
Aleh Mazol, Belarusian Economic Research and Outreach Center (BEROC)
This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)