Belarus Hopes To Cash In On Russian Sanctions
Earlier this month, Russia introduced a full embargo on imports of meat, fish, dairy, fruit and vegetables from the European Union (EU), United States, Australia, Canada and Norway.
Moscow sought to retaliate for the sanctions imposed by the West following the downing of the Malaysian Airlines flight over Eastern Ukraine in July. The food ban went into effect immediately.
Belarus, itself no stranger to Western sanctions, took the news in stride, promising to increase Belarusian food exports to Russia.
Whether the food embargo indeed holds substantial economic opportunities for Belarus, however, is not clear, especially if Russia will be able to fully monitor Belarus’ exports and re-exports. Russia has already accused Belarus of lacking capacity to monitor exports, reportedly identifying 11 violations at the Russian-Belarusian border last week.
Even if it does, the benefits for the Belarusian economy in the short run may be outweighed by negative impacts in the long run. Sustained sanctions will eventually produce an economic downturn in Russia that will also ripple through the Belarusian economy.
Belarus Is Getting Ready to Cash in
Last year, Russia imported $15.8 billion worth of agricultural products from the EU, as well as $1.3 billion worth of foodstuffs from the US. Following the recent imposition of sanctions, Western media reported that truckloads of fruit had been detained at the Russian border and left to rot.
Reacting to the panic of Greek farmers, who were hit hardest by the embargo, the EU commission promised to compensate peach and nectarine growers.
Farmers and producers in non-EU states like Belarus are much more cheerful. They view the embargo as a lucrative opportunity to boost exports to Russia. But how exactly is Minsk going to benefit?
On August 11, President Lukashenka said that Belarus, which enjoys a customs-free zone and shares a long border with Russia, would fulfil all obligations to protect the market of the union state as regards the transit of goods across its territory.
He also promised to increase food exports to Russia. At the same time, Lukashenka did not follow Russia’s ban. Neither did the third member of the customs union – Kazakhstan.
The Hard Limits of Belarusian Food Industry
Despite Belarus’s promises, the opportunities for increasing food exports to Russia without violating the embargo are highly constrained in the short run. Belarus cannot breed more cows or grow more potatoes overnight.
Therefore, any immediate increases of food exports to Russia, short of flaunting the embargo by simply relabeling European products, will lead to the disappearance of produce in the domestic market.
Belarus’ reaction to the Russian-Georgian war provides a blueprint that can be followed this time as well.
Back in 2008, Georgian wine and mineral water easily found their way into Russia via Belarus. Russia chose to look the other way because it needed allies.
Whether Belarus will cash in on the embargo depends primarily on Russia’s willingness to monitor and enforce food exports from Belarus.
A quick look at the long list of Belarusian food exports shows just how difficult it is to shut down the flow of Western food into Russia without undermining Russia’s trade relationship with Belarus.
Data from Belstat, for example, shows that, from January to May of this year, Belarus exported 11,921 tons of citrus fruit, 149.9 tons of Atlantic Salmon, and 304 tons of bananas into Russia.
Even greater quantities of Western produce are exported to Russia after being processed in Belarus. The Belarusian firm Santa-Bremor, owned by the oligarch and Lukashenka confidante Aleksandr Moshensky, is a poignant example.
The company sells all of its products under the “made in Belarus” label. However, its products contain salmon, caviar, and seafood, which cannot be found in landlocked Belarus. Belarusian media recently reported that Santa-Bremor increased its exports to Russia by 30% over the past week alone.
Belarus is also home to a number of fruit and vegetable processing plants, which rely on Western produce and sell the finished products to Russia. Allowing these companies to continue exports technically violates the embargo. But exports continue under the “made in Belarus” label, in part because Russia knows that prohibiting such exports would hurt the Belarusian economy and crack the foundations of the Customs Union.
Recognizing that a number of vehicles with perishable projects were stuck at the Belarusian border, Lukashenka has already proposed that products banned from entering the Russian market be sent to Belarusian processing facilities.
On August 20, Belarus cancelled ban on live cattle from the EU, which may be a sign that it hopes to increase re-exports of meat to Russia. Officially, however, the ban was scrapped due to lower concern over Schmallenberg virus.
Because the Russian-Belarusian border can be crossed without customs checks, Western products can reach Russia via many other routes. In fact, thousands of Russians may simply choose to go shopping in Belarus more often.
Reacting to the likely increases in domestic food prices, Belarusians, in turn, may increase their shopping trips to Poland, where food is already cheaper than in Belarus.
How far will Russia go to Enforce the Embargo?
Circumventing Economic Customs Union rules when they hurt the national interest seems to be a recurring pattern in Belarus’s behaviour. Last year, Russia failed to secure Belarus’ and Kazakhstan’s support in imposing restrictions on Ukrainian goods in the even that Kiev would sign the Association Agreement.
Russia raised the issue again in June at the meeting of the Eurasian Economic Commission but its proposal, to no avail. Thus, Belarus was able to insulate itself from the economic consequences of Russia’s trade war with Ukraine and may even benefit from re-exporting not only Western, but also Ukrainian goods to Russia.
Moscow certainly has enough power to pressure Belarus into compliance. However, it seems reluctant to do so at the time when its influence in the post-Soviet space is threatened and Belarus is a valuable ally.
Early signals from Russia indicate that it is not ready to look the other way. Just this week, Russia’s Federal Service for veterinary and phytosanitary control (Rosselhoznadzor) has said Belarus was unable to control exports of prohibited foodstuffs to Russia. According to Rosselhoznadzor, Minsk’s failure to control exports “threatens Russia’s food security”. According to UNIAN, the Russian side identified 11 violations of the ban by Belarus between 11 August and 15 August alone.
Tellingly, however, Moscow did not blame Belarus directly. Rosselhoznadzor’s official statement has placed the responsibility on the EU – for not labeling the products correctly. It decided to warn Belarus rather than criticize its directly.
The Long-term Impact of Western Sanctions
The deterioration of Moscow’s relationship with the West has contradictory consequences for Belarus’ economy. In the short term, the conflict has opened new export opportunities for Belarus.
Over time, though, Belarus’ economic dependence on its larger neighbour means that Moscow’s economic problems sooner or later will ripple through the Belarusian economy.
The Russian stock market and the rouble have already fallen, and Russia's growth forecasts for the year look bleak. Belarus may feel the effects of Moscow’s economic downturn in the not-so-distant future.
Russia’s economic problems could, for example, weaken the Belarusian machine-building industry. Large export-oriented plants in this sector, such as the Minsk automobile plant, stand to lose a lot of money if Russia’s demand slows.
The Belarusian financial sector is also vulnerable. Four Russian state-owned banks that are targeted by Western sanctions — Sberbank, Vnesheconombank (VEB), Gazprombank, and VTB Bank — all have operations in Belarus.
Reluctant Alliance with Russia, Hope for S-300, Milex-2014 – Belarus Security Digest
Reluctant allies: Moscow has to put up with Minsk's position in the war against Ukraine. However, Putin does not see it necessary to hide his irritation any longer.
The exhibition of arms and military machinery Milex-2014 was a success. Helicopters are a luxury for Belarusian border guards.
Belarus hopes that Moscow will finally keep its promise and transfer four battalions of S-300 anti-aircraft missile systems.
Moscow is unhappy with Minsk; Minsk does not believe Moscow
On 2 July 2014, Russia's President Vladimir Putin paid a one-day visit to Minsk to attend the festivities on the occasion of the 70th anniversary of the liberation of Belarus from the Nazis.
Initially, Minsk hoped that Vladimir Putin would come on 3 July to attend the festivities and the traditional military parade. According to our sources, it was the reason for moving the parade to the evening. For the daytime, they scheduled a number of events with participation of Putin and Lukashenka, which eventually had to be moved to 2 July.
The Belarusian authorities showed their lack of confidence in Moscow's reliability as an ally during the entire month. On 8 July 2014, during his visit to the 103rd Guards independent mobile brigade of the Special Operation Forces of Belarus, Alexander Lukashenka imparted his apprehensions that "the brothers [i.e. the Russians] would fail to cover our backs and we would have to fight the war on our own".
On 15 July 2014, while receiving graduates of military schools, Alexander Lukashenka said that the Belarusian army was able to "respond adequately to internal and external threats to the national security".
It should be noted separately that during the reception of graduates of military schools Lieutenant General Viktar Sheiman was on a par with the current leaders of security agencies. Sheiman may be regarded as an anti-crisis manager. And if Alexander Lukashenka once again has called upon his old proven staff, it means that the crisis is "on the doorstep".
Exhibition of arms and military machinery Milex-2014
The traditional international exhibition of arms and military machinery Milex-2014 took place on 9-12 July. The event was the biggest in its entire history. At the exhibition, Belarusian companies of the military and industrial complex signed about 60 contracts, agreements and letters of intent in the area of armaments and military equipment.
According to officials, the total volume of the contracts amounted to $60 mln. Besides, further contracts worth over $1 bln are under discussion.
The visit to Belarus of Pakistan's Minister of Defence Production Tanveer Hussain held in the framework of Milex-2014 is especially noteworthy.
Pakistan presents a special interest to Belarus also because this country is one of China's key partners. In addition, the level of development of Pakistan's defence industry may be of interest to Belarus in a number of areas, including missile and aviation technology.
Russia is ready to transfer S-300 to Belarus
At least, they say so. During the exhibition, the signing by the Russian party of a contract for a gratuitous transfer of S-300 anti-aircraft missile systems to Belarus was announced. The transfer of the equipment will take place after the Belarusian party signs the document.
The number of the systems to be transferred is not known: will all four battalions promised already in 2011 be transferred or only a part of them? The modification of the anti-aircraft missile systems in question is also unknown.
Earlier, they talked about S-300PMU1 but the transfer of S-300PS systems of earlier modifications (1989 – 1995) appears more likely. The latter are upgradable to versions that are more sophisticated.
Since April 2011, the issue of supply of four battalions of S-300 has been publicly discussed. In the meantime, they have always said that the supply can be expected in the nearest future. The equipment should be transferred "as is" and Belarus will pay for its repair, shipment and modernisation.
It should be noted separately that Moscow has demonstrated far greater quickness in the issue of supply of five battalions of S-300 anti-aircraft missile systems to Kazakhstan. In January this year they signed a respective agreement and the delivery of the equipment should begin later this year already.
Minsk needs S-300 to replace the liquid fuel missile systems S-200.
The border guards left without helicopters
The helicopter unit of the State Border Committee of Belarus was transferred to the Ministry of Emergency Situations. The reason for this was the need to optimise the costs of the border agency.
Belarus plans to replace the helicopters by UAVs, which have much lower operational costs and announced that the border guards would receive the short-range UAVs Berkut-2. The tactical range of its operation is up to 35 km with altitudes range from 100 to 3,000 metres. However, those are the declared parameters which in practise are likely to be more modest.
Belarus continues to develop its own anti-aircraft missile system
It was announced that there were already 15 procurement requests for the domestic anti-aircraft missile system Halberd. However, most likely the question is not about firm contracts but only letters of intent. The development of the anti-aircraft missile system Halberd is in its final stage; the product is not ready yet.
Further development of the project of the domestic anti-aircraft missile system Halberd bumps into the absence of Belarus' own missiles. The instability in Ukraine restrains cooperation with this country.
Attempts to buy missiles in the West or in Russia are doomed to failure: nobody needs competitors. In this regard, integration of the missiles of the anti-aircraft missile system Buk in Halberd may be of interest.
Firstly, these missiles have more powerful warheads in comparison with the already used. Secondly, there is a certain stock of these missiles. Thirdly, the domestic air defence system, which, in its turn, is a part of the unified regional air defence system of Belarus and Russia, uses the anti-aircraft missile systems Buk.
The number of those wishing to become army officers constantly decreases
During the second year in a row, the admission campaign to military schools and military departments of civilian universities essentially ends in failure. An additional enrolment has been announced in an expedited manner and the requirements to the level of training of the prospective students have been dramatically reduced.
Moreover, some schools substantially reduced their recruitment plans already in the beginning of the admission campaign. However, it will not solve the problem.
Thus, the last year's experience shows that many students admitted during the additional recruitment failed to pass the first exams and were dismissed for underperformance.
Andrei is the head of “Belarus Security Blog” analytical project.