Can Belarus keep a strong position on the global arms markets?
In 2012, Belarus became 18th out of the world's 20 leading arms exporters, according to a report by the Stockholm International Peace Research Institute (SIPRI) published last month.
Despite this achievement, the situation of national arms industries remains precarious. Belarusian arms producers are increasingly loosing sway on the post-Soviet market. Since 2007, The Kremlin has pursued a policy of substituting Belarusian products with Russian ones.
Under these circumstances, Minsk is focusing on traditional Soviet-era markets (such as China and Vietnam) and cooperation with conservative regimes in the Middle East and Southeast Asia. For example, Belarusian firms are currently seeking a contract on modernisation of Malaysian MiG-29s. At the end of February, Belarusian officials signed new agreements with a major defence company from the United Arab Emirates.
Top-20 for the last time?
In 2012-16, Belarus sold $625m worth of arms. In comparison, neighbouring Ukraine sold $3.7bn worth of weapons over the same time period and managed to keep its place among the top-10 global arms exporters.
According to SIPRI, Minsk received the most revenue from aircraft sales – $312m, and air defence systems – $195m. The export of armoured combat vehicles brought in $96m. Most of these arms were remnants of the Soviet military, although they were usually modernised before sale. At the same time, the share of products of Belarus's own firms is rising, e.g., radars, optics, and electronics. Belarus has recently focused on developing complete weapons systems, such as the Palanez multiple-launch rocket system. However, it has yet to export them.
Even a cursory analysis of SIPRI's figures shows that this could be the last time Minsk manages to get into the top-20 global arms suppliers. Given the share of aircraft in its exports and the fact that Belarus effectively no longer has aircraft to sell, Belarus will face a significant decline in its revenues from arms exports.
This can be avoided only if it decommissions the Su-25, a close air-support aircraft of the Belarusian armed forces, and sells them. Such plans have in fact been articulated repeatedly in recent years. Another possible option – the sale of some of the Belarusian military's MiG-29s – is improbable, as this would undermine Minsk's commitments to the Single Air Defence System with Moscow.
The three largest importers of Belarusian arms in 2012-2016 were China ($170m), Vietnam ($150m), and Sudan ($113m). China and Vietnam have been traditional Belarusian partners in the defence sphere since Soviet times. Export to Sudan became possible when certain conservative Arab regimes, namely Saudi Arabia and the UAE, bankrolled the Sudanese.
Belarusian arms in the Middle East and Southeast Asia
Cooperation with Western-allied Arab regimes continues. On 21 February, Belarus's State Military-Industrial Committee and the UAE's Tawazun Economic Council – the UAE's national agency dealing with defence equipment procurements – signed an undisclosed agreement.
While the Russian media described the document merely as a 'memorandum of understanding,' an IHS Jane's Defence Industry analysis insisted that Belarus and the UAE had signed a 'defence technology transfer agreement.'
The agreement followed another weapons deal concluded between Belarus and the UAE just days before. According to the $14.37m deal, the Emirati military contracted the Belarusian defence firm Beltech Export to supply spares and provide repair services and technical support for the BMP-3 infantry fighting vehicles of the UAE armed forces.
Meanwhile, Belarusian defence industries are also actively working in Southeast Asia. In 2016, Belarusian firms concluded two major arms deals there by delivering surface-to-air missile systems and radars worth $51m and $30m to Myanmar and Vietnam respectively.
Currently, the Belarusian 558th Aircraft repair plant is struggling to get a contract on modernisation of Malaysian MiG-29s. It has a chance: the speaker of the lower chamber of the Malaysian parliament Pandikar Amin Mulia visited the plant in December.
Is the Kremlin spending tens of millions to undercut Belarusian partners?
Belarusian defence industries are still mostly oriented towards post-Soviet nations. Yet fundamental changes are afoot. Without much publicity, Russian defence industries are consistently undercutting Belarusian suppliers. Russian government agencies are planning to replace Belarusian-manufactured components – alongside Ukrainian and Western-supplied defence equipment parts – with Russian state programmes.
Russian officials openly boast about their successes in substituting Belarusian imports with Russian products and services. A case in point is the company Remdizel, a unit of KamAZ corporation, which separated from the latter and took KamAZ's military projects with it.
Initially, Remdizel repaired and overhauled KamAZ chassis and trucks. However, in an interview recently published by Russian the defence review Eksport Vooruzhenii, Faiz Hafizov, director general of Remdizel, announced an expansion. His enterprise will now provide maintenance and overhaul services for Belarusian MAZ-543 and prepares to do the same for Belarusian MZKT-7930. The Russian army widely uses both to carry missiles.
This squeezing out of MAZ and MZKT from the Russian market is not a private initiative of Remdizel, as proven by respective agreements it has concluded with the Russian defence ministry and its departments. The director of Remdizel expects that in 2017 the revenue his firm gets from maintenance and overhaul of MAZ and MZKT of only military types can increase by at least 8-9%. This means a corresponding decrease in revenues of Belarusian firms.
Can Russia live without MZKT?
The sixth issue of the review Russia in Global Affairs last year featured an article summarising the achievements of the Russian defence industries in substituting imports. Belarusian supplies were listed among foreign imports to be replaced by Russian analogues. Furthermore, the author, Russian defence analyst Andrei Frolov, admitted that although the Kremlin started adopting defence imports substitution programmes in 2013-2014, the Russian government had begun to get rid of post-Soviet partners years before.
For instance, the Russian Zavod Spetsialnykh Avtomobilei, based in Naberezhnye Chelny, since 2010 has been developing a series of chassis to replace the Belarusian MZKT analogues as prospective arms platforms. Moreover, Putin signed an order on respective R&D works as early as 2007.
This is only the beginning. In July 2016, the local daily Biznes Online revealed that the project in Naberezhnye Chelny had failed, and now Russia is launching a second large-scale programme to substitute Belarusian-manufactured chassis. The costs already amount to tens of millions of US dollars, but the Kremlin seems intent on getting rid of Belarusian MZKT at any cost.
Other Belarusian defence exports to Russia will be affected as well. For instance, the same Russia in Global Affairs review announced the 'production of [Russian] night vision sight matrices instead of French and Belarusian products' as another major achievement of Russia's defence industry. Given that Belarusian firms traditionally supplied sights and other optics for Russian-made tanks and armoured vehicles, it seems that the Kremlin is making no exceptions for Belarus in its drive towards autarchy.
Belarusian defence industries are undergoing arduous but relatively successful transformations. On the one hand, they are forced to develop new products, as their Soviet legacy has already been sold. On the other hand, Putin's policies have left Minsk with no choice in the long-term perspective: it must survive with less support from Russia. As the SIPRI report has shown, Minsk is so far surviving. Minsk's marketing efforts pursue a consistent and fastidious strategy by focusing on solvent customers, including certain former Soviet allies, conservative regimes in the Middle East, and beyond.
Corruption in Belarusian sport: the trend of five-year prison terms
Several corruption scandals shook Belarusian sport in 2016. They demonstrate that even Alexander Lukashenka's favourites are not safe from corruption.
Perhaps the most discussed case was the five-year prison sentence of Maksim Subbotkin, the General Director of the most successful ice-hockey club in Belarus – Dynama-Minsk, whom the court charged for embezzlement.
In spite of the fact that the Belarusian state prides itself on its achievements in fighting corruption, bribery remains widespread in all spheres of life, including sport. Moreover, corruption has become a part of the Belarusian political system. Corruption scandals perform an ideological function and serve to control the bureaucracy.
Alexander Lukashenka's favourite club
The story of Alexander Lukashenka's favourite club starts in 2003, when the Ministry of Internal Affairs decided to revive Dynama Minsk: the most successive Belarusian club during Soviet times. In the early 2010s, with a budget of around $20m, Dynama became the richest professional sport club in Belarus. Most profitable state enterprises, such as SC Belaruskali and the Mazyr Oil Refinery, subsidised the project.
Representing Belarus in the Continental Hockey League, Dynama became one of the most popular teams in the league, with an average attendance of more than 12,000 spectators per match. Lukashenka himself monitored the team's results and regularly criticised the club for poor performances.
It might seem that such close attention from the head of state should render the club immune from corruption. However, in 2015, the club's top-managers became embroiled in a corruption scandal. After spending a year and a half in jail, in October 2016 a court sentenced ex-CEO of the club Maksim Subbotkin to five years behind bars.
Another top-manager of Dynama, Uladzimir Berazhkou, spent eight months in prison, but Lukashenka pardoned and released him after he re-paid $65,000 worth of monetary losses. Despite the corruption charges, the functionary got a position as head of the Department of Marketing and Communication in the Belarusian Football Federation immediately after his release.
Maksim Subbotkin also compensated monetary losses amounting to $150,000, but the president denied him clemency. According to the investigation, Subbotkin had used his subsidiary company, Dynama-Marketing, to misappropriate funds. Moreover, the ex-general director had 'employed' Berazhkou’s teammate Leanid Sagyndykau in his club when in reality he did not work there. Berazhkou handed his salaries to Subbotkin.
It should be mentioned that in spite of their repayments, neither top-manager fully admitted his guilt. Subbotkin even denied the charges and appealed the sentence.
The latest corruption cases in Belarusian sport
The Dynama Minsk corruption case received considerable attention in the media, but this was not the only large corruption case in Belarusian sport in 2016. Another top-manager, the ex-general director of the Basketball club Tsmoki-Minsk, Kanstantsin Shereveria, received five and a half years in September 2016. The functionary will also have to pay $180,000 worth of damages.
The court accused the manager of the largest Basketball club in the country – which has an annual budget of $2m – of misappropriation. According to the investigation the manager had misappropriated players’ salaries and organised his birthday party using club funds. However, Sheveria, a club founder and former basketball player, denied the accusations, claiming that he had used all appropriated funds for club development.
The latest corruption scandal in sport occurred in the Belarusian Football Federation. In January 2017, head of the Judiciary Department Andrei Zhukau received five years imprisonment for bribery. The investigation revealed that between 2014 and 2016 he had enriched himself by $650 and a bottle of Cognac. He had received these small bribes from referees and coaches as a reward for referee appointments on Belarusian football league matches.
Corruption as an element of the political system
In 2015, Belarus came 107th in Transparency International's corruption index. Nevertheless, the state media characterise the fight against corruption as one of the most significant accomplishment of the Belarusian authorities. Alexander Lukashenka intends to preserve the image of corruption fighter, which he created in the very beginning of his rule. The Belarusian media cover the corruption cases of highly-placed functionaries, top-managers, and businessmen in great detail. Such trials remain commonplace in Belarus.
With rare exceptions, the state owns and sponsors all Belarusian sport clubs. The way sport clubs are managed is not significantly different from state-owned factories. For that reason, clubs are as vulnerable to corruption as other state enterprises. Even projects as special as Dynama are not spared.
On the other hand, given the non-independent nature of the judiciary system, it is impossible to be fully confident as to whether the defendants are guilty or not. The number of acquittals in Belarus raises doubts about the independence of the judiciary. Acquittals occur less than half a per cent of the time, much less than in the EU and even in neighbouring Russia and Ukraine. Furthermore, most functionaries accused of corruption plead not guilty.
In the machinery of the Belarusian state, highly sensitive to corruption, almost any civil servant can be accused of bribery and receive a five-year prison sentence. Corruption cases in sport illustrate the overall situation in public administration and state-owned enterprise management. As these trials show, arbitrage practises do not distinguish between $150,000 losses and petty bribes. Both kinds of crime lead to equal punishment.
Such a system is very expedient for Alexander Lukashenka personally. It fosters his image as a corruption fighter and allows him to keep officials and managers on a short leash. According to the law, the Belarusian president can pardon his subordinates imprisoned for corruption if they compensate for the losses. Very often, he even offers positions to newly released functionaries, as was the case for Uladzimir Berazhkou. These powers give the head of state unlimited possibilities for control of the bureaucracy.