How Not to Be Cheated by Belarus Authorities
The incumbent Belarusian government has a long record of deceptive behaviour in its foreign relations. Both its major trading partners – Russia and the European Union – have more than once seen official Minsk let them down on its commitments and promises. These promises included political liberalisation, introduction of single currency with Russia, recognition of Abkhasia and South Ossetia and many more.
The words of the Belarusian authorities are taken with distrust and suspicion not only in Belarus but even more so abroad. When it comes to contractual obligations Belarus' counterparts prefer to be on the safe side of the road and double check that the Belarusian regime will not have a chance to deceive them again. The safeguards which Russia is now taking when ion its new loans to Belarus is a vivid illustration of that.
Bad Reputation Is Easy to Earn
With the European Union the deception mostly occurred in the political realm. In the already distant year of 1999 the Belarusian president made a public commitment at the OSCE summit in Istanbul to organise an all-national round-table with the opposition. Upon his arrival back home he threw the reached agreements in the garbage.
In 2008 Belarusian authorities promised during the behind-the-scenes negotiations with EU diplomats to allow a number of opposition figures enter parliament in exchange for a de facto recognition of the parliamentary elections. When the de facto recognition was about to happen, not a single representative of the opposition got a seat.
The history of deceptions in relations with Russia is far richer. One can name multiple commitments and promises that the Belarusian government failed to fulfil in the framework of the Union State of Belarus and Russia. To name just a few: single currency with Russia, unhampered Russian exports, fair (unsubsidised) Belarusian exports or free access to privatisation for Russian business.
And, perhaps, the biggest blow to the Russian interests was non-recognition of independence of Abkhasia and South Ossetia. According to the outgoing president of Russia Dmitry Medvedev, in the immediate aftermath of the Russian-Georgian War in August 2008 Lukashenka solemnly promised that Belarus would quickly recognise the two breakaway provinces. But this has not happened even now, four years later.
As a consequence, the level of trust in foreign states' undertakings with Belarus is now at its absolute low. But while the European Union is still trying to find proper methods in dealing with the unreliable counterpart amid the ongoing diplomatic row, Russia is using concrete instruments to make sure that the Belarusian authorities will not dupe it again.
For instance, every new instalment of Russian loans for the chronically ill Belarusian economy is now strictly conditioned on the fulfilment of contractual obligations. The Russians adjust the mechanisms of loan administration to minimise opportunities of cheating.
The EurAsEC Loan: the Case of Strict Conditionality
At the end of June 2011, amidst the heyday of the financial crisis, the Belarusian government managed to negotiate a $3 billion loan from the Russia-controlled Anti-Crisis Fund of the Eurasian Economic Community (EurAsEC). But it was agreed that the whole sum would be transferred in several instalments. According to the Letter of Intent that Belarus signed last June, each instalment has strict conditions attached to it.
It became evident that the Russia-dominated Anti-Crisis Fund was serious about its conditions already when it came to the second instalment. Initially, it was scheduled for the end of October. But because the Belarusian authorities were delaying a number of macroeconomic decisions promised in the Letter of Intent (for example, a sufficient increase of the interest rate) the second instalment arrived only on 30 December and after those decisions were made.
The same is now the case with the third instalment of $440 million. According to the Letter of Intent, it should have been transferred by 28 February 2012. However, in 2011 Belarus failed to fulfil a condition – to limit discounted lending under state programmes. The Anti-Crisis Fund deems it to be a considerable violation of the contract as extensive financing of state programmes leads to deficits of the balance of payments.
Therefore, the Fund now demands that the government complies with its commitments and that monetary and budget policies are more conservative. And, unlike in previous years there is now a general feeling that Belarus will not do away with promises only and will have to fulfil all its commitments.
The Nuclear Power Plant Loan: the Case of Direct Loan Administration
It was announced at the end of last November that Russia would provide $10 billion loan for the construction of a nuclear power plant in Belarus. The loan will also come in several instalments. And it will not be transferred directly into the Belarusian government’s account. Instead, the money will first go to the Russian Vneshekonombank, which will make all payments in accordance with the intergovernmental loan contract.
Belvneshekonombank, Vneshekonombank’s daughter bank in Belarus, was appointed as the bank-agent of the Belarusian government under the loan contract. It will facilitate all banking operations needed to receive, serve and return the money.
Thus, through the system of Vneshekonombank the Russian side will fully control the use of the loaned money and make sure that it is used in accordance with the contract. This deprives the Belarusian authorities of freedom to manipulate with the funds.
Following the Russian Suit
The Russian authorities have learned their lesson of how to avoid being cheated when dealing with Belarus. They no longer expect a fair game on the part of Lukashenka. Instead, they develop a strict policy of incentives based on the weaknesses of the Belarusian economy. This narrows Minsk's manoeuvring space and steadily streamlines the behaviour of the Belarusian regime as the Russians want it.
The Statement at the Conclusion of the latest IMF mission to Belarus released on 5 March shows that the IMF is also following the Russian suit in judging the Belarusian government exclusively by its policies and not sheer promises. This is, indeed, the only way to deal with a deviant partner.
Yauheni Preiherman is Policy Director at the Discussion and Analytical Society “Liberal Club” in Minsk
EU-Belarus Relations: Playing Hardball
EU travel ban against 21 Belarusian officials provoked extravagant behaviour by Belarusian authorities which analysts are still struggling to explain. On 28 February Belarus asked the Polish and EU delegation ambassadors to leave the country. The EU response was strong and equally unexpected: it recalled all its ambassadors from Minsk in a sign of solidarity.
This confrontation wasted another opportunity to restart the EU-Belarus engagement dialogue. It may also negatively affect the human rights situation in the country. Experts propose a variety of explanations of this conflict, from psychological reasons to the plot of Russians. But regardless of the explanation, the relations between the European Union and Belarus are now at the lowest point ever, which harms all parties involved.
Many expected improvement in EU-Belarus relations when Gunnar Wiegand from the European External Action Service was officially visiting Minsk on 8-10 February. After a series of meetings with Belarusian officials Wiegand announced that several political prisoners might be released in the following weeks. It looked like the success of tacit diplomacy.
However, something else happened. The court in the eastern of Belarusian city Vitsebsk sentenced a prominent opposition activist Siarhei Kavalenka to 25 months in prison. His only "crime" was hanging out an old national flag on the New Year tree at the central square of Vitebsk. This unexpectedly harsh sentence was one of the reasons why EU Foreign Ministers’ decided to extend travel ban to 21 more representatives of Belarusian authorities.
But despite intensive lobbying of some opposition groups, the EU stopped short of introducing new economic sanctions either against Belarusian state enterprises or businessmen. It seemed like one compromise too many. No one expected that in response the Belarusian Foreign Ministry would demand the Polish and EU delegation ambassadors to leave the country to demonstrate their disagreement with the EU Council’s decision. Subsequently Belarus recalled its ambassadors from Brussels and Warsaw “for consultations”. The EU countries responded to that action by a unified recall of all their ambassadors from the Belarusian capital.
Belarus: "Do Not Try to Teach Us!"
A sudden departure of European ambassadors shocked Belarusian experts. One of the leaders of the Tell the Truth campaign Andrey Dmitriev thinks that Lukashenka wanted to show its firmness in hard economic times. A former member of parliament, Volha Abramava, supposed that this conflict was necessary for consolidation of the Belarusian people around the ruling elite before the 2012 parliamentary election.
According to BISS analysts Dzianis Melyantsou and Alexey Pikulik, the main problem is that the European Union sees Belarus as a typical Eastern European country that aspires to the EU membership. But Belarusian authorities would prefer to be treated like Kazakhstan or Azerbaijan. In other words, they do not want to have conditions set on their dialogue on political issues. Belarusian authorities try to undermine the EU’s belief that it is possible to change the regime in Belarus.
One of the leaders of the Belarusian opposition Anatol Liabedzka thinks that Europe's failure either to introduce economic sanctions or to significantly increase the travel ban list was seen as a weakness by Lukashenka and he tried to play a hardball in return. The European Union responded in the same manner.
The Russian Factor
Other experts are quick to remind that Vladimir Putin conducted his election campaign using anti-Western rhetoric. It is possible that Lukashenka wanted to display his loyalty to Putin to extract concessions later. Uladzimir Matskevich and some other experts believe that the only party which benefits from further isolation of Belarus is the Russian Federation.
Given the influence of the Russian security services on their Belarusian colleagues this version has its own merits. Russian tycoons and state officials may renew pressure on Belarus over privatisation of key assets after Putin's victory and Belarus isolation would help them secure better deals.
Lithuanian President Dalia Grybauskaite also thinks that the isolation of the official Minsk will only increase Russia's influence in the country. "Politically and economically, they just push Belarus to Russia and reduce its dependence on the West or any influence of the West," she said.
Harmful Consequences, No Winners?
The Belarusian issue consolidated European politicians and became a matter of principle for them. It is again high on the EU agenda. This may lead to new European projects aimed at changing the situation in Belarus. Moreover, the diplomatic scandal provided advocates of economic sanctions with new arguments and raised doubt about the future of the 2014 IIHF World Hockey Championship in Belarus.
It is hardly possible that both sides are ready for further confrontation. Many fear that economic sanctions are disadvantageous and will increase the dependence of Belarus from Russia. And nobody is interested in deterioration of the human rights situation in Belarus in case of new unfriendly acts.
Belarusian authorities have already made clear that they could increase pressure on civil society. In particular, they threatened to initiate criminal prosecution against several opposition activists who advocated EU sanctions against Belarus. As in the past activists inside Belarus serve as hostages of Lukashenka's geopolitical games.
When Will the Ambassadors Return?
The European Union and Belarus are interested in dialogue, but none wants to make the first step. Both sides intend to maximise their opportunities and minimise their contributions. Belarus is not ready to break off trade or diplomatic relations with European countries with which it has more than $7.5bn trade surplus.
And Gunnar Wiegand’s visit shows that negotiations continue using semi-formal diplomatic channels even in the conflict situation. Andrei Savinykh from the Belarusian Foreign Ministry declared that they were not planning to recall ambassadors from other EU countries and said that EU representatives could come back when they would like to do that.
The European Union is the only serious international actor that is truly interested in an independent, democratic and prosperous Belarus. Although the EU could do much more even now, in the long-run it is the only actor able and willing to provide resources for the transformation of the country towards a successful market economy. Clearly, safe and democratic neighbourhood is in their interest.
Engagement is also in the interests of Belarusian authorities. Lukashenka may soon face increased economic pressure from Russia. Once Vladimir Putin is done with his reelection campaign he may become less interested to pump as many subsidies into the Belarusian economy and may request something more tangible in return.