Lukashenka’s Chinese options
On 26 October, prominent Chinese government expert on post-Soviet states Wang Xiaoquan warned that an escalation of Western sanctions against Belarus could disrupt China-EU transit routes. Paradoxically, Belarusian President Alexander Lukashenka needs to improve relations with the EU in order to advance his partnership with Beijing.
Contrary to stereotypes, China has provided Belarus with some new technologies and capital in recent years. In some cases, this cooperation has even strengthened Minsk’s foreign policy positions elsewhere, above all in conflicts with Russia. However, China has replaced neither Russia nor the West as a Belarusian partner. Moreover, China’s commitment to its Belarusian partner remains questionable despite persistent speculation over Chinese support for Lukashenka.
Going to Beijing for technology
In the face of recurrent problems in acquiring new technologies from Russia, the Belarusian government in recent years has turned to Beijing. This has benefited Belarusian space and military missile programmes, as well as numerous projects in the automotive industry. For example, Belarus managed to launch its first satellite, Belintersat-1, in January 2016 after the Export-Import Bank of China provided $258.6m of almost $300m of the project costs. Belintersat-1 was conceived as a commercial venture. However, already in March 2019 the Belarusian government began to notice that the satellite had failed to generate the expected revenue, and asked Beijing to cancel the debt. Last week, Belarusian oppositional media reported that China had refused to forgive Minsk an outstanding $233m in debt.
Later, in October 2018, the second satellite, constructed by Belarus State University for research purposes, was also launched into space with Chinese help. On 31 August 2020, Lukashenka signed an executive order concerning the launch of the second satellite, to be constructed by Belarus State University in 2021. Although no details concerning the launch have been published, most probably it will be done with Chinese help too.
The automotive industry provides more ubiquitous examples of Belarus trying to rely on China to achieve more economic sustainability as an independent nation. A joint venture between Belarusian MAZ and Shaanxi Fast Gear- the latter belonging to China’s Weichai corporation – has now completed construction of production facilities for manufacturing gearboxes for trucks and buses. The construction of the factory, whose products will replace Russian gearboxes, started as recently as August 2019.
Another successful case provides BelGee, a joint-venture with Chinese Geely, which manufactures cars. Since 2017 it has sold about 40,000 cars (including 10,520 in January-July 2020). Almost half of them have been exported to Russia. In an interview with AV.by in August, director of BelGee Hienadz’ Sviderski gave assurances that from 2018, the factory had been generating profits while also repaying the loan: BelGee manufacturing was built almost entirely from a $250m Chinese loan. According to Sviderski, the localisation of production has now reached more than 50%.
There is, however, one important caveat to this success story. BelGee, which last year became the fourth most popular brand in Belarus, enjoys unique conditions created by the government. The latter made clear in no uncertain terms its intention to implement this project by appointing Sviderski, even without relieving him of his position as Deputy Minister of Industry. To promote sales, the government forced banks to provide special loans for purchasing these cars. At the same time, the government has increased the import tariffs for second-hand cars.
Chinese money helping against Putin?
Belarus needs not only technological support but also money, especially as its isolation from the West has been increasingly compounded in recent years by tensions with Moscow. The most remarkable case of Beijing rescuing Minsk occurred last December. Back then, at the peak of the tensions between Minsk and Moscow over Putin’s new Russia-Belarus integration demands, China urgently provided a 0.5$bn loan to Belarus and granted Belarusian firms more access to its markets.
Besides loans, China has increased its technical and economic assistance, although the scale and final application of this remain unclear. On 30 June 2020, Belarusian Deputy Prime Minister and former ambassador to Beijing Mikalai Snapkou said:
In the up eight years up to 2015, we received in total about $130m of this kind of assistance. Since 2015, after the meeting of our leaders, we have received $130m each year in assistance. It goes to social housing, hostels, infrastructure… In total, the absorbed and implemented technical and economic aid from China exceeds half a billion dollars. Taking into account the projected facilities, within 3-4 years, it will be $800m.
The question is whether the Chinese money is used to address the real needs of the country, or instead is spent on prestigious projects with little use for national development, such as international sports events. Indeed, this past summer China started building a football stadium and swimming pool for international competitions in Minsk, each at an estimated cost of around $120m according to forex signals Telegram reports.
In addition, Beijing frequently provides money on the condition that Belarus buys goods and services from Chinese firms. Minsk has already encountered such poor quality of work from Chinese subcontractors that it had to dismiss them. The case of the Svetlahorsk cellulose factory proves that. Initially, the Belarusian government had commissioned a Chinese corporation to construct the plant, but after it failed to deliver, Belarus in 2018 moved to build it on its own. A similar scenario took place with the construction of a paper factory in Dobrush, also in 2018: after delays and failures, the Belarusian government took the contract away from a Chinese subcontractor and gave it to an Austrian firm.
An exaggerated friendship
This demonstrates the contradictory nature of Belarus-China relations which is mostly ignored. Both supporters and critics of Lukashenka tend to exaggerate the degree of support that Beijing is willing to provide him with. The problem is that they mostly rely on Belarusian state media or Lukashenka’s own words in judging how close the Belarusian regime is to Beijing.
Furthermore, the Belarusian authorities are trying to create an impression of closeness, for example, by handling the Chinese ambassador to Minsk at least as respectfully as the Russian envoy. On 24 September, Lukashenka awarded Ambassador Jui Jimin with an order and discussed Belarusian domestic politics in great detail. The Belarusian president asked the ambassador to convey to Xi Jinping, “my good old friend, the kindest words of gratitude for the support he has always provided, especially recently. He was the first to congratulate me on my victory in the elections.“ Xi Jinping indeed congratulated Lukashenka on 10 August, the next day after the contested Belarusian presidential election, although not before Putin.
However, there is little evidence from the Chinese side for these claims by the current Belarusian leadership regarding Belarus’ closeness to Beijing. As Zhang Xin, a research fellow at the Centre for Russian Studies at Shanghai’s East China Normal University recently told Nikkei news outlet, “Beijing is unlikely to go out of its way to prop up the besieged Belarusian leader,” say in form of new investments or loans “just to support Lukashenko as a leader.” The logic is clear: for China, relations with Russia or the EU weigh more than those with Belarus.
To sum up, although Belarus constantly articulates its will to develop relations with China as a strategic choice, the role of this partnership should not be exaggerated. Its political aspects are analysed only on the basis of the claims by current Belarusian leadership which is inclined to exaggerate its proximity to Beijing.
The economic side of the relationship seem contradictory. To date, Belarusian projects with China have failed to compensate for the problems in Belarus’ relations with the West. Moreover, Beijing demonstrates no eagerness to side with Minsk in its conflicts with the EU.
Transit wars weaken both Belarus and the Baltics
For more than a month, Alexander Lukashenka has been threatening to stop exporting Belarusian goods via Baltic states’ ports, and to halt their transit via the Baltics and Poland. Alongside other measures taken by him, such as in the military sphere, the transit wars seem to be a concession by Belarus to Russia in exchange for Russia’s support in the post-election political crisis. However, in all probability, the Belarusian government does not in fact want to implement these policies.
On 9 October, deputy director general of Russian Railways Alexei Shilo said that his firm was capable of transporting all Belarusian oil products currently exported via the Baltic states to Russian ports. However, he warned that with regards to potash fertilisers—another bulk article of Belarusian export—Russian Railways would do so only on the condition that these shipments would not damage the interests of Russian potash fertiliser producers. Moreover, Russian news agency RIA Novosti reports that Russia does not in fact have sufficient port facilities to export Belarusian products.
Is Belarus finally getting on board with Putin’s plan?
Lukashenka launched regional transit wars on 28 August, when he responded to the Lithuanian government’s sanctions against Belarusian officials by demanding that Belarusian ministers table suggestions on how to reroute cargo away from Lithuanian ports. Following the Russian prime ministerial visit to the Belarusian capital Minsk that took place shortly after, it became clear that the cargo would go instead to Russian ports. In an interview on 28 September, Russian Energy Minister Alexander Novak said that “there is capacity at the ports of Primorsk, St. Petersburg, Ust’-Luga … The volumes can range from four to six million tons of oil products.”
In taking these steps, Lukashenka may finally be bowing to the Russian government which for years has publicly demanded that Belarus join its plan envisioning an end to sending any non-container cargo through Baltic states’ ports by 2024. That could deal a heavy blow to Lithuania, as Belarusian cargo accounts for about a third of the Lithuanian Klaipeda port’s turnover (Belarus through this port exported 1.4m tons of oil products in 2019, with a projected 2m tons of exports this year). The share is even growing against the backdrop of the coronavirus recession and increasing oil flows from non-Russian sources coming to Belarus via Klaipeda.
The Belarusian leadership is also maintaining a militant tone regarding cargo land transit. Talking to the State Customs Committee’s Chairman Yury Sian’ko, Lukashenka said on 5 October:
As you have reported to me, almost 40% of trucks this year have come from Lithuania and Latvia. … How does the Customs Committee view the reorientation of these cargoes? And the development of our own logistics centres? We have created powerful logistics centres. But many services, including for our businesses and for the Eurasian Economic Union countries, are still provided in Lithuania. We can provide these services to these carriers in Belarus.
Indeed, since early September the Belarusian authorities have increased checks on transit cargo being shipped from Lithuania via Belarus. This has resulted in longer shipping times.
Bluff and reality
Multiple questions arise about the viability of such changes to transportation flows. First, Russian analysts consistently point out that the terminals in the Leningrad region of Russia lack the capacity to take on Belarus’ shipments. Even after new facilities start operating there in the next couple of years, the problem will not be solved for a key product among Belarusian exports—fertilizers. The total capacity of the terminals in the Leningrad region will not be sufficient to replace Klaipeda in Lithuania, which handled about 10m tonnes of fertiliser in 2019.
Second, Belarus is bound to incur economic losses. After testing Russian routes for export in 2018 with pilot shipments of Belarusian oil products, Minsk found the profitability to be approximately USD 10 per tonne lower than shipments through the ports of the Baltic states. This is despite a 50% discount granted by Russian Railways on tariffs for the transportation of oil products from Belarus. The distances are longer than to the Baltic states’ ports, and Russian ports provide less efficient and more expensive services.
In the case of fertilisers, the expenses will increase even more. Currently, the Belarusian government is saving money because Belarus’ state potash fertiliser company, Belaruskali, owns around 30% of one of the terminals in Klaipeda. In addition, the Belarusian Potash Company is a shareholder of Fertimara UAB, a Lithuanian ship brokerage and chartering company.
The solution to some of these problems may be for Belarus to construct a new, large facility in Russia. Lukashenka has already suggested that Putin invest the USD 3bn remaining from a Russian loan to Belarus for the construction of a nuclear power plant into a port facility in Leningrad province. However, it will take years to get off the ground.
A parallel game
Not everything is decided and even commentators on Russian state-owned Sputnik have emphasised the need for top-level political agreements to arrange for the export of Belarusian oil products via Russian ports. After meeting Russian President Vladimir Putin on 14 September, Lukashenka implied that they were still not there: “I told him bluntly: if you offer such conditions as we have in the Baltics, we don’t care [which route we use].”
Besides financial losses incurred from redirecting export flows, Minsk may lose a major strategic project —diversification of its oil imports. After all, as late as in January the Belarusian leader demanded: “We have to achieve a situation when we will buy 30-40% of oil from Russia, import 30% via the Baltics and 30% through Ukraine.” In recent months, the Klaipeda port received oil from Norway, the US, and Saudi Arabia that went on to Belarus.
And Minsk apparently is eager to keep diversifying. On 6 October, a ship with Azerbaijani oil destined for Belarus arrived at the Ukrainian port of Odesa. 95,000 tonnes of crude demonstrate that the policy of oil source diversification is ongoing—however slowly.
Furthermore, in recent weeks, the Belarusian government has announced that it is continuing negotiations with Poland over the shipment of US oil destined for Belarus via that country. On 1 November, Belarus plans to start constructing a link between the northern and southern lines of the Druzhba pipeline, which will enable two Belarusian oil refineries to receive oil from both Baltic and Black Sea ports outside Russia. For Belarusian political analyst Ihar Tyshkevich, these designs are
a step towards diversifying oil supplies and reducing oil dependence on Russia. … Even if these are not Belarus’ real plans, but a bluff, it shows the lack of “complete control” of Putin over the Lukashenka regime.
Most probably, Minsk is waging new transportation wars at the behest of the Kremlin and not as a response to the Baltic states’ imposition of sanctions on the Belarusian leadership. The past indicates that this is likely the case now. Belarus has repeatedly in the past threatened to “withdraw its exports from Lithuania”, but even the dispute between Belarus and Lithuania over a Belarusian power station failed to prevent the countries from developing economic relations and Lithuania handling Belarusian cargo in Klaipeda.
The Baltic states depend on the Belarusian cargo flow—especially since Russia withdrew its cargo and started starving their ports about three years ago. However, Belarus will suffer badly as well. The shrinking political economy of joint development in the region undoubtedly will result in radicalised confrontation in the region and less stability and security. Both the Belarusian government and the opposition should be aware of this possible geopolitical catastrophe.
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