Realists winning, Russian factor poll, Belarusisation increased – digest of Belarusian analytics

Only 5% of Belarusians want Belarus to become a part of Russia according to the fresh polling data by the Belarusian Analytical Workshop.

Chris Miller sees Moscow’s plans to make Belarus a cornerstone of its Eurasian integration project as unsuccessful.

Grigory Ioffe argues that realists winning the tug of war with idealists, both in the Belarusian government and in the opposition.

The opposition is split on street protests tactics. Belarusization has not ended and even increased, argues Alieh Trusaŭ.

This and more in the new edition of digest of Belarusian analytics.

Belarus-Russia relations and Eurasian integration

Belarus: Sitting on Two Chairs Is What the Doctor Ordered – Grigory Ioffe considers Belarus’ sitting-on-two-chairs foreign policy. The expert believes that there is no mischief, just a genuine desire to sustain itself as an independent state in a problematic neighbourhood known as the historical ‘bloodlands’.

Realists Winning Tug of War Over Belarus – Grigory Ioffe observes the ascending realism in Belarus in the growing understanding domestically that a) so-called Eurasian integration is no universal master key, but rejecting it altogether is harmful and unrealistic; and b) improving relations with both the EU and the US is vital because the sources of technological progress and healthy economic strategies are in the West.

Only 5% of Belarusians want Belarus to become a part of Russia. However, the Russian factor of impact on Belarus remains: 63% of the Belarusians positively assess the annexation of Crimea; the influence of Russian media on residents of Belarus is 60%. The fresh polling data by the Belarusian Analytical Workshop were announced at the round table, organised by the Minsk Dialogue expert initiative.

Belarus and the Failure of the Russian World – Chris Miller sees Moscow’s plans to make Belarus a cornerstone of its Eurasian integration project as unsuccessful. Given its culture, history, and economy, no country is a more natural member of the ‘Russian world’ than Belarus. But over the past two years, no country has done more to demonstrate the weakness of Russian efforts to reestablish hegemony in the post-Soviet space.

Spring 2017 mass protests

The Opposition Is Arguing About Street Tactics – Naviny.by analyses two current tactics of street activities of the Belarusian opposition – sanctioned and unauthorised actions – and concludes: in fact, there is no single solution. If, as a result of proper use of a particular political situation, the action turns out to be really mass, then, regardless of its status, it would become an important event on the political scene.

Situation in the Field of National Security and Defence of Belarus. March 2017 – According to the monthly Belarus Security Blog, the most important event in March was a wave of repression by the authorities, which was characterised by extreme chaos. The Belarusian leader managed to choose the worst from all bad decisions in the field of domestic policy. It jeopardised the prospects for Belarus’ relations with the West.

How Belarusians will rhyme 'Lukashenka, go away!' Next Time? – Naviny.by discuss the situation when Belarus authorities have managed to decrease a wave of street protests, but they do not have a program to make the population’s life normal. Moreover, now the government itself, with its unsuccessful absurd decisions becomes 'the main factor of destabilisation.'

Other

Belarusian Courts Don’t Speak In Belarusian On the Internet – Legal Transformation Centre Lawtrend releases a study, which highlights the current judiciary state and problems of communication of activities on its websites and outlines the possible ways to improve the situation. The researchers hope that the Supreme Court, that is to become a common portal for the entire judicial system, will take into account the study’s recommendations.

Freedom Of Association And Legal Conditions For Non-Commercial Organisations in Belarus in 2016 – Legal Transformation Centre and Assembly of Pro-Democratic NGOs release an annual review which highlights the most important trends and developments related to the public associations and other forms of civil society in Belarus in 2016. Namely, the authors notice a trend of switching of CSOs to fundraise money inside the country.

Popular Myths About the Belarusian Economy – Grigory Ioffe analyses some common stereotypes of the Belarusian economy. For example, it is true that Belarusian state-run enterprises produce a larger fraction of the country’s gross domestic product compared to its post-Soviet neighbours. However, Belarus significantly outperforms Russia and Ukraine on social indicators such as morbidity, mortality and social infrastructure.

Belarusisation Has Not Ended and Even IncreasedAlieh Trusaŭ, Chairperson of the Society of Belarusian language believes that dispersal of Belarusian protests in February and March did not affect Belarusisation – on the contrary, it started to grow: a Belarusian-language band presented the country at the Eurovision Song Contest, the number of hours in the Belarusian in school increased etc.

Belarus policy

Public procurement from a single source in Belarus: analysis and recommendations The paper explores legal regulation of procurement from one source and procedures for their conduct, official statistics on public procurement..

Public procurement from a single source in Belarus: analysis and recommendations. The paper explores legal regulation of procurement from one source and procedures for their conduct, official statistics on public procurement, official information on procurement from a single source and public discussion of the issue. Since procurement from one source is one of the procedures of public procurement, the scope of this research includes legal regulation common for all procedures.

During the analysis of the data the authors also focused on the interrelation of procurement issues from one source with other issues of legal regulation, including antitrust regulation, protection and development of market competition, antidumping policy during tenders and other.

Monetary policy and financial stability in Belarus: current statе, challenges and prospects. This work is devoted to the current state of monetary policy and banking sector of Belarus. The paper shows that in the 4th quarter of 2016 – 1 quarter of 2017 significant changes in the monetary environment took place, the most important of which is the convergence of inflation expectations with actual inflation. Along with this favourable trend, a number of problems of the banking sector continue growing and threatening financial stability. Among them are bad debts and a systemic excess of liquidity in the banking system.

Belarus Digest prepared this overview on the basis of materials provided by Pact. This digest attempts to give a richer picture of the recent political and civil society events in Belarus. It often goes beyond the hot stories already available in English-language media.




Eurasian Customs Code, new visa liberalisation, food exports – Belarus state press digest

Lukashenka finally signs laws on implementaiton of the Eurasian Customs Code. After a presidential meeting in Saint Petersburg, Russia approves additional credit for Belarus.

Foreign visitors of the 2019 Eurogames are to enjoy more beneficial visa-free regime. Legislation on business liberalisation is open for public consultation and recommendations.

Belarusian space scientists prepare to launch two satellites by 2020.

This and more in the new edition of the Belarus state press digest.

Foreign policy

Lukashenka signes a set of agreements on strengthening the integration of the Eurasian Economic Union. On 11 April 2016, Belarusian President Alexander Lukashenka signed a package of agreements on integration with the Eurasian Economic Union, including the Customs Code of the Union, reports Belarus Segodnia. All other Union members signed the Customs Code at the Summit in December 2016 but Lukashenka refused to participate on the grounds that Russia had gravely violated existing agreements within the Union.

The agreements will secure the strategic engagement and political stances of Belarus within the Union regarding further integration with the global economy, as well as enhancing economic cooperation and free market negotiations with developing foreign economies. Additionally, they will advance custom-free regulations, coordinate the financial and energy markets among the members of the Union, and coordinate transport, information, and trade policies.

Belarus will extend the visa-free term for foreign visitors for the 2019 Eurogames in Minsk. Zviazda reports that the government is considering extending the length of visa-free stays for visitors of the 2019 Eurogames, so that they will have enough time to discover nearby places, which in turn will contribute to the development of Belarusian cultural tourism. Voters decided to hold the 2019 Eurogames in Belarus at the 45th session of the General Assembly of the European Olympic Committee in Minsk in October 2016.

Economy

Legislative and regulatory acts on business liberalisation open to public consultation. The government presented a set of regulations meant to ease the business environment significantly for a month of public consultation, writes Belarus Segodnia. The altered legislative framework facilitates setting up businesses, minimising requirements and allowing hopeful entrepreneurs to simply notify the government when they open a business. It will be the responsibility of business owners to comply with the new framework.

It also repeals scheduled inspections, ensuring that only informal and well-grounded inspections will be held, and introduces a tax advisory for business. The regulations also enact a moratorium on introducing new taxes for business.

Rosselkhoznadzor gradually lifts ban on Belarusian food exports. Experts at Rosselkhoznadzor, the Russian supervisory agency responsible for overseeing food production, checked 18 Belarusian food processing plants and lifted temporary restrictions on beef, meat products, and finished meat products from two enterprises.

Leanid Zajac, Belarusian Minister of Agriculture and Food warned farmers, food processing companies, and officials in the Ministry of Agriculture to pay maximum attention to the implementation of technologies and production regulations. The Russian supervisory authority remains extremely meticulous about Belarusian exports and sometimes goes beyond the bounds of common sense.

The Russian market remains a priority: in 2016 Belarus exported food products worth $3.7b to Russia, or 14.8% of the Russian Federation's total import. The inspection also targets the re-export of agricultural products banned by Russian counter-sanctions against Western countries. The head of Rosselkhoznadzor, Sergei Dankvert, accuses Belarus of re-exporting products from the sanction list and deliberately distorting statistics.

Russia will give Belarus an additional $1b in credit. On 9 April 2017, Belarusian Vice Prime Minister Uladzimir Siamaška announced that following the meeting between the Belarusian and Russian presidents in Saint-Petersburg, the two parties have reached an accord to grant Belarus about $1b in credit through the Eurasian Fund for Stabilisation and Development. This comes in addition to an already-facilitated loan from Russia worth $1.4b allocated to Belarus through the Fund between 2016 and 2017. Belarus received both loans on favourable terms, reports Belarus Segodnia.

Other

Belarus fails to tackle forced labour of Belarusian construction workers in Russia. According to Oleg Melnikov, head of the movement Alternativa, which provides assistance to victims of slavery and forced labour, his organisation has rescued and assisted in the release of about 400 Belarusian citizens subjected to slavery in the Russian Federation over the course of almost six years. However, there are no official statistics on Belarusians being forced into slavery overseas, therefore their number could amount to several dozen every year, writes Respublica.

Human traffickers typically seize the documents of Belarusian men upon their arrival in Russia, put them in squalid living conditions in unknown locations, and force them to work 14-16 hours a day with little or no payment. They often subject slaves to torture and threats to prevent them from escaping, and some have been mutilated or killed while working. Meanwhile, neither Belarusian nor Russian laws provide the necessary normative-executive grounds to prevent and combat slavery.

Belarus develops potential in space technology. The Belarusian chairman of the United Nations Office of Outer Space Affairs, Aliaksiej Bielacarkoŭski, argued in an interview with Respublica that Belarus has inherited priceless knowledge and experience in space technology from the Soviet Union. Many inventions and technologies developed by Belarusian scientists are actively used for building land registries and maps, systems of accurate localisation, geodesic systems, satellite-based navigation, geological explanations, and weather forecasting, among other technologies.

Belarus closely cooperates with Russia in space technology; however, more ties and collaborative projects should be developed with other foreign institutions and states as well. The country has built a new satellite and plans to launched it very soon. It will also launch a nano-satellite created by the Belarusian State University by 2020.

The state press digest is based on review of state-controlled publications in Belarus. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Belarus has obtained gas and oil concessions from Russia: but what did Russia get in exchange?

After a meeting with Alexander Lukashenka on 3 April in Saint Petersburg, Vladimir Putin announced that all oil and gas issues between the two countries had been resolved.

The media in Belarus reported on the Kremlin's concessions extensively. However, what Minsk will provide in return remains unclear. Belarusian leader Alexander Lukashenka provided a clue when he said that the summit dealt more with security than with energy issues.

Moscow indeed wants closer collaboration with Minsk in the realms of security and foreign policy. On 31 March, before the summit, Russia's Security Council held a meeting on Russian-Belarusian relations. The two governments clearly chose to resolve the issues critical to each of them: Russian gas and oil supplies for Minsk, Belarusian security and foreign policy cooperation for Moscow.

Nevertheless, numerous other issues continue to undermine relations with Russia. Now, even leading experts in the Belarusian government doubt the utility of Moscow-led Eurasian integration in its current form.

Horse trading between Minsk and Moscow

Assessments of the results of the Petersburg summit differed starkly among Belarusian and Russian media sources and analysts. For instance, the Russian liberal daily Kommersant argued that Moscow had ceded almost every possible position, and implied that Lukashenka came out on top. Meanwhile, many Belarusian analysts, such as Dzyanis Melyantsou, insisted that Minsk must have given something valuable to Moscow in exchange.

The media reported extensively on what the Kremlin agreed to give to Minsk: Russia will offer Belarus a discount on gas beginning in 2018 and resume petroleum supplies to Belarus at previous volumes.

However, a clue to what Minsk agreed to in exchange was provided by Lukashenka himself when he announced that national security issues were the most important subject of discussion at the summit.

Why now?

Although this solution to the dispute had already been voiced last summer, it was only now that Russian leadership made the proposal. Two major international developments are likely to have influenced Putin's move.

The first is the geopolitical situation in the region. With Russia's hopes that Trump would be more acquiescent dashed and tensions in Eastern European as high as ever, Moscow needs a less recalcitrant Minsk to deal with numerous urgent problems.

In particular, Moscow needs Minsk to host a massive military power show, the military exercise West-2017. So far, Belarusian officials have downplayed the confrontational aspects of the exercise, emphasising the necessity of transparency. Minsk is extremely averse to further challenging Russia's opponents in this way.

Second, Moscow would probably like to put a stop to Minsk's latest attempt to bring non-Russian oil to the region through a regional cooperation scheme. Minsk has already succeeded in quietly bringing in Azerbaijani oil, and has recently started to purchase Iranian oil as well. In both endeavours it collaborated with Ukraine; in the latter it may even have had the help of Poland. The current Russian leadership has bones to pick with both these countries.

However problematic the results of these efforts may seem at the moment, they are not hopeless. The efficiency of such oil schemes could increase if Belarus succeeds in making its diversification attempts a collective project undertaken together with other countries of the region. Minsk understands this: its deals with Ukraine and contacts with other countries prove it.

Moreover, as Lukashenka revealed in an interview on Mir TV on 7 April, the Belarusian government was preparing to import non-Russian petroleum within the country as well:

We will soon complete the modernisation of our refineries … As soon as this is finished, the output of white oil products at our refineries will reach 95%, so the problem of petroleum [imports] will disappear by itself. We will be able to buy oil from anywhere, recycle it within the country, and make appropriate profits. The Russians also realise this.

Belarusian officials doubt the value of Eurasian integration

The most recent oil and gas dispute between the two countries lasted more than a year. Over the course of the feud, the Belarusian government took several eyebrow-raising demarches: Lukashenka refused to participate in the Collective Security Treaty Organisation (CSTO) and Eurasian Economic Union (EAEU) summits in December, and Belarus would not sign the Customs Code of the EAEU last year.

The director of the government-affiliated Economy Institute of the Belarusian Academy of Sciences, Valery Belski, harshly criticised Eurasian integration in an article written on 13 March for the largest Belarusian internet portal Tut.by. As he proclaimed, 'the value of the Eurasian Union for Belarus decreases if the prices for energy resources are not made closer [to domestic Russian prices]'.

This sentiment neatly encapsulates the conclusions the Belarusian government is drawing from its dispute with the Kremlin. For instance, Belarusian prime minister Andrei Kabyakou on 7 March emphasised that the difference in natural gas prices paid in Belarus and Russia had grown from 38% in early 2014 to 110% in 2016.

This makes Belarusian enterprises less competitive, as their products become more expensive than Russian ones. And that, of course, contradicts the agreements on Eurasian integration.

Disputes between Minsk and Moscow increase

The gas dispute also brought other matters of contention to the forefront: reduced oil supplies, disputes over Belarusian food exports, Russia's border checks with Belarus, replacement of Belarusian details in Russian industrial products, limiting access of Belarusian firms to Russian defence programmes, etc all hinder bilateral relations. Many of these problems have been festering for years.

What's more, Minsk points out that many of these issues are of a political rather than economic nature. Agricultural exports to Russia is a case in point. In November 2016, Rosselkhoznadzor, the Russian government agency which oversees agriculture, announced that it had discovered bacteria in meat imported from the Belarusian Vitsebsk Broiler Poultry Factory. It promptly banned all products from the firm on the Russian market.

In February 2017, however, Rossekhoznadzor allowed products from the same Vitsebsk firm to be presented at the Prodexpo-2017 exhibition in Moscow and awarded them prizes for high quality. Nevertheless, Rosselkhoznadzor refused to remove restrictions on Vitsebsk poultry products in Russia.

Similar problems exist elsewhere. As anonymous representatives of the Belarusian defence industries commented to Kommersant daily, 'in spite of all agreements, we remain strangers in the Russian state defence order. And the state defence order in Russia includes many categories of products: from table lamps and fabrics to trolleybuses.'

In short, Belarusian-Russian relations suffer from more fundamental problems than simply trade disputes between close allies. At the Saint Petersburg summit, the two governments resolved the most urgent issues in the energy and security spheres. However, numerous other problems persist, despite long years of declared integration. For this, the political attitudes of the Kremlin bare much of the blame. New disputes between Minsk and Moscow are sure to arise in the future.




Analytical paper: Belarus-Russia relations after the Ukraine conflict

Since the Russian-Ukrainian conflict began, the Kremlin has persistently tried to expand its control over Belarus, a process that has had quite the opposite effect as Belarusian government policy became more independent in 2014-2015.

There has always existed a paradox in the simultaneous contingence and estrangement in Belarusian-Russian relations.

Estrangement looks the stronger of the two today, evidenced by the decrease in Belarus’ military dependence on Russia and its refusal to allow the establishment of a Russian military base on its territory; the reduction in the Russian economy’s role in Belarus; discrepancies in the foreign policy and media spheres; and conflicts between the political elites of both countries.

These are some of the conclusions found in a new analytical paper Belarus-Russia Relations after the Ukraine Conflict released by the Ostrogorski Centre today.

Background

This paper examines the integration/disintegration tendencies in Belarus-Russia relations since November 2013, when protests started in Ukraine. The ensuing Euromaidan, annexation of Crimea, and war in the Donbass have considerably altered European politics, including relations between Minsk and Moscow.

Despite close relations and the formal joint construction of the Union State, which also provides for integration processes, Belarus and Russia are becoming estranged from each other, in numerous ways. There are two reasons for this.

Lukashenka has probably never before taken so seriously the possibility of a Russian military operation inside Belarus

First, the Kremlin’s policy towards Ukraine led to a re-thinking inside Belarusian authoritative circles of the possible steps that Russia could take with regard to Belarus. Alexander Lukashenka has probably never before taken so seriously the possibility of a Russian military operation inside Belarus as he did when he claimed in May 2015 that the Belarusian army needs to be so strong that it is capable of “being thrown from Brest to Vitebsk in half a night to strike a blow”.

Secondly, the decline of the Russian economy lessens the Kremlin’s role as guarantor of Belarus’ well-being. In the conditions of slumping prices, shrinking of the domestic market, and declining GDP growth and forex reserves in Russia, diversification of the Belarusian economy has transformed from wishful thinking into a vital necessity.

Military disintegration: how to say “no” to your ally

Military cooperation has always been the “holy cow” of Belarusian-Russian integration, and the basis for journalists’ and Western experts’ statements presuming that the Belarusian army remains a part of the Russian one.

One of the grounds for such a presumption is the existence of the Integrated Regional Antiaircraft Defense System which, according to the Russian military, started functioning in 2016. The agreement on its creation was signed back in 2009 and in fact brought nothing new to Russian-Belarusian military cooperation. It looks likely that announcing the establishment of an antiaircraft defense system was aimed at making milder Belarus’ refusal to place a Russian military air base on its territory.

The refusal to create the airbase reflects a broader trend – i.e. Belarus’ attempts to reduce its military dependence on Russia. The presence of so many Belarusian military personnel in Russia has always ensured that there is a mental connection between the Belarusian and the Russian armies – it is hard to find any top Belarusian military official who has not studied in Russia.

However, the number of Belarusian military cadets at the Russian military’s higher educational establishments is decreasing: last academic year there were 447, this year only 374.

The joint Shield of the Union exercises in 2015 gathered 1.5 times fewer military personnel than the 2011 Shield of the Union or West-2013 exercises (i.e. 8,000 participants compared with 12,000). While military exercises seemed all but impossible without Russia before, today the Belarusian paratroopers practice with the Chinese every year.

Although the scope of such training exercises looks miserly in comparison with the exercises with Russia, it shows Belarus’ desire to find new partners.

China, in general, has become a noticeable partner for Belarus. This is most clearly seen in the joint development of weapons systems by Minsk and Beijing, the multiple launch rocket system fire Polonaise being an example.

Failure of the Eurasian Economic Union and economic cooperation

In many ways, Russia’s economic decay is responsible for the fact that in only its first year of existence, the Eurasian Economic Union’s (EEU) became a failure for Belarus.

First, the integration project inherited practically all the tariffs (about 600) that existed in the Customs Union. Due to such mechanisms, about two third of goods and services have been withdrawn from the common market of the EEU. Secondly, economic interaction between the countries has reduced. According to data provided by the Eurasian Economic Commission, the trade turnover of Belarusian goods with the EU countries in 2015 was only 74.8 % of that in 2014.

Thirdly, although Belarus has introduced unpopular measures like increasing fees for the import of cars, the regulations of the economic union serve Russia’s interests, as evidenced by the continuing economic wars. Fourthly, the importance of oil and gas, which were the key motivators for Belarus to join the EEU, have fallen sharply

Discrepancies in foreign policy

Russia’s aggressive foreign policy and economic decline have become one of the most important motivators for the Belarusian authorities to normalise relations with the West. Data provided by the Belarusian Institute for Strategic Studies (BISS) shows that since 2013 Belarus has intensified its relations with the European Union, and today contacts with the EU outnumber those with Russia.

The BISS data reflects the fact that Belarus started normalising relations with the EU and building up contacts with “developing countries” at the beginning of 2013. This included support for Ukraine’s European integration. This shows that the increase in dialogue with the West started not because of Russia’ expansionist policy, but for internal reasons.

It is nonetheless indisputable that the activation of Belarusian contacts with the world and deepening discrepancies in the foreign policies of Moscow and Minsk in 2013-2014 were in many respects a product of Russia’s foreign policy and economic decline.

It is important to note that Belarus’ normalisation of relations with the West is not an attempt at a geopolitical U-turn. So far, neither Belarus on the one side, nor the European Union and the United States on the other, have taken any cardinal steps in the form of big economic projects (Belarus still hasn’t even managed to obtain a loan from the International Monetary Fund) and contact in the political and military spheres remains at a low level.

Conclusion

Despite Belarus’ lessening dependence on Russia, relations seem unlikely to come to the point of a dramatic breakdown in integration.

First, Belarus remains overdependent on Russia financially – it continues to receive from Russia loans and “subsidies” – i.e. discounts for oil and gas and access to the common market. Furthermore, it remains highly important to Lukashenka that Russia acknowledges the results of the presidential elections in Belarus. Secondly, Belarus remains an important country in Europe for Russia. Therefore, the Kremlin won’t allow the total disintegration of the two countries’ relationship.

Nonetheless, the process of estrangement will continue further, and this is also connected with the generational changes inside the societies. The number of Belarusians who once lived in the same state as Russia – the USSR – is steadily decreasing and the quantity of people who identify themselves as ethnically Russian is reducing. Also a new nomenclature elite is emerging, interest in Belarusian culture is reviving, and young people are becoming more open to the world.

And the last, but important change: a political class that is accustomed to sovereign power, in which decisions are taken independently, has formed in Belarus.

Ryhor Astapenia & Dzmitry Balkuniets




Belarusian arms industry struggles to survive under Kremlin pressure

On 25 April, Belarus ' State Military Industrial Committee announced that in the first quarter of 2016 its defence industrial enterprises had increased exports by 31 per cent compared to the previous year. Their net profit grew even more, by 1.6 times.

Remarkably, the Belarusian defence industry has succeeded even while Moscow continues its policy of restricting access to Russian markets for Belarusian defence firms. The Kremlin continues to design substitutes for Belarusian products.

Minsk is responding by cooperating with Ukraine, China and numerous developing countries. The Kremlin is effectively forcing Belarusians to distance themselves from Moscow and build the economic foundations for an independent state.

Why MZKT is so important

On 20 April, President Alexander Lukashenka announced that Minsk would sell Russia the Minsk Wheeled Tractors Factory (MZKT) only if Moscow gave Belarus some oil deposits in Siberia. The Moscow-based Vzglyad daily commented that Lukashenka himself realised that the Kremlin will neither pay the price he demanded nor give him an oil deposit.

MZKT for many years has provided Soviet and later Russian missile and rocket systems with chassis. Among them are the famous missile system Iskander, multiple rocket launcher systems Uragan and Grad, surface-to-air missile systems Tor, Buk, S-300 and S-400, ballistic missile systems Topol and Yars, and others. According to Russian experts, Russia buys between 60 per cent and 90 per cent of MZKT's production.

Throughout the 2010s, Russian firms repeatedly claimed to have designed replacements for the Belarusian MZKT chassis. This happened most recently in March when Almaz-Antei said it was ready to cease using Belarusian products. Yet Moscow still wants to acquire MZKT products and Russian firms continue to install their weapons on Belarusian chassis. This raises questions about the veracity of Russia's claims and threats.

Kremlin bent on substituting its Belarusian allies

Russia started to design replacements for the MZKT chassis as early as 2010 and has been trying to do so consistently since. It points to a clear political line. One leading Russian military expert, deputy director of the Russian Centre for analysis of strategies and technologies Konstantin Makiyenko confirmed to Vzglyad,

“The strategy of import substitution concerns not only Western and Ukrainian products […]. It is a global concept. Russia, after burning its hands on Ukraine and Europe, strives to substitute imports across the spectrum […] We are ready to completely abandon the Belarusian products [of the defence industry].”

The Kremlin's official policies reflect that. Recently, Minsk even complained to the Eurasian Economic Commission (EEC), a body established in the course of Eurasian integration, about Russian regulations on defence orders. Specifically, it challenged the decision of Russia's cabinet of ministers of 29 December 2015 that restricted acquisition of foreign goods and services for Russia's defence needs.

On 12 April, the EEC recognised that the Russian government had violated the principle of equal access to the government's orders for participants in the Eurasian integration process. But Minsk has nothing to celebrate: Moscow is known to have simply ignored earlier such verdicts of the EEC.

Ukraine as a solution

The Kremlin is effectively destroying an important link between Belarus and Russia by disrupting industrial cooperation that goes back to Soviet times. Russian experts – and probably the Russian government – believe that the Belarusian defence industry in general and the MZKT in particular have no choice but to work for Russia. Vice President of the Russian Union of Engineers Ivan Andrievski emphasised that “It would be problematic for the MZKT to find access to European and other markets.”

It is partly true. Belarusian industry is hardly currently in a position to find a good replacement for Russian markets and partners. But if Putin attempts to squeeze Belarusians out of Russia, they are not going to surrender and are already working on alternatives.

Belarus' continuing large-scale cooperation with Ukraine fits this pattern. The most well known illustration of this concerns MAZ activities in Ukraine. In March Belarusian truck manufacturer MAZ signed an agreement on establishing a production line of trucks in Ukraine's Cherkasy with the Ukrainian corporation Bohdan. It will manufacture trucks according to both civilian and military modifications using Belarusian and Ukrainian components. That creates an alternative to the established Ukrainian KrAZ truck production works.

Ukrainian president Petro Poroshenko allegedly responded to criticism about neglecting the existing KrAZ production by explaining that Belarusian trucks successfully passed the necessary tests and are more resilient in combat conditions. On the basis of MAZ-6317 the Ukrainians have also designed an armoured vehicle for their police and National Guard.

According to MAZ's own information, the company has become a leader in sales of trucks of a corresponding type in Ukraine after providing Kyiv with 294 trucks in 2015. According to Lyashko, in February Kyiv may have bought another 120 MAZ trucks.

New markets already bring profits

Belarus continues to do numerous defence industrial projects with China or other, more distant countries. In March a military parade in Myanmar featured surface-to-air missile system Kvadrat-M modernised by the Belarusian firm Alevkurp. Incidentally, its launchers also operate on the MZKT chassis. Another Belarusian firm, Minotor-Service, last year modernised almost 500 BTR-50s for Egypt.

Circumstantial evidence points to some unpublicised major deals on military equipment being underway with Pakistan. Recent months have seen other significant breakthroughs. On 26-27 February Defense Minister of Thailand Prawit Wongsuwan came to Minsk. On 28-30 April he was followed by Defence Minister of Indonesia Ryamizard Ryacudu who was also received at the highest level, by Lukashenka.

These efforts to diversify the markets and partners of the Belarusian defence industry have already brought some results. The National defence industry achieved good results not only in the first months of this year but also in 2015.

Based on the results of the economic activity of Belarusian firms in 2015, the government has included on its list of the 29 most profitable national enterprises three major defence firms. That represents not only an honour but also a commitment to make a contribution to the state budget fund of national development.

Russian politicians and experts are quick to dismiss their official Belarusian allies. The Kremlin apparently believes that Minsk has no choice but to gradually surrender Russians national economic assets or even statehood. That is the mindset that Russian leaders have displayed with regard to former Soviet nations since 1991. History proved them wrong many times as the former Soviet countries distanced themselves from Russia after experiencing such attitudes. Belarus could become just another such case.




Milking Oligarchs, Political Modernisation, MSQRD – State Press Digest

Economic difficulties push Belarusian authorities to extraordinary ways of gathering revenues. They continue arrests of top businessmen, regardless of their position in Lukashenka's apparatus, on tax evasion charges, allegedly waiting for a big payoff.

In domestic politics, the authorities try to modernise Belarus' political system and raise the role of loyal political parties and associations without introducing major changes to the authoritarian model.

Belarusian programmers sell MSQRD, an IT startup, to Facebook. All of these and more in this edition of State Press Digest.

Politics

KGB head Vakuĺčyk: there are no sacrosanct people in Belarus. Belarus Segodnya publishes comments made by Belarusian KGB head Valier Vakuĺčyk on the recent arrest of Belarus' top businessman Jury Čyž, as well as other high-rank businessmen detained earlier this year. In addition, to Vakuĺčyk's explanation around the ambiguous tactics used to evade taxes, he also provided some additional details on the subject.

Vakuĺčyk said that he personally took decision to arrest Čyž, since he is not on the staff list of the president and does not need a sanction for arrest. “If I let him go, I would be responsible for that and could appear in his shoes now. There are no sacrosanct people in Belarus, and some wrongly think that appearing on a photo with the president or playing hockey with him gives them immunity”, Vakuĺčyk said.

The authorities want loyal political parties to build in the political system. Belarus Segodnya highlights the meeting of deputy head of Presidential Administration Ihar Buzoŭski with the leadership of pro-government political parties and civil associations ahead of parliamentary elections scheduled for this autumn.

“Political parties need to show concrete positive actions aimed at building civil society, economic and social development, and this concerns not only electoral campaign period”, the official said. He added that political parties and civil associations can become effective sites for public dialogue, channels of public opinion and developers of policy proposals.

Pro-government political parties have become passive since the 1990's, because the centralised political system of Belarus does not accept multiple political actors. Apparently, the authorities try to modernise the system and invent new functions for the half-dead loyal political parties.

Eurasian integration

Post-Soviet space needs reindustrialisation and a new integration idea. Ahead of the 25th anniversary of the formation of the Commonwealth of Independent States (CIS), newspaper Soyuz. Belarus-Russia interviews Russian political scientist, of Belarusian origin, Kiryl Koktyš on the future of post-Soviet integration. According to the expert, previous relations across the post-Soviet space were built around “oil rivers” and participation of former Soviet countries in the trade of Russian hydrocarbons. Today, the countries need to introduce a new model, based on production rather than export of natural resources.

The old concept of an Eurasian Union is dead and the new one has not yet emerged. Designed as a replica of the European Union, it failed to implement free movement of people, capital, goods and services, and after sanctions war demonstrated a complete failure. However, the post-Soviet leadership cannot offer a new idea of integration and each country has its own interests towards Russia.

Economy

Russia aims to boost gas transit via Belarus. Russian gas giant Gazprom has developed an extensive investment programme for Belarus, reports Soyuznoye Veche. It will invest $2,5bn in modernising the Belarusian system of gas transport with one billion of the sum going towards underground gas storage. Moscow is also contemplating the creation of a new pipeline Yamal-Europe-2 from Russia to Central Europe via Belarus.

Kremlin plans to stop transit via Ukraine after 2019, and Belarus is considered a more reliable partner for transiting Russian hydrocarbons. However, Poland, backed by the EU and US, is blocking Moscow's plan for pipeline expansion. Therefore, the future of boosting Belarusian transit capacities remains unclear.

Belarus works on diversification of food export. According to Seĺskaja Hazieta, by 2020 the government plans to split the food export to 30%-30%-30% for the Eurasian Union, the EU and third world countries. Diversification of export becomes a crucial task for food producers in Belarus, as the Russian market, which currently absorbs 94% of Belarus food production, will be gradually contracting. Until 2020 Russia plans to reach around 90% of self-sufficiency in food according to its security doctrine. Yet by now only 2 of 46 diary companies of Belarus managed to enter the market of the non-Eurasian Union countries.

As for the EU market, only 10 Belarusian companies have certificates for selling their products in Europe. The trade with the EU is complicated due to the European protectionist agricultural policy which contains high import tariffs. Moreover, due to economic crisis Belarusian food export in 2015 fell by 26% compared to 2014.

Business

Facebook buys successful Belarusian startup MSQRD. Mobile application for making selfies with masks of celebrities, superheroes and animals emerged only four month ago and has already reached over 15 million downloads. The unique technology seemed so promising that Mark Zuckerberg decide to purchase the startup, writes Soyuznoe Veche. The exact price remains a secret, but is estimated at $100-150m.

MSQRD founder Jaŭhien Neŭhień says that they created the technology over three days and were surprised by its popularity. Shortly after, numerous media celebrities started to post selfies with MSQRD and it rapidly spread around the world. The application became another IT breakthrough from Belarus, following World of Tanks, Viber, and maps.me.

Social

Released gangsters try to revive the old order. A few recent criminal cases of debt extortion reminded Belarus of the 1990's, when the criminal world thrived here, writes Narodnaja Hazieta. In the beginning of the 2000's the authorities implemented a vast crackdown on criminal mobs, and those convicted have been released recently and are trying to revive the old order. Homiel police official Andrej Zajac explained that most former gangsters after spending a decade in prison do not want to work legally and seek criminal sources of income.

However, they find it difficult to work in the new situation, because law enforcement works more effectively than it did in the 1990's-2000's. They try to engage in extortion racket of drug dealers or simply go to Russia where they find more opportunities for this activity. “This is the result of many years of tough work, and if not properly controlled, the gangsters can regain power within a year”, the official said.

The State Press Digest is based on review of state-controlled publications in Belarus. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Belarus and the Declining Eurasian Economic Union

The first year of the Eurasian Economic Union (EEU) has highlighted how differently Russia and Belarus see this integration project.

While Russia tries to create something resembling for the external audience the European Union and for the internal audience Soviet Union, Belarus has failed to gain additional benefits from the project. Reduction of a large number of trade tariff exemptions has been slow and Belarus’ trade within members of the EEU fell by a third.

On 24 November, the Russian newspaper Kommersant wrote that the Eurasian Economic Union may soon abolish duty-free export of cars produced on the territory of the EEU. This will hit Belarus the most and may undermine the whole idea of the existing assembly lines of Geely, Peugeot and Citroen cars in the country.

Union for Russia’s Ambitions?

The first year of the Eurasian Economic Union showed that Russia wanted to make the project look like the European Union. Armenia and Kyrgyzstan became members alongside Belarus, Kazakhstan and Russia. The EEU has signed a mutual free trade agreement with Vietanam, and according to Putin’s article published on 17 November on the web site of Chinese news agency Xinhua, currently about 40 countries are considering having an FTA with the Eurasian Economic Union.

Some ideas look EU-inspired, such as the desire to abolish roaming within the EEU and working on a common identity. At the beginning of the year, the Speaker of the Higher Chamber of Russia’s Parliament, Valentina Matvienko highlighted the need to "strengthen information work to grip the masses with Eurasian ideas."

But it seems that only Russia thinks about the Union in this way. Belarus looks at it differently.

So Little of the Economy and So Much of Politics

The first year of the Eurasian Economic Union brought poor economic results for Belarus. Moreover, falling oil prices and declining Russian economy has hit the integration project hard.

In the first six months of 2015 the trade between Belarus and other EEU countries was $2.5 billion less than in the first half of 2014. This means that Belarusian trade with the Eurasian Economic Union dropped by a third this year. According to data of the Eurasian Economic Commission, only Belarus and Armenia experienced a similar decline.

The year 2015 failed to bring trade liberalisation. This may sound weird for Belarus, as the country usually sticks to protectionist policies, but Belarus actively promotes the removal of restrictions on trade between EEU member countries.

Belarus tries to reach out to important markets such as gas and oil. However Russia plans to liberalise them at last, but only in 2025. This will allow other countries' companies to buy Russian resources under the same conditions as Russian companies.

During 2015, it seems all Belarusian top officials advocated the reduction of restrictions. On 12 July, Uladzimir Makei, the Minister for Foreign Affairs, complained that "the EEU should not be a toy" hinting that the Kremlin sees the union this way. According to Andrei Kabiakou, the Prime Minister of Belarus, the list of exemptions in mutual trade began to increase in February 2015.

The greatest problem of the Eurasian Economic Union has little to do with the economy, at least in terms of what people usually understand as the economy. Trade wars, despite previous agreements, have continued. The Eurasian Economic Union began its life against the background of the Belarus-Russia food war. Throughout the year, the conflict flared up when Russia accused Belarus of re-exporting Western products. Therefore Russia banned the import of goods and reinstalled customs checks at the Belarusian-Russian border.

Continued trade wars indicate that the Kremlin perceives the EEU as a political project. Moreover, now almost every issue has become politicised.

On 24 November, the Russian newspaper Kommersant published an article according to which Kazakhstan and Russia propose to remove preferences for foreign car manufacturers who assemble cars in the Eurasian Economic Union. If that happens, foreign companies could stop the assembly of Geely, Peugeot and Citroen in Belarus. This summer Belarus signed a contract with General Motors, which could also be reviewed if the EEU cancels the free zone benefits.

In December, the heads of the Eurasian Economic Union may make a decision on removing the trade preferences. It seems that all countries except Belarus support this move.

The Two Inertias of Eurasian Integration

Despite the fact that Belarus in many respects appears no closer to the other countries of the EEU this year, the Eurasian Economic Commission, the technical body of the Union, made a few steps forward in integration. In September, the Commission announced that it had adopted a number of agreements on the energy, agricultural and infrastructure sectors. The next year the liberalisation of the drug market should occur, and in 2017 there will be a common foreign exchange market.

However, political inertia remains dominant, which causes disintegration. Russia perceives the EEU as a political project promoting their own hegemony. Therefore many other countries fear Eurasian integration.

Moreover, some countries remain reluctant to see the Eurasian Economic Union as only an integration project in itself. On 24 November, Kazakhstan completed the ratification of documents related to accession to the World Trade Organisation. A significant portion of tariffs agreed between Kazakhstan and the WTO appeared lower than those adopted in the EEU.

Moreover, the economic decline, particularly in Russia, undermines incentives of countries to integrate further. Under such conditions the first year of Belarus membership in the Eurasian Economic Union has shown rather poor results. Eurasian integration remains more about hype than substance.




Belarus in the Eurasian Economic Union: Enough is Enough

Last week, Belarusian Foreign Minister Uladzimir Makei criticised cooperation within the Eurasian Economic Union. Minsk is no longer hiding that its own position on the EU-led Eastern Partnership initiative starkly differs from Russia's stance on the issue.

Although Minsk continues to assure Moscow about its brotherly support, brazen commentaries from pro-Putin commentators in Russia leave little doubt: the Kremlin does not believe these assurances. The Belarusian leadership responds by turning to Western countries or even China as a counterbalance.

By putting pressure on Minsk, Moscow believes it has driven Belarus into a corner. Yet there may be an exit still – and it leads westwards.

Minsk Paying for Russia

In criticising the newest post-Soviet integration initiative of the Eurasian Economic Union​, Makei pointed out that the creation of a common economic space had essentially been delayed until 2025, and a series of exemptions and limitations currently exist within the Union. The economic basis of the project, as well as sincerity of its participants, have raised a number of questions.

Indeed, since 2014 trade between the Eurasian Economic Union​ member states has been declining. In reality, each country appears to be going its own way. Makei recently stated that “Kazakhstan strives to rapidly join the WTO. And meanwhile there are more than 3.5 thousand items in which Kazakhstan is in the negotiation process with the WTO to achieve a reduction in customs protections.” As a result, Kazakhstan has a more liberal trade regime than other Eurasian Economic Union​ member states.

However, it is actually Belarus who suffers from these kind of actions from its partners in the Eurasian Economic Union​​. Russia joined the WTO much earlier and it is also ignoring the interests of Belarus and Kazakhstan. Russian politician Yuri Boldyrev recently commented on the matter by stating,

We have simply betrayed Kazakhstan and Belarus, or in the very least did not show concern for them. We promised them to join the WTO together – you can well remember the public statements to this effect. And then we joined unilaterally. And since then both Kazakhstan and Belarus, as the members of the Single Customs Space, are bearing the costs of these developments. At the same time they do not have the right to defend their own interests.

Minsk is not willing to pay for Russia's image project – the Eurasian Union – out of its own pocket. Even less so in view of the fact that Moscow cares less and less about its ally. Russia not only joined the WTO while ignoring Belarus, it also launched a massive intervention in Ukraine without informing Belarus.

The Kremlin consistently denies Minsk new military hardware all while demanding from Belarus a Russian air force base within its borders, and Putin is not hiding that he does not regard Belarus or Kazakhstan as allies. For him, Russia's sole allies are its own army and navy.

Can Russia Make Lukashenka Dance the Can-Can?

Emboldened by improved relations with the West, the Belarusian authorities rebuffed the Kremlin over the Eastern Partnership as well. Last month, Makei emphasised that the idea of Eastern Partnership was “necessary, needed, and useful”. That stands in stark contrast both with Putin's recent criticism of the Eastern Partnership and with the statement by one senior Russian official, Putin's closest associate Igor Shuvalov, who called the Partnership “a grave mistake” and the reason for the war in Ukraine.

These statements, however, do not indicate that Minsk is deliberating any radical change in its foreign policy orientation. Belarus' location and close economic ties with Russia means mean that Belarus will remain its important ally, a reality that is taken into consideration by every responsible political player in Belarus, be they members of the authorities or the opposition. Living next door to Russia can at times be both a strategic asset and liability for the Belarusian state.

Therefore, when top Belarusian officials repeatedly state that Minsk's friendship with Russia is healthy as ever, these words reflect their heightened awareness of the sensitive nature of their ties at present. It does not, however, mean that Belarus is a marionette of Russia.

Balazs Jarabik of the Carnegie Endowment for International Peace commenting of Belarus' resistance to making outright anti-Russian public statements said that EU politicians understand the precariousness of Minsk's position. Therefore, “everybody is looking at Minsk with understanding.” President of the European Council Donald Tusk admitted that “Belarus is genuinely independent and neutral on the issue [of Crimea's annexation] which is so important for both the EU and Belarus itself.”

However, the Kremlin may well hold another view. Rostyslav Ishchenko, a Ukrainian political commentator who in recent years became known for his close contacts with Russian government and support for Putin, recently dismissed Lukashenka's independence. At an event organised by the Russian Gorchakov Foundation in Moscow he claimed,

Politically, it is not difficult to force Lukashenka to dance the can can. In two days time Russia could announce that it does not consider Belarus a sovereign state and in three days Lukashenka faces a Maidan and full-fledged foreign aggression, because he is nothing and his name is holds no meaning.

Kremlin Driving Minsk Towards the West

Ishchenko's words are not the first verbal threats launched this year by people known to be close to the Russian government. These attacks and the Kremlin's public dismissive stance towards its own allies has produced any number of consequences – one has only to listen to Belarusian officials to see its effects.

In May, Deputy Foreign Minister Alena Kupchyna conceded that Minsk hopes that the EU will help Belarus strengthen the economic basis of the nation's independence by providing access to European financial institutions and supporting Belarusian efforts to join the WTO. In June, Belarus' Foreign Ministry spokesman commented that despite Washington maintaining sanctions against Belarus bilateral relations are improving.

Earlier this month the chairman of the lower chamber of the Belarusian parliament Uladzimir Andreichanka announced that Minsk was working on returning to the Parliamentary Assembly of the Council of Europe. Belarus lost its special guest status there after the controvercial 1996 constitutional referendum.

Due to its economic, political, cultural and historical ties Belarus cannot afford enact dramatic changes in its foreign policy. At the same time, Minsk faces the increasingly cynical attitude of Kremlin and draws its own conclusions. No one should overestimate the importance of the intergovernmental organisations and initiatives promoted by Moscow, like the Commonwealth of Independent States, the Union State of Belarus and Russia, or the Collective Security Treaty Organisation.

It looks the Eurasian Economic Union is following the path treaded by similar initiatives – despite the loud rhetoric coming out of the Kremlin, few concrete results have been seen as a result. For its part, Minsk is learning from its past experiences – and it is certainly not going to spoil its relations with the West for dubious Kremlin projects. The West could gain a lot if it continue to work with Minsk by encouraging a pragmatic line in Belarusian politics.




Belarus Threatens to Spoil the Inauguration of the Eurasian Economic Union

According to a leaked document published by TUT.BY this week, the Belarusian parliament will insert its own special clause when it ratifies the Treaty of the Eurasian Economic Union.

The clause will reserve the country’s right to ignore its treaty obligations if Russia does not agree to lift all barriers of the free trade regime that are harmful to Belarus.

This most recent scandalous development is unfolding only three months before the planned inception of the next stage of the Eurasian integration project – the Eurasian Economic Union.

This is a result of Belarus’s harsh reaction to Russia's plans to reform its taxation system in the oil sector, something more commonly known as a “tax manoeuvre". Belarus will suffer considerable financial losses if this move pushes forward.

The presidents of Belarus and Russia will meet in Minsk on 10 October. Given the current geopolitical climate, Vladimir Putin will surely have to make concessions. The Russian Prime Minister Dmitry Medvedev has already promised to cushion the effect of the tax manoeuvre for the Belarusian economy.

Oil Tax Manoeuvre

The House of Representatives, the parliament’s lower chamber, plans to discuss the Treaty of the Eurasian Economic Union (EAEC) on 9 October. Rather uncharacteristically, a leaked document appeared on the TUT.BY portal before the parliament's planned discussion. According to it, MPs will amend the ratification instrument with an important reservation.

Belarus wants to sign a bilateral (with Russia) or trilateral (with Russia and Kazakhstan) agreement that will lift “barriers, limitations and exemptions” in trade for certain goods and services. The leaked document specifies those goods and services: energy resources, industrial assembly-line products, automobile shipping and others. Without such binding agreements, Belarus will not guarantee that it will strictly adhere to its Eurasian integration obligations.

This is how the Belarusian authorities are reacting to Russia’s previously announced oil tax manoeuvre, a plan to tweak oil taxes by increasing the mineral extraction tax and cutting export duties. The move is part of Moscow’s attempts to improve the competitiveness of Russia’s economy by reforming its tax system.

In particular, it wants to stimulate more efficient consumption of energy resources inside Russia and limit the energy rents that it doles out to its Eurasian partners.

For example, Belarus gets, according to some estimates, about 16% of its overall GDP from Russian subsidies. The manoeuvre will mean a surge in crude oil prices and losses for oil refineries as well as for the country’s economy at large. In other words, it will significantly impact Belarus’s export potential. According to official statistics, mineral resources made up 33% of Belarusian exports in 2013. Agricultural and industrial exports will also suffer.

Belarus Wants Compensation

On 29 September Alexandr Lukashenka met with members of the lower chamber of the Belarusian parliament. He stated that his government would not put up with the Kremlin’s tax manoeuvre.

According to Lukashenka, the tax manoeuvre might cost Belarus more than $1 billion. He underlined that if Russia made such a move it would become a serious problem for the prospective Eurasian Economic Union's (EAEU) ability to function:

First of all, because we had a different agreement. Secondly, if certain actions are taken in one direction then there should be compensation in another direction. This is a significant amount of money and we should, by no means, suffer to lose out on it.

Lukashenka also stressed his position that the country’s accession to any organisation has to bring clear benefits to the state and its citizens:

We need to get more than we currently have. […] We have to take steps that do us good. Otherwise, what is the point if we do not benefit from it?

He called on the MPs to cautiously defend the interests of Belarus when considering the EAEU Treaty and hinted that the tax manoeuvre issue will impact the country’s decision on whether or not to ratify it.

Not the First Time

The Eurasian integration project is currently experiencing new tension between its members. Apart from the tax manoeuvre, other issues are also fouling up the integration project.

Ever since the Russian government introduced an embargo against certain categories of Western goods there have been growing rumours that Belarus has been re-exporting some of those goods and, subsequently, cashing in on the Russian sanctions. During the Customs Union-Ukraine-EU summit in Minsk on 26 August, Vladimir Putin even made a public accusation to that effect.

For its part, Belarus claims that it is suffering financial losses due to the Russian ruble's devaluation. According to the Belarusian Ministry of Agriculture, the country has already seen losses totaling around $160 million.

This is not the first time that similar scandals have arisen since the inception of the Eurasian integration project. Perhaps the incident with the most resonance took place in 2012 and had to do with solvent exports.

At that time the authorities in Minsk and their partners among Russian businessmen actively exploited a loophole in the Customs Union’s legislation. They disguised oil products as solvents and exported them to the EU. The trick helped Belarus to avoid making any payments export duties on oil products into the Russian state budget as the Customs Union’s laws did not classify solvents as oil products. As a result, Belarus saved about $2 billion in 2012.

What is Next for Eurasian Integration?

As with the solvents scandal, the current row will likely end with a compromise. On 2 October, during a meeting with Lukashenka, PM Mikhail Myasnikovich stated that his cabinet had suggested a way to resolve the tax manoeuvre issue.

Today Belarus has to transfer to Russia’s state budget all export duties on oil products made from Russian crude oil and sold to a third party. In 2013, for example, the government handed over $3.3 billion worth of export duties to Russian state accounts. Belarus has long expressed disagreement with this arrangement and even threatened not to sigh the EAEU Treaty was it not changed.

As a result, on 8 May 2014, Alexandr Lukashenka and Vladimir Putin agreed on a compromise formula: in 2015 half of the export duties on oil will go to the Belarusian budget and the other half will go to Russia.

Myasnikovich’s solution to the ongoing row foresees the whole sum going to the Belarusian budget.

Given Russia's difficult geopolitical position at the moment, the Kremlin is particularly interested in demonstrating progress with its Eurasian project. Therefore, it does not want to see any visible prolonged tension with Minsk and will be forced to offer some kind of compensation to its Belarusian partner.

On 7 October, the Russian PM Dmitri Medvedev met with his Belarusian counterpart and promised to cushion the negative effects of the tax manoeuvre. Precise details of what this entails remain unknown. Belarus will hardly get everything it wants but the concessions will likely be lucrative enough for Minsk to ratify the EAEU Treaty and host a peaceful summit of the Supreme Eurasian Economic Council on 10 October.

This will not, however, put an end to similar tensions in the future.




A Split in the Eurasian Union: Belarus Refuses to Join Russia’s Trade War with Ukraine

While Ukraine was preparing to sign the Association Agreement with the EU, Russia was trying to secure the support of Belarus and Kazakhstan in introducing protective measures against Ukrainian goods.

Moscow failed to convince its Eurasian partners that Kyiv’s Association Agreement would pose a threat to their economies and had to resort to taking unilateral action for raising customs duties on goods from Ukraine.

This case may well represent a model of relations that may come to dominate decision-making in the Eurasian Economic Union.

Fairly frequently, the three nations have viewed their respective interests as being too divergent to reach a comfortable compromise and instead are resorting to taking unilateral action.

Interestingly, Belarus itself behaves in a similar fashion towards several Ukrainian imports that it views as a real hazard to its domestic industries.

Unsupportive Allies

Russia’s authorities had warned their Ukrainian counterparts that they would resort to serious protective policies if the latter decided to sign the Association Agreement long before Kyiv’s Maidan happened. Presumably, those warnings may explain Viktor Yanukovych’s decision to not sign the agreement at the Eastern Partnership Summit in Vilnius back in November 2013.

When the newly elected Ukrainian President Petro Poroshenko declared that he would sign the economic part of the Association Agreement immediately after his inauguration, the issue returned to the Kremlin’s agenda. The Russian government raised it with Belarus and Kazakhstan, its Eurasian Customs Union (ECU) partners. At a meeting of the Eurasian Economic Commission on 23 June in Russian Sochi, the ECU’s supranational body, Russian officials suggested putting forth a collective response to Ukraine’s decision.

They argued that the Association Agreement threatens producers and manufacturers from the Eurasian troika. The Deep and Comprehensive Free Trade Agreement (DCFTA), the economic part of the Association Agreement, stipulates that Kyiv should remove its import duties on goods from the EU.

Ukraine is also a member of the Commonwealth of Independent States’ (CIS) region of free trade. Ostensibly, Russia fears that cheap European goods, disguised as Ukrainian goods, will flood the ECU’s markets and, thus, bankrupt less competitive producers in Belarus, Kazakhstan and Russia.

However, this argument has failed to convince Moscow’s allies. In the words of Belarus’ representative to the Council of the Eurasian Economic Commission Siarhei Rumas, Belarus and Kazakhstan “strongly reject” the proposal.

According to Rumas, the consequences of Ukraine signing the Association Agreement for the ECU’s economies remains unclear as the Eurasian Economic Commission has yet to analyse them. Under these circumstances, Belarus sees no “urgent need to adopt such a decision”.

As a result, however, Russia must invoke a special clause from the CIS free trade treaty and introduce its protectivist measures unilaterally.

Own Interests First

By rejecting Russia’s proposal, Minsk again demonstrates that its space to manoeuvre in its relations with Russia and remains resolute in using it to protect its own interests. It is abundantly clear now that one of Belarus' national interests includes maintaining good relations with Ukraine.

In 2013, Ukraine was Belarus’ third largest trading partner, following Russia and the EU. It accounted for 7.8% of the country’s foreign trade. Crucially, Minsk had a sizable trade surplus with Ukraine amounting to around $2.1bn.

Given the country's worsening economic situation and its traditional problems with its current and foreign trade accounts, the Belarusian authorities are actively looking for ways to minimise the negative repercussions of the crisis in Ukraine on their bilateral trade.

Minsk would be happy to re-export Ukrainian goods to Russia

Supporting Russia’s sanctions against Kyiv would exclude such a possibility. Moreover, Belarus would be happy to use the ongoing trade tensions between Russia and Ukraine to bolster its own position. For example, Minsk would be happy to re-export Ukrainian goods to Russia.

Similar events unfolded after the Russia-Georgia War in 2008. When Moscow banned Georgia’s imports, certain Georgian goods (for example, its staple wine and mineral water exports) started entering Russia via Belarus.

Therefore, instead of aligning itself with Russia’s policies, the Belarusian Foreign Ministry emphasises that it considers Ukraine’s decision to sign the AA with the European Union as “the sovereign right of a sovereign nation”.

Belarus Says No to Ukrainian Sweets and Beer

At the same time, Belarus’ government feels free to take the liberty of introducing its own restrictions on trade for certain imports from Ukraine that it perceives as a threat for domestic producers. Recently, both beer and confectionery products from Ukraine have been denied entry to the Belarusian market.

In May, the Council of Ministers adopted a decree that obliges confectionery importers to obtain one-time incentives. In order to acquire the licenses, importers need to set very high prices, prices so high that they automatically make their goods uncompetitive on the Belarusian market.

The decree does not name Ukraine specifically. It does, however, appear to be the primary target. According to the Ukrainian Confectionery Industry Association, Belarus’ authorities have begun to ask the importers of sweets from Ukraine to increase their prices and even blocked their deliveries a month before the decree’s adoption.

As a result, most Ukrainian confectionery producers have had to abruptly stop exporting their goods to Belarus. Similar developments have affected beer imports from Ukraine as well.

Unlike Moscow’s proposal to take collective, union-wide measures, the Belarusian government is much more concerned about its own domestic preferences when considering which Ukrainian imports to curb – a decision that has nothing to do with Kyiv’s decision to sign the Association Agreement.

In his 22 April 2014 State of the Nation address, Lukashenka proclaimed that the development was a top priority of what he called a new economic policy. Ukrainian confectionery and beer imports simply fell victim to the Belarusian government’s understanding, or lack of it, of how an internal market should develop.

It should be noted that Minsk did not even bother consulting with its ECU partners before introducing the restrictive measures.

Model for Decision-Making in the Eurasian Economic Union

Unilateral actions are likely to dominate sensitive decision-making issues in Eurasian Economic Union's future

The unilateral actions by both Moscow and Minsk suggest that a similar model will dominate sensitive decision-making issues in Eurasian Economic Union's future. Belarus and Kazakhstan's refusal to support Russia’s sanctions against Ukraine shows that the Kremlin lacks the ability to force its ECU allies into full political and economic compliance.

Belarus’ unilateral moves against Ukrainian beer and confectionery products implies that it does not take Eurasian regulations and supranational institutions very seriously.

This would appear to be a more or less natural state of affairs for an economic union that embraces authoritarian political regimes, each of whom are racked with difficult mixtures of contradicting economic problems and political concerns and ambitions.

In this light, Eurasian integration will likely face one of the two scenarios. Either Russia will have to pressure its allies into better compliance or the integration dynamics will gradually erode to reflect one of the more amorphous forms of the post-Soviet integration – something akin to the CIS and the Union State of Belarus and Russia.




Eurasian Allies: Can Belarus Learn from Kazakhstan?

While the Kremlin has achieved its primary goal by launching the Eurasian Economic Union last month, the leaders of Belarus and Kazakhstan look unsatisfied.

Both want to slow down the integration project's progress down and prevent it from spilling over in the political arena.

However, Kazakhstan and Belarus lack common long-term goals, and their respective economic cooperation and any potential joint projects the might come up with would likely face obstacles as they try to get past Russia.

Though Belarus and Kazakhstan share the fear​ due to the Ukrainian crisis, Nazarbayev is in a better position to pull his together country. His policies have long aimed at strengthening national identity, appointing Western-educated professionals into senior positions and maintaining room for geopolitical manoeuvring. Belarus, it would seem, has quite a bit to learn from Kazakhstan.

Community of Interest

On 29 May, the presidents of Belarus, Russia and Kazakhstan established the Eurasian Economic Union. Despite the fanfare surrounding the event, Nazarbaev and Lukashenka openly criticised the agreement a few days before the treaty's signing. The Belarusian head of state stated that this document differed from the one the parties had talked before.

As of late Belarus and Kazakhstan often appear to be in the same camp. Lukashenka and Nazarbayev both want to slow down the whole Eurasian integration project, or at least prevent it from going beyond  economic agreement into real political integration.

Both leaders have criticised the idea of creating a Parliament of the Eurasian Economic Union being fully aware that this would politicise the union and would almost surely be dominated by Russia. Moreover, Belarus and Kazakhstan worry about their ties because of Russia's role in the ongoing Ukrainian conflict.

A growing number of voices from both countries criticizers Eurasian integration. For instance, new regulations for business, which would stifle both Belarusian and Kazakhstani businesses, remain of the most frequently discussed effects of Eurasian integration. An imminent increase on the amount one has to pay for duties on imported cars also raises concerns.

Many also expect unrestricted Russian dominance over the Eurasian Economic Commission

Many also expect unrestricted Russian dominance over the Eurasian Economic Commission, the new economic union's main governing body.

However, in spite of their converging interests, Belarus and Kazakhstan have yet to coordinate their foreign policies towards Russia. Although in public officials talk about steady increases in imports and exports between each other and the importance of their strategic partnership, they both lack any particular affection for one another. 

Why Countries Cannot be Partners?

Belarus and Kazakhstan distrust each other, in part, because they lack common long-term goals. They both became members of the Eurasian Economic Union primarily because of Russian pressure, not fruitful bilateral relations. 

Their bilateral cooperation remains tiny considering their respective relations with Russia. In 2013, trade between Belarus and Russia appeared nearly 40 times greater than it was with Kazakhstan. In the case of Kazakhstan, it trades 30 times more with Russia than it does with Belarus. In the political and military arena, the proportions look even more significant.

For Kazakhstan, bilateral relations play an even smaller role, as it has rather small volume of exports that make their way to Belarus. 

Moreover, the Eurasian Union for Kazakhstan and Belarus remains little more than a mean to extract economic benefits from Russia. In this regard they look more akin to competitors than allies.

Geographical distance became one of the most serious obstacles to build their mutual trade relations, although Russia plays its own role in hindering their cooperation. Belarus and Kazakhstan have been negotiating an increase of the transit of Kazakh oil through Belarus and even its processing​.

Kazakhstan alsoremains interested in participating in the privatisation of Belarusian oil refineries, a role that is reserved for Russian business. In 2012 Kazakhstan's Ambassador to Belarus Ergali Bulegenov explained that not only would Belarus and Kazakhstan play a role in these negotiations, but Russia would as well.

Military-industrial cooperation can be named one of the successes of mutual relations. Belarus, for example, modernised 10 fighter jets for Kazakhstan, and as recently as the end of May more than 10 Belarusian companies participated in armaments exhibition in Kazakhstan.

Today, both countries require the expertise of the other. Belarus has few, if any, real experts on Kazakhstan, although the country, at least formally, looks the second most important partner of Belarus after Russia. 

Same Challenges, Different Solutions

Due to the Ukrainian conflict, Belarus and Kazakhstan have inadvertently stumbled into a very similar geopolitical reality. Both nations remain authoritarian and afraid of outside interference in their internal affairs and realise possible cost of freeing themselves from Russia's grip. 

Nazarbayev’s regime has been steadily strengthening the position of the Kazakh language

Unlike Lukashenka, Nazarbayev’s regime has been steadily strengthening the position of the Kazakh language and has made plans to switch over from its modified Cyrillic alphabet into using the Roman alphabet.

He plans to elevate the Kazakh language extend beyond the nation's borders. On 28 April during his lecture at Moscow State University, the long-time Kazakh leader said that Eurasian Economic Union institutions should use the state languages ​​of all its member countries in its operations.

The Kazakhstani authorities are increasingly appointing foreign university graduates, who have received training through the Bolashak scholarship program, to senior positions in the government. Around 10,000 Kazakhs have received higher education abroad, mostly in the U.S. and the UK, thanks to this program.

Certainly, Kazakhstan remains an authoritarian country, but the Belarusian authorities seem reluctant to make even minor cosmetic reforms.

Kazakhstan also has more space for geopolitical manoeuvring. On the one hand, China has substantial energy interests in the country and can act as a kind of counterbalance to Russia's influence. On the other hand, the West holds Kazakhstan in high regard, unlike Lukashenka's Belarus. After the Crimean conflict erupted, Lukashenka held talks only with Polish PM Donald Tusk, while Nazarbayev spoke with Obama and Merkel.

Kazakhstan and Belarus find themselves precisely where their life-long leaders have led them. However, Nazarbayev looks much more determined to preserve the independence of his country by strengthening its national identity and bringing in young professionals to work for the state. Lukashenka might consider picking his counterpart's brain for a bit – before it is too late.




Eurasian Integration: Does Lukashenka Have a Choice?

Aliaksandr Lukashenka expressed his resentment over exemptions and restrictions in the Eurasian Economic Union treaty during a meeting with a chairman of the upper chamber of the Russian parliament on 5 May.

However, Lukashenka had effectively no other choice as to agree on the creation of this economic bloc a week earlier, because the Belarusian economy heavily depends on Russia and the benevolence of its leadership.

In the short-term, Eurasian integration and associated benefits of good relations with Russia will help to resolve Belarus' economic problems, such as a high current account deficit and low international reserves.

In the long-term, however, it creates risks for Belarusian independence and its overall development. It condemns Belarus to stagnation and second-rate modernisation in the likely scenario that Russia's conflict with the EU and the US will continue for some time.

A commitment to EU integration can be more beneficial, but the government must adopt large-scale structural reforms to follow this path.

Exemptions Illustrate the Russian Dominance in the Union

Leaders of the new union aim to establish a common market of 170m people based on four freedoms – the freedom of movement of persons, goods, services and capital. Armenia and Kyrgyzstan also plan to join in 2014.

At the moment, though, the union is undermined by a major exemption from the single market rules. Integrators postponed creation of the single electrical energy market to 2019 and the single financial and oil and gas markets to 2025.

For Belarus, that means uncertainty over functioning of its major assets – oil refineries and transfer of Russian oil, gas and petroleum products to the EU. Therefore, the Belarusian president signed the Eurasian Economic Union Treaty unwillingly, bitterly opposing the exemptions.

To sweeten the pill, Russia offered Lukashenka a $2bn loan and the Russian state-owned bank VTB agreed to issue a $1bn bridge loan that is supposed to reach the state's coffers in the following 14 days. Besides, Russia signed a firm agreement on the amount of Russian oil supplies to Belarus (23m tonnes in 2015 and 24m tonnes from 2016 to 2024) which can be increased if Belarus creates new oil refineries.

In addition, Russia allowed Belarus to keep $1.5bn of Russian oil export duties in its state budget in 2015. The sides agreed on a further step-by-step reduction in the amount of duties due to be repaid to the Russian budget, with the prospect of keeping the full amount of $3.3-4 bln at home earlier than 2025. Nevertheless, Russia wants to keep the Belarusian leadership on a short leash and exercise leverage over its reluctant partner, so this issue remains within the framework of bilateral relations.

While some commentators and members of the general public believed that Lukashenka was genuinely willing to frustrate the integration talks with Russia and Kazakhstan, he could hardly do so.

Lack of Viable Alternatives

The reason for a relatively fast acceptance of integration on Russian terms lies in the high level of dependence of the Belarusian economy on Russia. Close ties with Russia serve as the main pillar of Lukashenka’s socio-economic model, with the total amount of Russian support in subsidies estimated at 15-16% of the Belarusian GDP.

The Belarusian economy is currently experiencing significant problems, including a high current account deficit, low international reserves and a troublesome situation in the foreign exchange market.

If Lukashenka abstains from the Eurasian integration project, Russia can quickly change its stance towards Belarus and make it comparable to the Ukrainian one, making harsh demands that would be unbearable for the weak Belarusian economy. That is the last thing the Belarusian ruler wants ahead of the upcoming presidential election.

Some Belarusian opposition parties, such as the Belarusian National Front or the Belarusian Christian Democracy, have criticised the Eurasian Union agreements, saying that they bind the country even closer to Russia. However, a strong opposition to this integration process does not exist in Belarusian society as the majority depends on the state and its paternalism.

Such opposition also does not make great sense for the economy, which remains unreformed and can quickly experience a currency crisis similar to what happened in 2011 if relations with Russia worsen.

To disappointment of EU advocates in the country, the demand for redistribution of rents instead of reforms remains very high among the establishment and the population alike. However, some other aspects of Eurasian integration may encourage the Belarusian leadership to change the country’s development model.

Eurasian Union as a Threat to Sovereignty

Vladimir Putin is building the Eurasian Economic Union with a clear political agenda, even though his counterparts have yet to admit it publicly. As he said in his Crimea accession speech, he wants to build and strengthen the "Russian World".

This idea is clearly hostile to independence of Belarus as a country where 70.2% of the population speaks Russian in their everyday life, according to a 2009 census. Russia dominates the Eurasian Union and will not hesitate to exercise its leverage to ensure its interests in Belarus, including the privatisation of the most attractive assets in favour of Russian businessmen.

The redistribution of oil and gas rents serves as a locomotive for integration between authoritarian leaders. They remain reluctant to take any decisive steps to put an end to their overreliance on oil revenues at the expense of their respective manufacturing sectors.

Though Belarus has a higher share of manufacturing in its GDP (25% as compared to 15% of Russia and 12% of Kazakhstan) and a lower share of fuel in its merchandise exports (38% as compared to 71% of Russia and Kazakhstan), the sustainability of the country’s economy still largely depends on preferential oil agreements with Russia. In addition, if Russia continues its self-isolation from the Western world, this factor will frustrate technical modernisation and economic liberalisation.

EU Integration Provides More Benefits

In the long-term, EU integration would appear to be a more beneficial option for Belarus because of the substantially larger size of the EU market. Technologically advanced investments from EU countries may facilitate the restructuring of the Belarusian economy and offset its current account deficit.

At the moment, Belarus has the lowest foreign direct investments (FDI) stock per capita ($1,514) among all its neighbours, both in the EU and outside.

A high level of state-owned property indicates that Belarus still has a large untapped potential for the attraction of FDI. A massive influx of FDI into the countries neighbouring Belarus has been made possible due to their commitment to rigid EU accession conditions that have promoted liberalisation of trade and capital flows, as Bronk (2002) argues.

However, the Belarusian government must implement painful structural reforms to pursue this agenda. The period of Eurasian integration must be strategically used to prepare for a momentum of change in attitudes of EU citizens from the fatigue to an interest in further integration.

The Ukrainian crisis has attracted a lot of attention to the region and opened a window of opportunity that Belarus should not miss. Otherwise, Eurasian integration may preserve the nation's Soviet-like economic model and bind the country to Russia for a very long time to come.




May Day Parade, Eurasian Union, Euroscepticism – Belarus State TV Digest

Alexander Lukashenka's annual address to the Belarusian people and parliament was the number one news item of the past week. 

The head of Belarus, Russia and Kazakhstan met in Minsk to discuss Eurasian integration.

Meanwhile, Ukraine's acting president, Oleksandr Turchynov, reported to the Belarusian leader developments in the eastern part of the country. 

Corruption in Belarus remains a problem, but not as serious as in Ukraine or in the West, one state TV journalist points out.

Foreign Affairs

Eurasian Integration – A Meeting of Member States in Minsk – Belarusian State TV reported that the meeting was one of the most important events of the week. The Belarusian leader stressed that the removal of exemptions in inter-state trade was a must to truly integrate the member countries.

The respective heads of states also discussed the enlargement of the Customs Union. Lukashenka advocated for not creating any additional incentives and privileges for new member candidates.

The creation of a common energy market remains a controversial issue for the parties, state TV noted. In their coverage, they reported that they it is expected that no later than 2025 there will be a common market for oil, oil byproducts and natural gas.

Eurosceptics in the Western Europe are Getting More Powerful – A state TV journalist commented on recent polls that suggest there is an increase in the popularity of the eurosceptic UK Independence Party and Labour Party supporters. Similar trends are noticeably springing up in France and Netherlands as well. According to [unnamed] experts, the French ‘National Front’ and Dutch ‘Party of Freedom’ may obtain up to 38 seats in the upcoming elections for the European Parliament. If they are able to reach an agreement with the British 'UKIP', and thus create a coalition of eurosceptic parties, it would have certainly an impact on the EP.

Facilitated Visa Regime for Moldovians, but… – The European Union has facilitated visa-free regime with Moldova. However, as a report on state TV emphasised, there are some limitations – Moldovans will not have the right to travel freely to the United Kingdom or Ireland. So far over 100 people have already travelled on the new visa-free regime.

Budapest: Visegrad Countries and the Eastern Partnership – The ministers for foreign affairs from the Visegrad Group countries met with officials representing the Eastern Partnership states. 

Elena Kupchyna, deputy minister of foreign affairs, in Budapest presented the official position of Minsk. According to her, the Eastern Partnership initiative requires some serious reconsideration. Other participants agreed with her, the report pointed out. Kupchyna also added that equality and a non-discriminatory policy for participation for all countries should become the main principles of the project.

Internal Affairs

1st of May: Workers Solidarity Day – The annual holiday brings together different generations, according to state TV. Leanid Kozik, a leader from the official (government supported) trade unions, emphasised that the unions are concerned with human rights and have been paying attention to them. That includes ensuring individuals' right to work, fighting against unlawful dismissals from work and the right for children of an employee to study, he explained further.

Annual Address to the Belarusian Nation and Parliament – State TV described it as "the event of the day for the state and our neighbours". Lukashenka spoke to the Belarusian parliament for 4 hours. Albeit the tradition of having an annual address of a head of state to the nation existing in many other countries, only in Belarus does it truly address the people, according to the reporting state TV journalist.

"A strong economy and honest authorities should be a foundation of sovereignty of the state and flourishing of the nation", noted a journalist, repeating the words of Lukashenka. Further they reported that throughout his speech the Belarusian leader cited the Bible and called for maintaining the integrity and independence of the country. "We accept any opposition which operates in accordance with the law", Lukashenka stated. The authorities are ready to implement progressive reforms, however, "any signs of radicalism in Belarus will be crushed at an embryonic stage".

Belarusians Praised Lukashenka’s Address to the Parliament –  One state TV journalist struck out to find out the reactions of both experts and ordinary Belarusians to Lukashenka’s address in Parliament. The assembled footage presented the opinion of students, doctors, pensioners, political scientists and even Internet users – all of which unanimously praised the Belarusian leader’s address.  

Lukashenka-Turchynov talks – State TV reported that both leaders had a phone conversation regarding the current developments in Ukraine. The acting president of Ukraine updated the Belarusian head of state on the situation in the country. In particular, he reported developments in the city of Slaviansk. "An anti-terrorist operation is being carried out there. Five terrorists, who opened fire on the armed forces of Ukraine, have been killed", the report stated.

Head of State Meets with Ordinary Belarusians – Lukashenka went to the city of Klimavichy in the Homel region, which was contaminated as a result of the Chernobyl nuclear power plant accident. State TV coverage stated that just after his talk in Belarusian parliament, the head of state immediately set out and met with ordinary people to answer their questions "as open as always and without censorship".

When meeting with people, Lukashenka discussed the developments in Ukraine and expressed his concerns for ordinary Ukrainians. He also criticised over re-writing history. "They are trying to deprive us of what makes us significant, improves our image, (they) deprive us of our history", he noted referring to any attempts of diminishing the importance of the Great Patriotic War. At the end of the report, locals thanked Lukashenka for his visit.

‘Pozicija’ (Position) Talk Show: Corruption in Belarus – Among the shows participants were officials, a state-run newspaper journalist and a businessman. In the short introductory feature about corruption, the reporter stated that the problem was not nearly as dire as in neighbouring countries.

The audience could choose, via text message, whether those who offer bribes or those who accept them are guilty. In the end it became clear that 78% of voters put blame of those who accept bribes.

According to one of the participants, the gradual privatisation of state enterprises could solve the problem. In his opinion, the privatisation of education and health care system would lead to gains in the quality of their services, but also a decline in corruption. Participants from the talk show also discussed corruption in Ukraine and in the European Union.

Additionally, they analysed if a particular political system facilitates corruption in a country. In liberal democracies it is hard to react quickly to problem, though in authoritarian countries a leader can react swiftly, one of the participants noted.

Belarus Digest prepared this overview on the basis of materials available on the web site of Belarusian State Television 1 (BT1) and ONT. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Lukashenka’s State of the Nation Address: Top 5 Messages

On 22 April President Lukashenka delivered his annual address to the nation and parliament. The “phantom” of Ukraine stood behind almost every part of his speech. During his annual address, Lukashenka made some impressive, even revolutionary, statements.

He called on Belarusians to unite in the face of external threats and demanded the punishment of those who speculate on the rights of Russians in Belarus. He devoted most of his time to discussing corruption and suggested economic reforms as a means of taming corruption and improving the nation's economic performance.

In closing out his address, Lukashenka declared a rather tough position on the ongoing Eurasian integration project.

Uniting the Nation

Aliaksandr Lukashenka began his annual address in quite an alarming way. He called on the nation to unite in protecting its independence in the face of instability in Eastern Europe.

“I am addressing you in difficult times. The surrounding states have gone into motion: Ukraine is boiling, the Russian Federation is trying to elevate its overall historical status. State borders are being shifted in front of our eyes. […] We must defend our most precious value – the independence of Belarus”, said Lukashenka.

He added that Belarus remains calm and uninvolved in any external conflicts. However, “we have reasons to worry”. He did not specify those reasons but offered three components for preserving the country’s independence:

  1. the nation should stay united;
  2. it should learn lessons from its own and others’ mistakes;
  3. it should have a clear vision of a future that will unite the young and the old.

The proposal to affirm national unity sounded most unusual. Lukashenka, of course, never argued for a national split but his policies regularly exclude any kind of compromise with the opposition. This time, however, he emphasised the need for a dialogue that will help them to avoid radicalism and a societal rift.

With an obvious reference to the Ukrainian crisis, he added: “society has to demonstrate tolerance towards a diversity of opinions and intolerance to any revolutions. We are tolerant of any opposition as long as it is constructive”.

Russians’ Rights in Belarus and the Russian Language

Continuing to draw parallels with the situation in Ukraine, Lukashenka commented on “some speculations” about the violation of the rights of Russians in Belarus. He called it complete nonsense stating that Belarusians have the same blood as Russians, which, in his opinion, makes any discrimination impossible.

Lukashenka warned Russia against "privatising" the Russian language

The president also claimed that no other country in the world demonstrates such a caring attitude to the Russian language and the Russian culture at large as Belarus does. He even warned Russia against "privatising" the Russian language” as, in his view, “it is ours as well”.

In a slightly contrasting manner, he then stated that “we are neither pro-Russian, nor pro-Ukrainian, nor pro-Polish – we are Belarusian”. He added that Belarusians would live on their own territory and would decide for themselves what unions to enter.

Finally, Lukashenka demanded that law-enforcement agencies “immediately eradicate any speculation about violations of Russians’ rights in Belarus”.

Corruption

The issue of corruption occupied a central place in the address. The amount of time that Aliaksandr Lukashenka devoted to it suggests that he is learning his lessons from the Ukrainian crisis, which, in his words, happened because of the corrupt Yanukovych government.

Lukashenka several times emphasised that the levels of corruption in the two countries are incomparable and that the Belarusian authorities have very harsh anti-corruption policies. To demonstrate this, he spent about half an hour discussing recent stories of high-ranking bureaucrats being arrested on corruption charges.

After that, the president offered three very progressive recipes against corruption that independent experts had been discussing for many years.

First, he suggested that the functions of the state, including the law-enforcement bodies, be limited. Second, he stressed the need to live within one's means: the less subsidies and public financial assistance government-owned companies receive, the more it helps to fight corruption. Here Lukashenka even promised to depart from his long-standing policy of so-called state paternalism. Third, the president spoke of raising the status of civil service and, in particular, increasing salaries there so as to minimise the incentives for taking bribes.

New Belarusian Economy

The economic part of the address offered some rather revolutionary ideas.

Lukashenka stated that he viewed his choice of socio-economic model in the 1990s as neither a mistake nor a great success. In his opinion, the country did not have any other alternative at that time.

It sounded like an excuse for the fact that the Belarusian economic model is turning less competitive and lagging behind the economies of other East European countries that went through reforms in the 1990s and 2000s.

Then Lukashenka started talking about a new Belarusian economy: “It is high time we enhanced our economic policy, in a quiet and evolutionary way but without delays or hesitation”. He suggested three targets:

  • Development of the internal market: about 70% of the economy depends on foreign trade, which, according to Lukashenka, makes the country too vulnerable to external shocks.
  • Improvement of the system of governance: the state should not support inefficient companies.
  • Stimulation of competition: like a real free marketeer, Lukashenka concluded that competition works as the main engine of economic growth.

These points do not necessarily indicate that Aliaksandr Lukashenka has changed his old anti-market beliefs. Some clarifications that he provided even seem to imply quite the contrary: for example, the internal market idea most likely originated from a desire to curb imports. However, the very fact that during his address he extensively employed a free market rhetoric is itself of interest.

Eurasian Integration

Before the Q&A session President Lukashenka limited the issue of Eurasian integration to a few formal remarks. But when an MP asked him about the prospects for the Belarusian economy after the launch of the Eurasian Economic Union in January 2015 Lukashenka made quite a strong statement.

He said that he would sign the founding treaty only after the removal of all limitations and exemptions from the free trade regime was concluded: “if you want to sign the treaty on the economic union today and lift these limitations in 15 years, as Putin suggests, then we will sign the treaty in 15 years”.

He reminded Belarusians that Russia had promised to resolve these issues but then changed its position, which excludes any possibility of a real union emerging. In Lukashenka’s view, after the failures of the Commonwealth of Independent States and the Union State of Belarus and Russia, the people want real progress. “If we want to totally embarrass ourselves then let’s not sign it”, he added.

This straight statement suggests that the summit of the Eurasian troika in Minsk on 29 April will see some really tough negotiations.

To sum it all up, Lukashenka tackled many issues in his annual address. They varied from serious and highly relevant to sometimes humorous. He even lectured the nation on recipes for a healthy diet. And judging by the discussion visible in social media, the president’s recommendation not to eat potatoes with meat (and eat potatoes with fish instead) resonated the most among the population.

Perhaps, this is due to the humorous and generally positive connotation of the recommendation. The rest of the speech appeared to be too alarming. 




Ukraine Can Help Belarus with Exemptions in the Eurasian Economic Union

The presidents of Belarus, Kazakhstan and Russia plan to sign the founding treaty of the Eurasian Economic Union in May 2014.

With the signing less than two months ahead, the parties cannot reach a compromise on a number of contested issues, such as trade exemptions.

Belarus seeks to abolish oil exemptions. This will mean an additional $3-4 billion for the country’s revenues at the expense of the Russian budget.

The crisis in Ukraine can impact the negotiation process in unpredictable ways. On the one hand, Belarus may have extra leverage over the Kremlin as Moscow, more than ever, needs good news from its Eurasian front. On the other hand, Russia’s Crimea campaign undermines its economy and ability to finance its integration project.

Hasty Negotiations

Eurasian integration resembles a race where each participant tries to demonstrate its ability to run at a faster pace than everyone else. The summits of the Eurasian troika (Belarus, Kazakhstan and Russia) usually witness calls by the leaders of the states to accelerate their integration. As a result, the integration agenda has in less than five years come a long way from the Customs Union to the Common Economic Space to the Eurasian Economic Union (EaEU). The latter may become fully functional as of 1 January 2015.

For that to happen, the three countries need to prepare and sign the founding treaty of the EaEU. They have set the deadline for May. However, more and more evidence suggests that they will fail to settle all of the outstanding issues in the time remaining before the deadline.

In 2013, against the backdrop of a rush towards integration, the Belarusian and Kazakhstani leaders started to voice serious concerns about the depth and strength of the integration project. At the summit in Minsk last October, they both emphasised several fundamental problems in the economic and political realms.

Economically, Eurasian integration fails to fulfil even the criteria of a customs union, not to mention a common economic area. According to the President of the Eurasian Economic Commission Viktor Khristenko, the Customs Union still has about 600 exemptions that restrict the free movement of goods, services, capital and labour force inside the union. Thus, the previous integration stages remain incomplete, yet the Kremlin already wants to move on the next step.

Politically, Russia tries to subdue the supranational institutions of the Eurasian integration and bring it under its full control. In the words of Kazakhstan’s President Nursultan Nazarbayev, the officials of the Eurasian Economic Commission should work independently from the national governments they represent but the Kremlin demands full loyalty from the Russian nationals there. What's more, Russia negotiates with prospective new members of the integration (e.g. Armenia) without proper consultations with either Belarus or Kazakhstan.

Back in October 2013, the leaders of the troika agreed that their governments would work to resolve these issues before signing the documents on establishing the EaEU. But a summit on 5 March in Moscow showed that such an agreement did not materialise.

The draft treaty establishing the EaEU consists of two parts: an institutional and a functional element. The latter raises particular concerns. According to Aliaksandr Lukashenka, only about 70-80% of the draft is ready to be signed. The rest includes the most sensitive economic issues, which remains unsettled.

Belarus’ oil interest

The central controversy relates to the exemptions from the ‘four economic freedoms regime’. Kazakhstan has a strong interest in abolishing restrictions on its access to Russian transportation networks, primarily to the pipeline system used to export hydrocarbons to Europe. And Belarus wants to get rid of the standing exemptions in oil trading.

According to a bilateral agreement, Belarus has to transfer all export duties on oil products produced from Russian oil and sold to a third country to Russia’s state budget. The price tag of this issue for Belarus amounts to $3-4 billion. In 2013, Belarus transferred $3.3 billion worth of export duties to Russia’s account. This year it might well reach $3.5-4 billion.

If this money stayed in Belarus it would essentially improve the nation's current balance. Last year, Aliaksandr Lukashenka even promised that he would turn the country into another Emirate if he had the duties on oil products at his disposal. The upcoming 2015 presidential campaign and the poor economic outlook only reinforce this desire.

Thus, the Belarusian authorities are doing their best to negotiate the abolition of the exemption while drafting the EaEU’s founding treaty. Officials in Minsk are resorting to both behind-the-scenes diplomacy and public statements to convince the Kremlin. For example, a couple weeks ago the Head of the External Economic Policy Department of the Ministry of Economy Raman Brodau called Russia’s approach to calculate its losses from the Eurasian integration “fundamentally wrong".

Russia's position in Light of Crimea

The Russian government does not, of course, volunteer to give into its partners’ demands. On 26 March the First Deputy Prime Minister of Russia Igor Shuvalov stated that the exemptions problem goes beyond gas and oil. According to him, Russia’s economy also suffers from certain exemptions introduced by Kazakhstan and Belarus. In particular, he named such goods as medicine, tobacco, alcohol and seafood.

Shuvalov opined that the three states are “so remote from finding mutual understanding and a common denominator regarding these goods that, perhaps, they will have to put them aside and negotiate after May, after the treaty is signed."

At the moment, this looks like the most likely option. The leaders of Belarus and Kazakhstan seem ready to undersign the EaEU’s founding treaty in May and to continue negotiations afterwards. But only if the Kremlin promises concessions. And here the Ukrainian factor may come into play.

Considering Russia's growing international isolation, Putin desperately needs good news on the Eurasian integration front. Under such circumstances, Belarus and Kazakhstan gain additional leverage in their negotiations with Moscow. The more intense the isolation the Kremlin faces, the more it has to pay its integration partners for loyalty.

At the same time, the annexation of Crimea will be quite costly for Russia. Preliminary estimates state that the new subject of the Russian Federation will roughly require $4-5 billion in annual subsidies. Moreover, Russia’s economy will suffer substantial losses as a result of capital outflow and a lack of foreign investment after its Crimean campaign. The former already claimed $75 billion in the first quarter of 2014. Under this kind of pressure, Russia might simply become unable to finance its Eurasian integration dream.

With all that is happening, politics within the Eurasian integration has become a particularly exciting development to watch. Post-soviet politics is getting as unpredictable as ever.