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.
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.
Will Nuclear Weapons Return to Belarus?
Last week, the Belarusian economic news portal afn.by published a story with the provocative headline “Lukashenka: The Situation with Crimea Allows Belarus to Get its Nuclear Arms Back.”
It was, of course, an exaggeration – the original statement lamented over the ineffectiveness of the Budapest Memorandum and its security assurances for nations that renounced their nuclear weapons. Talk of the renuclearisation of Belarus is not purely theoretical.
Minsk likely still possesses some amount of enriched uranium. Feasibly, Russia can convince its Belarusian ally to redeploy Russian nuclear arms within its borders. Can Belarus de facto go nuclear by allowing a Russian military base to be established on its territory?
Was Belarus Ever a Nuclear State?
Naviny.by, a web site of the Belapan News Agency erred when it overstated that, “Belarus remained a member of the symbolic club of nuclear states for only five years: since the break-up of the Soviet Union in December 1991 up to 27 November 1996, when the last train with nuclear arms departed from its lands.”
Indeed, the Soviet army deployed tactical and strategic nuclear arms in Belarus. Yet after independence, the Belarusian government never took control of them, but instead adhered to the principle of denuclearisation that was proclaimed back in 1990. Belarus had already suffered seriously in the aftermath of the Chernobyl nuclear catastrophe and wanted to rid itself of all things nuclear.
Minsk never had any real chance to get its hands on any nukes Read more
Furthermore, Minsk – despite its formal right to all facets of its Soviet heritage including its nuclear arsenal – never had any real chance to get its hands on any nukes. Both Western powers and Russia steadfastly opposed the fragmentation of the Soviet nuclear arsenal.
As former Belarusian diplomat Andrei Sannikov, who in the early 1990s participated in negotiations on the issue, explained in his interview for the Lithuanian news portal Delfi.lt, “The US did not accept any other option, and was willing to take – together with Russia – harsh measures if nuclear blackmail [on behalf of the newly independent states] continued.”
Only Ukraine made irresolute attempts to hold nukes for itself, but finally, joined in with Belarus and Kazakhstan who solemnly gave up nuclear arms that, in reality, they never effectively possessed.
Doubts About Denuclearisation
Initially, nobody questioned the denuclearisation of Belarus. The opposition itself boasted of inserting the tenet of denuclearisation into the young nation's Declaration of Independence. In 1996, President Lukashenka proposed to establish a nuclear-free zone in Central and Eastern Europe.
In 1999, he confirmed that Belarus had no intentions of becoming a nuclear power again. These kinds of statements indicated an independent line of thought, as they contradict Russia's potential plans to move their nukes westward of Russia's borders.
Yet from the mid 2000s, the mood in Belarus has changed. In 2007, Russian Ambassador Alexander Surikov hinted at the possibility of Russian nuclear arms being redeployed to Belarus in the face of NATO expansionism and American plans to install a missile defence system in Central Europe.
The prospect of having Russian nuclear weapons return to Belarus deeply concerned the Americans. US Senator Richard Lugar said that if such a deployment occurred it would be "counterproductive for Russian-American relations.“
In 2010, Lukashenka accused “nationalists” and Stanislau Shushkevich of giving up nukes on unfavourable terms. He lamented, “I had to sign that agreement, I had no choice: both Russia and the US put pressure on me – give up your nukes, you promised. We should not have done this, it was an […] expensive item which we ultimately might have been able to sell for a good price.”
Moreover, “If we had those weapons now, we would be treated [by the West] in another way [than we are].” In January 2014, opposition politician Siarhei Navumchyk expressed a similar opinion, accusing Shushkevich of improperly giving up the nation's nukes.
Does Belarus Have Materials For a Bomb?
Belarus retains about two tonnes of Soviet-era uranium which theoretically enables it to start its own nuclear weapons programme. In 2010, Lukashenka emphasised that Belarus still possessed highly enriched uranium, hundreds of kilogrammes of both effectively weaponised and less enriched nuclear material.
The former Chairman of Parliament Shushkevich disputed this claim. The Belarusian government to this day insists that scientists use this uranium only for research and medical purposes.
The Belarusian government to this day insists that scientists use this uranium only for research and medical purposes. Read more
Lukashenka said that both the US and Russia have for years tried to take Belarus' uranium stocks away from him. The Belarusian leadership hesitated to give it up after a December 2010 bilateral meeting, where Belarusian Foreign Minister Siarhei Martynau and the US State Secretary Hillary Clinton adopted a joint statement on Belarus' plans to relinquish its deposits of enriched uranium by 2012.
But the December 2010 presidential election in Belarus led to a new round of deterioration in relations with the West. Before the government suspended the outward bound transfer of uranium, only ten per cent of Belarus' highly enriched stock were shipped to Russia.
The director of the United Institute for Energy and Nuclear Studies Vyachaslau Kuushynau in August 2011 said that the transfer of nuclear fuel would continue after relations with the US improved. So far, the situation has not changed, although the US and Russia have succeeded in getting other post-Soviet nations (e.g., Ukraine and Uzbekistan) to transfer highly enriched nuclear-active material to Russia.
In April 2013, the Belarusian delegation at a session of the Preparatory Committee for the Review Conference of the Parties to the Treaty on the Non-Proliferation of Nuclear Weapons threatened to reconsider the nuclear status of the country.
It argued that by introducing sanctions against Belarus, the US and UK had violated the Budapest Memorandum's security guarantees for the independence and sovereignty of Belarus. Therefore, Minsk also could stop abiding by terms set forth in the Budapest Memorandum.
Indeed, the third point of the memorandum explicitly obliges the guarantors (Russia, US and UK) to avoid economic pressure on Belarus. The US Embassy in Minsk explained that the memorandum had no direct legal power and the sanctions against Belarusian enterprises did not amount to economic pressure as they were aimed at stopping the proliferation of weapons of mass destruction and human rights violations.
The Russian Option
Can Belarus again de facto go nuclear by allowing a new Russian military base be established within its borders? In February, the United Civic Party announced their suspicions that Russian aircraft that had been regularly deployed to Belarus since last December might have nuclear weapons. In reality, however, Su-27P fighter jets is only capable of air-to-air attacks, making it absurd to talk about them carrying nuclear payloads.
The redeployment of Russian nuclear forces in Belarus will take time. After independence Minsk did not pay much attention to the abandoned military sites that previously used to house nuclear arms. As a result, the sophisticated infrastructure has long since collapsed.
As former officer of the Strategic Missile Forces Vladimir Evseev commented to Belorusskaya Gazeta, without proper maintenance a missile silo soon becomes dilapidated and it might even be cheaper to demolish it and construct a new one.
The current Belarusian government has not exhibited any risky behaviour, no matter the arena. It is a survivor regime. Minsk knows it will pay dearly for tinkering around with any nuclear-active material. It would appear to the world that they were in the business of building bombs – and neither the West, nor the East likes the idea of Lukashenka with a bomb.
The Belarusian regime is also well aware of the fact that Belarus lies between Russia and the EU and NATO. Russian nukes in Belarus will provoke confrontation in the region. Such confrontation can make Belarus even more dependent upon Moscow – something which very few from the Belarusian elite wants.