Belarus and Russia Experience New Bout of Tensions

In recent years, there has been no shortage of bad blood between Belarusian President Alyaksandr Lukashenka and the Russian Kremlin. For example, in February 2004, Lukashenka referred to the stoppage of Russian natural gas flows into Belarus, in retaliation for Belarus’s insistence on lower prices, as “terrorism at the highest level.” And in June 2009, following a milk war—i.e., a series of rejections of Belarusian dairy products by Russia’s agricultural import controlling agency—the Belarusian head of state promised to reconsider his country’s participation in the Moscow-led Collective Security Treaty Organization (CSTO).

Still, Lukashenka’s September 20 televised statement during his talk with Grigory Rapota, the secretary of the Russia-Belarus Union State, was no ordinary event (Belta, September 20). The Belarusian leader displayed his utmost indignation at the state of economic relations with Russia, most importantly in regard to the ongoing argument about natural gas prices and repeated Russian bans on Belarusian dairy products. As for natural gas, since January Belarus has been paying $73 per 1,000 cubic meters, not $132, as was previously agreed upon (see EDM, June 15). In late August, as signs began to look promising for a breakthrough in the prolonged negotiations, sources in Russia reported a looming agreement stipulating $97 per 1,000 cubic meters as the new price until the end of 2016 and as little as $62.37 in 2017 (Kommersant, August 26). This report, however, was shortly disavowed. Then, on September 11, after a telephone conversation with President Vladimir Putin, Lukashenka assured the public that the issue would be resolved in two days, and yet the stalemate has continued to linger on (Tut.by, September 20). Moreover, in retaliation for Belarus’s intransigence, in July Russia cut its supply of oil by 37.6 percent. As a result, Belarus lost $200 million in revenues in the third quarter alone due to its lessened export of refined oil to Western Europe (Naviny.by, September 20).

In his talk with Rapota, Lukashenka acknowledged that many Belarusians express concern over bilateral economic ties with Russia. Mutual trade shrank by more than one quarter in 2015. And it has declined yet again, by one tenth, during the first half of 2016. In part this is because trade is denominated in US dollars, whereas the Russian ruble has substantially devaluated since 2014. Lukashenka also characterized Russia’s cutting back on oil exported to Belarus as “pressure that I would not tolerate and Belarusians would not either.” As for agricultural trade bans, Lukashenka attributed them to indulging Russia’s own oligarchs, who do not want competition from Belarus. In the end, Lukashenka warned he would “optimize” Belarus’s participation in the Eurasian Economic Union: in particular, he pledged to withdraw part of the Belarusian representatives from the union’s management body in Moscow (Nezavisimaya Gazeta, September 21).

Political commentators close to the government opine that Belarus’s inability to extract benefits from economic integration with Russia is due to energy price incongruity (i.e., the fact that despite the existence of the economic union Belarusian producers have to pay more for gas than Russians). This situation, they argue, borders on absurdity (Sputnik.by, September 22). Some observers claim that Russia is penalizing Belarus for its rapprochement with the West and for Minsk’s persistent support for Ukraine’s territorial integrity (Naviny.by, September 20). Nonetheless, they suggest Lukashenka may be willing to resolve the gas price argument with Russia now—while the effect of Belarus’s solidarity with the Russian team banned from the Paralympic Games in Rio is still strong. Indeed, on September 8, the Belarusian Paralympic team carried the Russian national flag in support of that country’s banned athletes, alongside the Belarusian flag; the resulting outpouring of gratitude in Russia was overwhelming (Lenta.ru, RT, September 8).

Perhaps one should not blow the current rise in tensions between Russia and Belarus out of proportion. According to a well-known Russian adage, intra-species relations, like arguments within a family, are bound to be more acrimonious than inter-species ones, i.e., than relations with outsiders. Still, some commentators’ observations about Belarus’s excessive dependency on natural resources may be accurate. No wonder Belarusian Prime Minister Andrei Kobiakov accurately attributed the country’s 3 percent economic decline over the first eight months of 2016 to diminished deliveries of Russian oil and low prices on potassium (which Belarus exports). Yes, Belarus’s High-Tech Park (see EDM, November 10, 2014) is great, say such commentators, but this is a drop in the ocean (Naviny.by, September 23).

But is it really just a drop? Unequivocal answers to this question are in short supply. On the one hand, exports of IT services from Belarus account for only 2.1 percent of GDP. On the other hand, from 2006 to 2016, this sector has grown at a rate of 26 percent per year and is now approaching $1 billion (Probusiness.by, September 19). In 2013, services for the first time exceeded industry in the proportion they contribute to Belarus’s GDP. And in 2015, the IT sector exceeded the production of industrial machines and equipment as a share of GDP. So much for Belarus’s much touted hyper-industrialization. What is more, there is a much higher share of value added in IT compared with manufacturing and even with oil processing (Probusiness.by, September 23). The IT production cycle is controlled by Belarus in its entirety, like that of potash (potassium); whereas much of Belarus’s manufacturing depends on raw materials and semi-finished products from Russia, while agriculture depends on Russia’s market. In contrast, pretty much all of Belarus’s IT service exports are directed toward the West. So looking forward, the IT sector, with 157 resident companies at the Minsk-based High-Tech Park—plus Wargaming and Viber, which “reside” elsewhere in Belarus—is a diversification vehicle for the country’s external relations.

In the meantime, however, the current economic situation looks rather grim, with the officially reported national average monthly salary in August amounting to just $389. In the Belarusian capital, the official reported monthly salary is $529 (Tut.by, September 23). Yet, these figure are difficult to reconcile when perusing Minsk’s packed supermarkets and shopping malls as well as observing the massive fleet of new Western and Japanese cars owned by the city’s residents.

The heirs to war-time partisans, Belarusians are not known for aggressive behavior or excessive pride. Nevertheless, they clearly have developed numerous subtle ways of defending themselves from outsiders and of putting to use all the assets of their seemingly resource-poor but neatly groomed country.