Foreign and security policy: Wearing several hats

January 03, 2017 11:40

Throughout the year, relations between Minsk and the Kremlin were tense over energy supplies with periodic exacerbations, albeit without information wars typical for the Belarusian-Russian relations. In H2 2016, Moscow reduced the supply of oil to the Belarusian refineries in retaliation for incomplete payment for gas supplies by Belarus. For the first time, Russia linked oil and gas supplies. The Kremlin ignored all Minsk’s attempts to reach an agreement about resuming the oil supply and reducing the gas price, albeit repeated assurances of the prompt dispute resolution.

The lingering dispute between Minsk and Moscow over oil and gas supplies has put an end to the previous model of the Russo-Belarusian relations.

Throughout the year, the Kremlin remained deaf to the economic, legal, ideological and brotherly appeals by Minsk and did not lower the price of gas; moreover, it reduced the oil supply in H2 2016.

In 2016, Minsk made efforts to create a positive image of the Belarusian NPP construction for the international community and attempted to neutralise criticism from Vilnius by engaging in a dialogue with the Lithuanian authorities. Inside the country, the authorities managed to reverse the people’s attitude towards the nuclear energy, which, however, was undermined by an attempt to becloud an incident at the construction site. Incidents at the NPP construction site mobilised Belarusian society to put pressure on the government to enforce safety rules, but not to abandon the project.

In 2016, Belarus' relations with Ukraine somewhat cooled. Kyiv was displeased with Minsk’s stance (pro-Kremlin) on some sensitive issues for Ukraine. The lack of political trust between the two states affected their cooperation in the security field. Ukraine failed to transfer some important technologies to Belarus.

Appealing to geopolitical arguments, Minsk managed to prompt Poland to pragmatic cooperation,

relaxed pressure on representatives of the Polish minority organisations and promised to facilitate the access of Polish business (including products from the sanctions list) to the Eurasian market. Many representatives of the Belarusian civil society regard this as the main reason why the Polish authorities reduced support for the Belarusian independent media.

After a long break (since November 2014) and after Western capitals lifted sanctions against the Belarusian authorities, the latter resumed executions. Meanwhile, the Belarusian authorities demonstrated readiness to engage in a dialogue on the abolition or a moratorium on the death penalty with the European institutions, albeit, apparently, without the intent to change the practice. Simultaneously, Minsk attempted to put human rights issues at the bottom of the Belarusian-European agenda by prioritising regional security and geopolitical confrontation issues.

Minsk aimed to improve communication with the White House and right the ship of Belarusian-US relations with full diplomatic missions in both capitals. Simultaneously, Belarus sought to maintain a visible distance from the Kremlin's military preparations in a confrontation with NATO, while retaining close defence cooperation with Russia within the Union State. This precluded any positive achievements in Belarus’ relations with the US and NATO.

Washington continued monitoring the situation in Belarus and the United States’ stand on the Belarusian authorities remained tough.

Meanwhile, the role of China as Belarus’ military and political partner, increased. China is becoming a source of technology and finance in implementing programmes having strategic importance for national security.

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Economic growth in Belarus may be delayed until 2018
January 23, 2017 11:13
Image: Novy Chas

The Belarusian economy was shrinking for the second year in a row, in 2016, by 2.6%. Before 2015, the Belarusian economy was growing for 18 consecutive years. In order to stop the economic slump, Belarus needs a favourable international market situation and to settle all trade disputes with Russia. The Belarusian economy is unlikely to recover before 2018.

According to the preliminary reports, in 2016, Belarus had a 2.6% GDP decline. The Belarusian economy was shrinking for the second year in a row – a 3.8% decline in 2015. Most economic indicators in 2016, except in agriculture, had negative values. Wholesale trade had the most negative impact on GDP due to falling exports of potash fertilizers and petrochemicals, as well as construction, due to reduced investment in fixed assets by enterprises and decreased housing construction volumes.

In 1996-2011, the Belarusian economy was growing most rapidly, average GDP growth rate was 6.9% per year. In 2011, amid emission injections in the economy, disproportionate growth of wages against the background of low productivity and significant financial aid for loss-making agricultural, construction and industrial enterprises, the Belarusian rouble depreciated by three times. The absence of economic reforms and significant relative weight of state in the economy amid deteriorating external economic environment led to a sharp economic slowdown – circa 1% per year in 2012-2014; the slowdown was followed by the recession, caused by a slump in the prices for basic exports from Belarus and cuts in soft loans issued to maintain production volumes.

Belarus’ budget for 2017 is based on anticipated 0.2% growth. The expected decrease in the construction volume is circa 17% in 2017, which is unlikely to allow industrial growth with the renewal of fixed assets by legal entities. Even if wages grow, they will be offset by the 15% increase in utility tariffs by late 2017. Wholesale trade is largely dependent on the potash market situation and the oil processing volume at the Belarusian refineries. In view of the planned reduction in Russian oil supply in Q1 2017 to 4 million tons, wholesale growth is only possible provided the potash market situation improves. In late 2016, engineering output increased significantly, but amid the trade conflict with Russia, she may prioritise purchases from domestic manufacturers. In the given circumstances, Belarus’ GDP would only grow in 2017, provided the Russo-Belarusian dispute over energy supplies was fully resolved, Russia removed barriers for Belarusian exports and the potash market situation improved. That said, Belarus’ GDP in 2017 is likely to decrease by 0.5% - 1% and is likely to be followed by an attempt to overcome the recession in 2018.

The Belarusian economy has been in recession for two consecutive years. Amid anticipated decline in retail trade, construction and unresolved dispute over energy supplies from Russia, economic recession is likely to persist in 2017 and the economic recovery may be postponed until 2018.