Minsk-Kiev: love is gone, but mutual interest remains
Statements by Ukrainian politicians about a possible closure of the Minsk process and potential military threats from Belarus, are not least because of the internal political process in Ukraine. Although a crisis matures in the Belarusian-Ukrainian political relations, the pragmatic bilateral interest outweighs politics.
Being at war, Ukraine is very sensitive to Belarusian moves contrary to the position of Kyiv. Belarus, due to complex relations with Russia, cannot take a clear pro-Ukrainian position. Hence, growing political distrust between the two states is only natural.
While not denying the validity of Kyiv’s claims to Minsk, the following should be marked.
Amid socio-economic crisis in Ukraine, external threat has united Ukrainian society and distracted it from domestic issues. This could explain recurrent untrue statements by Ukrainian high-level politicians about the concentration of the Russian troops on the Belarusian territory to invade Ukraine. Minsk agreements and the Minsk process were imposed on Ukraine. Both, the Ukrainian society and political elite are not satisfied with the results of Minsk talks. There is a political demand for a de facto waiver of Minsk agreements by Ukraine, hence, doubts about Belarus' equidistance from the parties to the conflict is only part of a complex mosaic.
That said, Kyiv rejected several proposals from Minsk, aimed at creating a system of trust in the security field between the two states, referring to undue close relations between Belarus and Russia. Kyiv believes there is a threat that sensitive information may leak to Moscow, i.e. there is lack of trust to Belarus.
Minsk is ready to give some guarantees to Kyiv in the security sphere within its capacities and interests. Obviously, Ukraine anticipated something more. Meanwhile, de facto bilateral cooperation in various fields is so important for both states, that neither Belarus nor Ukraine is ready to give up the benefits it brings. In this situation, Kyiv is unlikely to take any action, which could damage the existing cooperation between Belarus and Ukraine. Meanwhile, Ukrainian politicians are likely to tighten their rhetoric vis-a-vis Belarus. Albeit the trust between the leaders of the two countries fell sharply, pragmatic interests would guarantee conflict-free Belarusian-Ukrainian relations.
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.