Minsk seeks to demonstrate to NATO its independence

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July 25, 2016 23:31

Minsk continues manoeuvring between the West and Russia in anticipation to cooperate with each party to the conflict. Minsk aims to establish multi-level communication channels with the West, while it offers further cooperation in the security field to Russia, and promises to the West to facilitate stability in the region. That said, the Belarusian authorities are not ready to commit to the West in the security field.

Belarus is the only Eastern Partnership country, which was not invited to the Warsaw NATO Summit. The Alliance leadership invited even the most consistent Russian ally, Armenian President Serzh Sargsyan. The fact that Belarus was not invited was a clear message to Minsk that it could sit on two chairs in political matters, but security issues required taking a clear side.

On July 6th-7th, 2016, Belarusian Foreign Minister Vladimir Makei paid a working visit to Latvia. Among other things, during the meeting with his Latvian counterpart Edgars Rinkevich, he emphasised the development of inter-institutional contacts, including in the field of defence. That said, Latvia is currently representing NATO states in Belarus.

Developing a dialogue and cooperation between different ministries and departments of the two countries requires trust and understanding between the parties. In the near future, Belarusian and Latvian state bodies are planning to conclude agreements on cooperation. Since both parties raised defence matters during negotiations, such an agreement might also be concluded between the Defence Ministries of Belarus and Latvia.

In addition, Minsk intends to develop relations with NATO and facilitate Russia’s dialogue with the Alliance. While the latter could be regarded as an attempt to preserve Minsk’s image as a ‘peacekeeping platform’, Minsk-NATO relations is a complex phenomenon.

Belarus is concerned about potential escalation between Russia and NATO. If current crisis translates into an armed conflict, Belarus is unlikely to stay away from it. Russia would perceive such an attempt as a betrayal, or a hostile move with all the consequences. The West does not trust the Belarusian authorities. Despite Minsk’s political manoeuvres, from a military standpoint, NATO assumes that in the case of a military conflict, Belarus will be committed to Russia. Hence, there would be no other alternatives for NATO than military pressure on Belarus.

Belarusian National Security and Defence sector is extremely closed. Establishing direct contacts between the relevant agencies of Belarus and Latvia will not only contribute to mutual trust, but would make Belarus more clear and "transparent" for the EU and NATO. Belarus and Latvia have no historical contradictions and Belarus has a traditionally strong lobby in Riga. This means, for Minsk, Latvia is clear and predictable partner.

Hiding behind the rhetoric of facilitating confidence-building between NATO and Russia, Minsk will seek to establish multi-level communication channels with the West. If successful, such a policy would have a long-term importance for Belarus’ national security. NATO would stop perceiving Belarus together with Russia as a threat, albeit hypothetical. And the Kremlin would have fewer possibilities to drag Belarus into a potential conflict with NATO: it is better to have a relatively friendly neutral state than push Belarus into the arms of the West. That said, Belarusian defence capacity against the background of many NATO countries looks quite impressive, albeit obsolete.

Image: nato.int

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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