Russo-Belarusian defence cooperation has limitations
Thanks to close defence cooperation with Moscow, Minsk ensured freedom in foreign policy manoeuvre and a large-scale financial and economic support from Russia. However, this scheme is coming to an end, thereby boosting conflicts in bilateral relations and prompting the Belarusian authorities to improve transparency in communication with all their neighbours, including Russia.
Recently, the Russian Defence Ministry published plans of military rail transportation to Belarus and back, which could be an indirect evidence of the unprecedented scale of the Russo-Belarusian military exercise West-2017, unless there was an error (or an intended provocation). The Ministry is planning to send 4,000 railway cars to Belarus, which could transport at least one Russian division to the Belarusian landfills.
Amid Russia’s confrontation with the West, Minsk manages to secure some financial support from Russia due to periodic loyalty demonstrations to Moscow on the international arena, participation in the Russia-led integration projects and expansion (including demonstrative) of the Russo-Belarusian defence cooperation. This trend could not last indefinitely. Firstly, it already threatens Belarus with engaging into the confrontation with the West on the Kremlin’s side. Secondly, it alarms Ukraine, Belarus’ second most important trade and economic partner. Thirdly, the West regards it as a sign of Minsk’s critical dependence on Moscow, which weakens Belarusian positions in a dialogue with the West.
That said, Russia aims to use defence cooperation in order to establish her total domination over Belarus. The Kremlin puts forward new initiatives, which could call into question Belarus’ ability to control the national military capacity.
As economic recession deepens in Russia, she is less capable of supporting Belarus. In addition, Minsk’s desire to avoid being drawn into Russia’s confrontation with the West and Ukraine makes the Kremlin less eager to finance the Belarusian authorities. From a certain point, "payment" with military cooperation for the Russian financial and economic support may become unacceptable for Minsk: Moscow is likely to want to get more for less. For Minsk, preserving independence in foreign policy and continuing the dialogue with the West and cooperation with Ukraine is critically important. Russo-Belarusian military cooperation is nearing its "glass ceiling". Therefore, large-scale conflicts in bilateral relations are becoming virtually inevitable.
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.