Belarus attempts to replenish its international reserves at China’s expense

April 22, 2016 18:34

On July 19th, National Bank’s Chairman Ermakova talked about ongoing negotiations with China concerning an untied loan to replenish the gold reserves.

As a result of Lukashenko’s Chinese visit, USD 1.5 billion worth agreements were signed. The Chinese visit’s main purpose was to find further funding to support Belarusian socio-economic model. Belarus offered China a duty-free access to the Russian market at a relatively small cost. China continues evaluating what Belarus has to offer.

Official reports say that as a result of the Chinese visit, a number of economic cooperation agreements were signed, altogether worth circa USD 1.5 billion. On the one hand, Belarusian exports to China are insignificant – mainly potash fertilizers. In January - May 2013 Belarusian exports to China earned USD 279.1 million (of which potash exports were USD 184.1 million). On the other hand, Belarus’ imports from China were USD 1.13 billion during the same period, and trade deficit with China is only worse than Russo-Belarusian. The newly signed contracts will only strengthen the negative trends in Belarus’ foreign trade, but country’s leadership is not particularly worried about it.

The planned potential of the Sino-Belarusian industrial park (USD 50 billion) is already higher than the current exports and for a number of reasons cannot be considered as a potential export growth source. Russia will not allow for all variety of goods to be supplied at its market, irrelevant of the created common economic space. Belarus’ statements about the signed agreements deemed to disguise the main purpose of the visit, i.e. searching for financial resources to replenish the gold reserves. China is the largest international reserves holder – over USD 3.3 trillion – and is searching for profitable investments. Belarus needs financial fueling for its economic model, which is back to negative current account payment balance after a short ‘break’ in 2012.

From Belarus’ view, mutual interest is obvious. At a relatively small costs China can get a base for expansion into the Russian market and other Belarus’ neighbouring markets. As an additional bonus, China receives contracts to expand Chinese exports to Belarus and enhances its long-term impact on the country. Belarusian exports to China should be regarded as development of potential competition for Belarusian goods in the Russian market. China has a successful market expansion tactics: it makes test purchases of marketable products, makes their copies and offers analogues at prices, lower than their market values. Belarus needs financial resources, and China has it. Using Chinese funds, Belarus will attempt to modernize its economy, hoping for further growth in exports, which might lead up to a positive trade balance. So far, Belarus’ progress in this regard is questionable.

Belarus continues searching for additional financing to support its ineffective economic model. In the long term, Belarus will strengthen its financial dependence on the external contractors and will have to agree to projects that are not the most efficient.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.