Belarus"s economy in 2013: Forward to the Past
On February 21st forecast data about socio-economic development in 2013 was published.
The 2013 projected data demonstrates the return of the economy to the 2010-2011 standards. The economic model will not change – the government is only choosing sources of funding to support the status quo. The period until the next devaluation will last as long as the government is able to find the required amount to keep the situation as is.
The Economy Ministry Regulation No 1, dated January 4th, 2013 and published only in the second half of February states, that the Belarus’ current account balance in 2013 is projected with deficit minus USD 5.123 billion. In 2010, the balance was negative – minus USD 8.28 billion, in 2011 – minus USD 5.121 billion. In 2013 Belarus will benefit from gas supplies at discount prices – USD 2 billion, if compared with 2011. Excluding the possible continuation of the potential diesel fuel imports for the biodiesel production and potential benefits from the agreement on the duties’ distribution, the picture resembles that of 2010.
The improvements in 2012 were temporary and mainly due to additional financial benefits from Russian oil re-export schemes. Scheme’s suspension has triggered a chain reaction in the economy, which resulted in a drop in industrial production. The foreign trade balance was therefore negative and the financial economic outputs had deteriorated. Distorted perception of the real situation in the economy was due to savings of USD 2000 million to pay for the natural gas supply. The economic recovery was a misconception and some mistakes were repeated, which resulted in the devaluation in 2011.
Devaluation effect ceased to have impact in the second half of 2012. Wage growth has exceeded the nominal value compared with December 2010. The sale of Beltransgaz and oil re-export schemes increased the gold reserves to a relatively safe level (2 months worth of imports of goods and services). However, there were no significant structural changes. The main exports are petroleum products; Belarus’ dependence on its main market - the Russian Federation, has increased; privatization efforts have been halted, the modernization de facto looks like the distribution of funds with minimal economic impact; private business operate primarily to maximize their profits due to potential sudden change in the business conditions, including the assets’ nationalization.
Thus, the economic cycle in Belarus has looped. The period until the next devaluation will last as long as the government is able to find the required amount to keep the situation as is. The government considers sales of certain assets as a last resort option. The economic model will not change – the government is only choosing sources of funding to support the status quo.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.