Economic modernization as one of the main reasons for the negative trade balance
The foreign trade deficit in July 2013 was USD 446.5 million.
Implementation of extensive economic modernization plans has resulted in a slump in export growth performance in 2013. Modernization in Belarus entailed a sharp increase in capital equipment imports, disabling improvement in merchandise trade. In addition, negative developments in external markets will further increase the trade balance deficit.
The initial plan for export growth in Belarus in 2013 was 15.2 % as compared with 2012. In H1 2013 the forecast not only failed, but lagged behind 2012 exports by 20.7 %. In 2013 international trade was gradually deteriorating. In Q1 2013 the largest negative foreign trade balance was registered in February - minus USD 246.4 million. In Q2 the minimum value (minus USD 272.8 million) was in June and the maximum - minus USD 447.3 million – in April. July 2013 data repeated the worst result in 2013, when foreign trade balance was minus USD 446.5 million.
Compared with 2012, the lack of solvents and lubricants exports in foreign trade balance had a negative impact on foreign trade performance. Belarus lost USD 3.4 billion on lubricant exports and raw materials imports reduced by USD 2.4 billion. Compared with January-July 2012, in 2013 foreign trade balance fell by USD 4.2 billion, which implies that lubricant exports had significant, but not decisive, impact on the foreign trade performance.
The capital goods situation is also negative. In H1 2012, the trade surplus for this product group was USD 502.4 million and in 2013 trade deficit was USD 414.3 million. According to modernization plans, haulage companies have sharply increased automobile trucks imports to renew their fleet. Supplies of manufacturing equipment for the construction of dairy farms have increased, as well as power grid equipment purchases. Against the background of falling Belarus’ cargo and agricultural machinery exports to Russia, investment imports exceeded investment exports.
Economic modernization in Belarus meant to improve the competitiveness of Belarusian goods in foreign and domestic markets. However, so far, new equipment imports have not resulted in greater exports to international markets. Despite the construction of a large number of dairy farms, dairy exports have not increased – on the contrary, they have decreased compared with 2012. Over USD 1 billion was spent on modernizing cement plants, but only few were able to slightly increase their export volumes. A sharp rise in foreign currency proceeds should not be anticipated. Despite renovating power grids, electricity imports have not reduced. The competition is increasing on international markets (Russia and the EU) due to the economic slowdown, which results in Belarus losing its market shares due to the low competitiveness of Belarusian goods and services.
Thus, the foreign trade situation is deteriorating while modernization fails to bring positive results. The forecast is that the international trade situation will continue deteriorating, particularly bearing in mind problems with potash exports from Belarus.
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.