Looking for USD 2 billion for modernization
On March 15th, 2013, Russian Finance Minister confirmed the Belarus’ request for a USD 2 billion loan.
Belarus’s economy balanced development is impossible without external support. Modernization is considered a way out of a devaluation loop. Belarus plans to gain funds via new concessional loans and ad hoc assets’ sales.
On March 15th, 2012 balance of payments data was published. In Q4 international trade in goods and services was negative. In Q4 2012 the current account deficit was USD 1.775 billion. Russia’s support - reduced natural gas supply prices somewhat improved the situation, but in order to maintain the current consumption level, Belarus needs international loans in pecuniary or commodity form.
Production modernization could help to solve the problem. Additional investment imports for the modernization in 2013 are estimated at USD 1.6 billion. The National Bank is skeptical about the feasibility for a new IMF loan, which could provide the necessary funds at a preferential interest rate (IMF loans interest rates range around 4% pa).
Bearing this in mind, Belarus requested a new loan from Russia. It is assumed that by the end of the modernization Belarus will reduce the imports volumes in woodworking, engineering, petrochemical industries and will improve export opportunities, which will result in improved international trade balance and will generate the foreign exchange inflow sufficient to service the public debt. Russia’s international reserves as of March 1st, 2013 were USD 526 billion and USD 2 billion is insignificant amount. However, if Russia decided to open a new credit line for Belarus, it would furnish it with additional terms related to privatization. Some Belarusian assets, put up for privatization, oil refinery in particular, have a limited number of buyers. The sale of other assets is complicated by excessive demands by Belarus, both in financial terms and in terms of guaranteeing certain social benefits to enterprises’ employees.
Thus, Belarus resumed to searching for international loans to sustain current operations. Deeper involvement in the integration processes, both in financial and economic terms, has narrowed the number of potential donors to a single country, which weakened Belarus’ negotiating position and forced to start negotiations about the sales terms for some enterprises. Belarusian authorities do not have any trump cards left for the forthcoming negotiations, other than continued membership in the Customs Union.
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.