Privileges under the mandatory sale of foreign currency earnings abolished
The Decree No 326 of 25 July 2011 "On issues of mandatory sale of foreign currency” abolished the privileges of the obligatory sale of foreign currency earnings. 30% of the foreign currency earnings fall under compulsory sale rule.
As of 25 July Belaruskaliy, Beltransgas, Belgorkhimprom, GPTO “Belaya Rus” and enterprises-refiners of cane sugar will have to sell 30% of their foreign currency earnings. Moreover, the rule will also be applied to the Belarusian Bar Association, innovation infrastructure enterprises and residents of scientific and technological parks, except for the High Technology Park. Also, 30% of foreign currency earnings should be sold by research and development enterprises (exporters and developers of IT services). The Decree abolished benefits for the foreign currency revenues from the purchase of government securities and securities of the NBB and foreign currency earnings to be transferred to the budget from the sale of resources released by the Armed Forces of Belarus. The text of the document is currently unavailable therefore it is not clear what enterprises will still enjoy the benefits.
Abolition of benefits within the compulsory sale rule is one of the requirements set for the Belarusian authorities with regard to USD 3-billion loan from the EurAsEC. Incentives applied to exporters - JSC "Belaruskaliy", CJSC “Belarusian Potash Company” (BPC), two refineries, and the Belarusian Oil Company and others resulted in sales of only 19% of the currency coming into the country. In anticipation of the heating season this amount is clearly not enough to cover the cost of critical imports and payments for foreign currency loans. At the same time, banking experts point out that the abolition of benefits for these enterprises will lead to a slight inflow of foreign currency to the foreign exchange, i.e. about $ 100 million. Taking into account the views of the new Head of the National Bank of Belarus and the Presidential Administration, experts do not exclude that the next step of the NBoB will be to increase the level of compulsory sale of foreign currency earnings.
Therefore, using various administrative constraints and expanding the scope of circulation of foreign currency (payments for imports, leasing, tourism, etc.), the authorities will try to keep the existing rate of Br 5000 per USD for all segments of foreign currency exchange market. Therefore they nevertheless adhere to administrative rather than market rules. However, without a substantial inflow of foreign currency to the country’s GCR, it has no prospects in the medium term (2012). Moreover, since currency at the “single rate” remains inaccessible for the majority of the population and businesses the recipients of the message about stabilization and single exchange rate are unknown. Government’s intention to strengthen the administrative regulation will automatically cut off Belarus from foreign donors and will make it even more dependent on the success of privatization of strategic assets. However, future investors are aware of this and in no hurry to buy. Therefore the authorities drive the country’s economy into a dead end, increasing the costs of future reforms.
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.