On February 12th, Russia’s Deputy Prime Minister Dvorkovich visited Belarus.
Modernization plans and foreign debts payments require significant financial resources. Russia remains the only major potential creditor. Russia links loans to implementation of joint projects. Investors from other countries will be directly or indirectly limited by requirement to provide loans.
The State Programme for Belarus’ Industrial development until 2020 envisages, that the economy requires USD 10 billion annual net profit for industrial modernization. Belarus’ economy net proceeds in 2012 were USD 8.6 billion. Foreign investment is needed. In 2013 it is planned to attract USD 4.5 billion net FDI.
Economy Ministry compiled a list of 800 companies, which can be sold to domestic and foreign investors. The State Property Committee plans to make USD 5 billion from the sale of minority stakes in 103 enterprises, including Belaruskali, Naftan, GrodnoAzot.
The State budget cannot be used due to the high foreign debt payments: in 2013 the state has to pay off USD 3 billion. Russia can provide loans, but only for implementing joint projects.
On December 12th, Deputy Prime Minister of Russia Dvorkovich visited several companies in the country’s three regions. Formally, the countries are talking about joint ventures, but the example with Rosbelavto demonstrates that Russia will insist on having a controlling stake in joint ventures and will acquire shares needed control a company. It is planned to establish two joint ventures for the potash fertilizer production: one based on GrodnoAzot, and another joint venture based on Integral and Gomselmash. A signal of Belarus’ compliancy was closure of the issues regarding establishing of a joint trader Soyuzkaly – negotiations lasted for a long time.
In late February fulfillment by Belarus its commitments to the EurAsEC Anti-Crisis Fund will be considered. Privatization condition (USD 2.5 billion annually) was not fulfilled. Belarus has received a clear signal that failure to implement this condition will result in delays with the allocation of the loan’s next tranche – as it was with the 4th tranche.
An additional incentive for the government is the situation on the currency market. The fourth tranche was spent entirely to reimburse the outflow of foreign exchange reserves.
Thus, Dvorkovich’s visit has identified the “first round” companies, the management of which could be taken over by Russia through joint ventures. Belarus will still attempt to negotiate the price, but unlikely will be able to delay the privatization process indefinitely. In any case, negotiations on long-term project MAZ-KAMAZ are moving to their final stage, and the harmonization of the conditions to establish a joint venture Soyuzkali is almost complete. In the meanwhile, the deal with establishing a joint venture based on MKZT could be finalized sooner than others.
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.