State aid unlikely to resolve problems with Belarusian economy
Despite the overall economic recovery, some Belarusian industries continue to generate losses. Over the past ten years Belarus spent more than USD 2.5 billion on industrial modernisation, which boosted growth in production, but had no impact on its efficiency. High costs would prevent such industries from reporting profits by the year-end.
According to Belstat, as of August 1st, 2017, three industries reported losses. Namely, 34 woodworking enterprises of 121 with a total loss at BYN 118 million, which outpaced profits of other woodworking enterprises. Profitability of sales in the woodworking made some 0.8% and losses were attributed to due payments on modernisation loans. In addition, metallurgy and glass and cement plants were loss-making, too. Unprofitable enterprises took the lead in laying off workers across the country.
In previous years, the state invested more than EUR 1 billion in modernising the wood processing; more than USD 500 million in the key metallurgy enterprise, BMZ; some USD 1.2 billion in the cement industry, however they still require the state support. In 2016, BMZ reported over USD140 million in losses, all three cement plants were unprofitable, as well as most wood processing enterprises. That said, in 2017, exports in wood processing grew by 39%, in metallurgy by 30%, and at cement plants by 64% as compared with 2016. However, the growth in exports led to an increase in losses. High production costs are unlikely to enable these enterprises to report break-even production by the year-end, while reduced discount rate would be to no avail in repaying loans, since they were issued in foreign currency.
Overall, the growth in exports did not help metallurgy, woodworking and cement plants to report profits. The state would continue to provide state support for these industries, however it is unlikely to help overcoming losses in 2017.
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.