The economic consequences for Belarus from the EU-imposed sanctions
Measures presented by Europe seem both sufficient and substantial. The Belarusian elites correctly understood all the European messages, from this comes the desire to hush up the conflict and withdraw from the EU-Belarusian pique. However, because the factor of one man is extremely high in Belarusian politics - the situation remains in limbo.
On March 23, the European Union introduced new sanctions against Belarusian individuals and companies that have both an economic nature as well as economic consequences for the country. The owner of the group of companies \"Triple\" Yuri Chizh and General Representative of the companies’ group \"Univest\" in the CIS and the sponsor of the Presidential Sports Club Anatoly Ternavsky have joined the businessman Vladimir Peftiev on the black list (Peftiev has been on the list since last year). In addition, 27 of their companies have entered the black list. Without examining the criteria according to which these companies have been selected, we note only that some of the companies, operating exclusively in the domestic market of Belarus appeared on the black list, while others, which have close ties with several European companies (from Latvia and Slovenia) did not.
Getting onto the black list of companies related to the oil business, is of greatest interest, as the export of petroleum products into the EU via the Baltic ports is extremely profitable for both companies and for the budget. The EU has placed one of the largest oil traders in the Belarusian market on the blacklist - \"Eunice Oil\" (Ternavsky), and JV \"NefteHimTreyding\" (Chizh), which is engaged in refining of oil on commission, as well as in the import and export of petroleum products, including into the EU.
The European market is one of the major markets for Belarusian oil products, and supplies are growing, shown in January this year. According to customs statistics, exports of petroleum products, for example, in Latvia increased in monetary terms by $ 105 million in comparison with January of last year, in Lithuania – by almost $ 25 million, Poland – by 17 million dollars. Customers in the EU are also interested in Belarusian oil products. Lithuania and Latvia have already expressed their concern over the possible loss of Belarusian deliveries.
However, we are not yet talking about banning all exports of oil products from Belarus. Namely, in this case, sanctions would be extremely painful. We are only talking about sanctions against individual businessmen and their companies. And in this case, the negative effects are minimal.
At present it is not possible to mathematically estimate the economic impact of the sanctions; however there is no doubt that damage will be done. The fact that the Belarusian side has refrained from imposing retaliatory sanctions, and in the first place, from the most conflict-ridden scenario suggests that the experts of Lukashenko have shown their ability to think strategically and perform an analysis of not only short-term losses.
Of course, some of the losses will be neutralized by new supply schemes and new companies. However, the discovery of new business schemes is a rather costly business. Also, we should not forget about the image (psychological) costs. Thus, all costs can be categorized as short-term and long-term, as well as direct and indirect.
1) transaction costs - the search for new partners to open new roundabout schemes, the threat or the transition of the oil business under the Russian protectorate.
2) image-making costs, the split in the elites and the need to make a choice (I am with Lukashenko or not) - an indirect incentive for the migration of the most senior managers and businessmen to Russia. Although it is not possible to calculate economically the painfulness of this measure, in our opinion, this is quite a sensitive measure, because on the one hand, high-ranking businessmen and officials do not want to make such a choice. On the other hand, Russia acts as a kind of vacuum cleaner for the Belarusian labor market - and the loss of highly skilled professionals, executives, etc. reduces the stability and adequacy of the Belarusian model.
3) an increase in dependence on Russian capital and its banking system – it will be increasingly difficult for Belarus to attract investment and credit resources in new conditions. At the same time, these resources are extremely important - both for the return and maintenance of old debts and modernization of the economy. For example, the government is considering an ambitious program to modernize oil refineries, electricity, etc., however the country does not have funds for this. Accordingly, there is a great need for investment or low-cost loans, but European banks and companies will have even less motivation to work in Belarus in the new environment, while the Russian side is not so interested in lending to enterprises, as acquiring assets. At the same time, Belarus is not yet ready to give all the assets of the country to Russia (or Russia is not willing to pay the price offered by Lukashenko).
4) the likelihood of a new IMF credit has been further reduced. Under the conditions of tough confrontation both with Europe and with the EU, the probability of a positive outcome of negotiations on a new loan stand-by program has been reduced to almost zero. At the same time, Belarus already needs the loan for 2013.
Thus, despite the seemingly minimal damage to the country and its oligarchs, in fact, measures presented by Europe seem both sufficient and substantial. The Belarusian elite correctly understood all the European messages. From this comes the desire to hush up the conflict and withdraw from the EU-Belarusian pique. However, because the factor of one man is extremely high in Belarusian politics - the situation remains in limbo.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.