Economic cooperation schemes between Russia and Belarus will be changed
On September 11th, Rosneft President Igor Sechin visited Belarus.
Rosneft is increasing its presence in Belarus, and is an example of how future cooperation within the Customs Union will develop. Belarus anticipates that Russia will reduce the size of energy benefits and the number of persons supervising economic projects with Belarus. In these circumstances, it is unlikely that Belarus will manage to delay the privatization of its assets any further.
When the TNK-BP acquisition deal was closed, Rosneft Oil Company inherited the company’s assets in Belarus. Under Belarus’ law, only a legal person registered in Belarus can carry out tolling refining in the country. It was not Rosneft that was registered in Belarus, but TNK –BP. TNK- BP West was renamed to RN –West and since June 18th, 2013 Rosneft has had the opportunity to work in Belarus. Another asset was the stake in the Mozyr Refinery. Slavneft owns a 42.58% stake in the Mozyr Refinery. 99% of Slavneft shares are divided on par between Gazprom Neft and Rosneft, and the latter has the TNK-BP package. Since Rosneft entered the Belarusian market, it came second after Belaruskali among the largest tax-payers in Minsk Oblast (in January – August 2013).
Sechin’s visit should be treated as Russia strengthening the centralization of economic contacts with Belarus. The monopolization of oil supply is hardly feasible, since other large and influential Russian oil companies also have the interest to supply oil to Belarus. However Rosneft wants to concentrate oil refinery in its hands. It also envisages increasing its presence in Ukraine, which is why it wants to increase its shares in the Mozyr Refinery. The increase in the Rosneft’s shares in oil refinery in Belarus may be an option for Russia to reduce its budgetary losses from cooperation within the Customs Union. Russia assessed such losses at USD 6.7- 6.8 billion over three years. Russia will also reduce its assistance in terms of gas price reductions. The price for gas in 2014 is anticipated at USD 175- 180 per 1,000 m3, which is USD 12 higher than the average price in H1 2013. Potentially, Sechin will supervise the stalled integration projects.
Reduced aid from Russia will push Belarus towards privatizing its assets. Belarus’ preliminary calculations show that Belarus will have to sell state property in 2014 worth at least USD 4 billion. Uralkali’s CEO Baumgertner’s arrest chastened potential investors in Belarus, therefore Russian businesses will have, de facto, a monopoly on acquiring assets in Belarus and Sechin will lead the negotiations. Delayed privatization, in the absence of guaranteed external funding, will result in a rapid reduction of gold reserves - to critical levels - and a repeat of the 2011 crisis.
Thus, Russo-Belarusian negotiations over economic issues will become harsher. The reduced number of negotiators will narrow room for manoeuvre, and in 2014, Belarus will be forced to sell one of its major assets to avoid a rerun of the 2011 crisis.
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.