International goods trade: no chance for positive trend
On July 1st, Belstat released data on foreign trade in January-May 2013. Exports amounted to USD 16 billion (decreased by 15.6% compared with January-May 2012), imports - USD 17.42 billion (down 10.9%), foreign trade deficit - minus USD 1.4 billion.
In May, Belarus has lost one of the main exports – potash sales. Concerns about the growth in investment goods imports have been fully justified. Merchandise trade will not only be unable to shift to an upward trend by the year-end, but the situation might deteriorate even further and one of the main reasons would be African swine fever (ASF).
According to the National Statistics Committee in May foreign trade balance was negative USD 372.9 million. The negative export trend in May also showed two major exports - oil and potash fertilizers. If in Q1 2013 fertilizers were one of the two positions which showed exports growth by at least USD 100 million compared with Q1 2012, in January – May potash exports dropped compared with 2012. On June 30th, contract for potash supply to China expired. There are no chances to conclude a new one by the year-end. Brazilian market remains the only chance for Belaruskaliy to maintain foreign exchange proceeds not lower than in 2012.
Industrial modernization has resulted in a sharp increase in investment imports. Imports reduction to that of last year should not mislead. In fact, only one import position has dropped significantly - oil, which was used to produce solvents, lubricants and biodiesel in large volumes. Trucks, electrical machinery and equipment imports increased by more than USD 1 billion in January-May 2013 compared with 2012.
The foreign trade situation is deteriorating in several dimensions. One of the main potential threats is the loss of the Ukrainian market of petroleum products. Rosneft and Vetek plan to start oil supplies to Ukrainian refineries, which can result in decreased demand for Belarusian oil products. ASF virus can have serious economic consequences not only for agriculture but also for the economy as a whole. On average, pork production exports’ proceeds were USD 40 million per month. Deliveries from two regions have already stopped. If the virus spreads across the country, Belarus will have difficulties not only with meat exports and supplies, but also with implementation of quarantine measures, which will reduce the traffic intensity through Belarus.
Thus, even theoretically, it would be impossible for Belarus to achieve foreign trade in goods surplus. Given open borders with Russia, Belarus is unable to discourage consumer imports, and investment equipment import for the modernization purposes is declared a priority. Simultaneously, Belarus’ export potential is not great and is subject to risks – both due to domestic causes and due to the world economy slowdown.
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.