Minsk-Kiev: love is gone, but mutual interest remains

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December 19, 2016 11:31
Фота: "Наша Ніва"

Statements by Ukrainian politicians about a possible closure of the Minsk process and potential military threats from Belarus, are not least because of the internal political process in Ukraine. Although a crisis matures in the Belarusian-Ukrainian political relations, the pragmatic bilateral interest outweighs politics.

Being at war, Ukraine is very sensitive to Belarusian moves contrary to the position of Kyiv. Belarus, due to complex relations with Russia, cannot take a clear pro-Ukrainian position. Hence, growing political distrust between the two states is only natural.

While not denying the validity of Kyiv’s claims to Minsk, the following should be marked.

Amid socio-economic crisis in Ukraine, external threat has united Ukrainian society and distracted it from domestic issues. This could explain recurrent untrue statements by Ukrainian high-level politicians about the concentration of the Russian troops on the Belarusian territory to invade Ukraine. Minsk agreements and the Minsk process were imposed on Ukraine. Both, the Ukrainian society and political elite are not satisfied with the results of Minsk talks. There is a political demand for a de facto waiver of Minsk agreements by Ukraine, hence, doubts about Belarus' equidistance from the parties to the conflict is only part of a complex mosaic.

That said, Kyiv rejected several proposals from Minsk, aimed at creating a system of trust in the security field between the two states, referring to undue close relations between Belarus and Russia. Kyiv believes there is a threat that sensitive information may leak to Moscow, i.e. there is lack of trust to Belarus.

Minsk is ready to give some guarantees to Kyiv in the security sphere within its capacities and interests. Obviously, Ukraine anticipated something more. Meanwhile, de facto bilateral cooperation in various fields is so important for both states, that neither Belarus nor Ukraine is ready to give up the benefits it brings. In this situation, Kyiv is unlikely to take any action, which could damage the existing cooperation between Belarus and Ukraine. Meanwhile, Ukrainian politicians are likely to tighten their rhetoric vis-a-vis Belarus. Albeit the trust between the leaders of the two countries fell sharply, pragmatic interests would guarantee conflict-free Belarusian-Ukrainian relations.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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