Putin and Lukashenko: there will be no emergency aid
At the meeting in Sochi on September 15th Putin and Lukashenko discussed Belarusian-Russian relations. In the short term no decisive breakthroughs, destructive conflicts, or ‘first aid’ financial assistance from Russia should be anticipated.
Belarusian media reported that the meeting in Sochi was initiated by Russia, but on September 11th, President Lukashenko phoned Putin to congratulate him on the success of the APEC Summit (Asia-Pacific Economic Cooperation), where the Russian President represented interests of Belarus and Kazakhstan as part of the Customs Union.
In Russo-Belarusian relations, the most important issues for Russia include: the introduction of utilization duty on motor cars by Belarus simultaneously with Russia, and in general – synchronization of trade policies and Belarus’ political support of Russian integration initiatives. For Belarus, the most important issues are to obtain the next tranche from the EurAsEC Anti-Crisis Fund, compensation measures for Russia’s WTO accession, new loans and / or sale of state enterprises.
On the Russian issues, “common issues” were discussed in a spirit of constructive and peaceful cooperation, but no concrete decisions were taken. On the issue of introduction of utilization duty on motor cars by Belarus, Belarus received the opportunity to sell its consent to such a measure, and to delay introducing the duty until a convenient date. Russia would like Belarus to introduce this duty at minimum for agricultural vehicles, as this would simplify the movement of imported motor vehicles within the Customs Union borders, reducing Russia’s control costs. Basically, Russia could motivate Belarus to take this step, if Russia in exchange could ensure lower costs for Belarusian agricultural producers after the utilization duty has been introduced by Russia.
Regarding Belarusian issues, there was no chance that the parties could find easy solutions. The only exception was a virtual guarantee that Belarus will receive the fourth tranche from the EurAsEC ACF with the only disagreement about the allocation terms. Russia is not set up to pay compensation to Belarus because of its WTO accession. Putin was hardly impressed by problems voiced by Lukashenko concerning migration control at the Customs Union border. It would be premature for Russia to consider new loans for Belarus: such option exists but not in 2012.
In order to close the funding gap, Belarus would either have to sell a large enterprise or focus on negotiations with the IMF. Since it is unlikely that Belarus will reach an agreement with the IMF in 2012, Belarus will have to find a buyer for some of the largest state-owned assets by the end of the year.
The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN 1,000, which would lead to an increase in the average wage in the economy as a whole to BYN 1 500. The pace of wage growth in 2017 is insufficient to ensure payroll at BYN 1000 by late 2017 without manipulating statistical indicators. In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, enterprises – to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets. In 2010, the artificial increase in wages led to a threefold devaluation in 2011, an increase in the average salary to BYN 1500 will not match the capabilities of the economy and would lead to yet another devaluation.