Talks about Russian air base deployment in Belarus continue

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April 22, 2016 18:32

On June 5th, during the Council of CIS Defense Ministers meeting in Minsk, Russian Defense Minister Sergei Shoigu reiterated that Russia was planning to establish a military commander in Belarus in 2013 and deploy a joint air base in the future.

Belarus has not yet officially confirmed the deployment of Russian air base in Belarus, implying that negotiations are still ongoing. High political risks force Belarusian military officers to refrain from comments on the matter.

Over the past month and a half Minister Shoigu has twice declared that Russia was planning to deploy its Aviation Regiment in Belarus. However, his statements should be treated with a degree of skepticism since there was no clear official confirmation of this information by Belarus until now.

Belarusian media quoted Shoigu in terms of Russia’s plans to deploy a Russian air base in Belarus (this time they referred to ‘a joint Belarusian-Russian airbase’). It is also know that Chief Russian Air Force arrived in Belarus to look for a suitable airfield for the airbase.

So far, the information about the airbase is only coming from Russia, which implies that Belarus treats the issue rather as a plan, not a final agreement and wants to use it as a stake in the ongoing negotiations ‘clarifying’ these arrangements (in April 2013 President Lukashenko said that the agreement was mainly about Russian fighter jets supply to equip the Belarusian army, and that the Air base deployment was only a plan).

Potentially, the political uncertainty keeps Belarusian military officials from comments on the issue: neither of them wants to risk taking responsibility. In addition, during the past two years Belarus’ Air Force and Air Defense command was subjected to harsh personnel purges (especially after the ‘teddy bear’ drop in July 2012), which also affected their attitudes.

On June 3rd, just before the Minsk Summit, Belarus’ Deputy Chief of Staff for Research Oleg Krivonos made a sleek statement that in the future Belarus was planning to host the ‘modern combat aircraft means and air defense systems in response to the defense missile deployment in Europe’. However, the plan’s details - what kind of missiles, deployment terms, timing and place - were not disclosed.

Thus, the Russian Ministry of Defense statements should be treated as “dissenting opinion”, residing on certain bilateral agreements however the final decision is yet to be made on the political level and will depend on the success of Russo-Belarusian negotiations on economic cooperation between Putin and Lukashenko.

The cornerstones of these negotiations are privatization in Belarus and oil supply in Q3 and Q4 2013. In addition, Belarus is interested in obtaining modern Russian weapons on favorable terms, which was mentioned by President Lukashenko on June 5th.

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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.