Official Minsk does not wish to side with Kremlin over Ukrainian conflict
The President of Russia, Vladimir Putin discussed the aggravation of the socio-political situation in Ukraine in his telephone conversations with President of Belarus, Alexander Lukashenko, and President of Kazakhstan, Nursultan Nazarbayev.
President Lukashenko as well as the President of Kazakhstan Nazarbayev have so far not given in to pressure from the Kremlin as regards support for Russia’s aggression in Crimea. The Belarusian authorities are trying to keep public opinion in Belarus informed in on the situation in Ukraine without compromising its territorial integrity. Official Minsk has undertaken several measures to strengthen national security.
The Kremlin, caught in international isolation due to the conflict in Ukraine, has stepped up pressure on its strategic allies in an attempt to win their support. First, on the initiative of President Putin, telephone conversations with the presidents of Belarus and Kazakhstan were held, their main topic was ‘the critical development of the situation in Ukraine’. Then, the head of Russia used the opportunity to personally convince the heads of the Belarusian and Kazakh states of the need for his actions with regard to Ukraine during the meeting of the Supreme Eurasian Economic Council. It is noteworthy that the meeting of the heads of states had been moved to an earlier date and was conducted in the midst of the escalating tensions in Russian-Ukrainian relations.
However, neither the president of Belarus nor Kazakhstan have offered their support for the Kremlin’s actions in Ukraine. Besides, President Lukashenko is trying to avoid making official statements on the crisis in Russian-Ukrainian relations. At that, the Belarusian Foreign Ministry continues to insist in its statements on the importance of preserving Ukraine as a ‘stable, territorially integral, independent state’.
Moreover, the Belarusian authorities are carefully trying to inform public opinion while downgrading the divide among the citizens on how they perceive Ukrainian events. The Belarusian state media coverage of what is happening in Ukraine is relatively balanced and differs significantly from the Russian propaganda. For example, the Deputy Foreign Minister of Belarus,Mikhnevich outlined one of the key aspects of the official position on Ukraine during his meeting with students in Gomel: ‘there is a call not to apply external pressure... let the Ukrainian people sort it out themselves’. It is worth noting that the meeting of the Belarusian Ministry of Foreign Affairs representative with young people was organised in the south-eastern region, on the of Belarus-Russia-Ukraine border with traditionally strong pro-Russian sentiments.
One can observe consolidation of the standpoints of the Belarusian authorities and the opposition with respect to actions of the Russian leadership in Crimea. Most opposition parties and movements assess Russia’s aggression against Ukraine in extremely negative terms. At the same time, as usual, the Belarusian authorities are nervously reacting to any manifestation of solidarity of opposition activists with the Ukrainian people.
Official Minsk reacted to the escalating crisis in Crimea also by bolstering measures to ensure national security by making additional amendments to the draft law ‘On defence emergency’. It is noteworthy that he authors of the document consider possible threats on the part of the US and EU as well as Russia, i.e. their strategic ally. The member of the National Security Committee of the Belarusian parliament, Valevach, commented on the relationship between the draft law and events in Ukraine: ‘As soon as the conflict started, geopolitical interests in Russia, the US, the European Union immediately appeared. The state should always be ready to repel the external threats’.
Thus, President Lukashenko will not yield to the Kremlin’s pressure and will refrain from supporting the Russian aggression against Ukraine. Official Minsk will seek to limit the Russian presence in the country in all areas. Regardless of further developments in Crimea, the Belarusian leadership will strengthen measures to ensure national security.
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.