Has Belarus’s Support for Russia’s War Gone Unrewarded?



While the growing trade between Minsk and Moscow has alleviated the former’s current economic difficulties, Belarus is becoming more dependent on its eastern neighbor in the long term and ceding its economic sovereignty.


When Belarus came out in support of Russia’s war against Ukraine, some anticipated that Moscow would generously reward it for its backing and compensate any losses from sanctions. Others expected that Russian subsidies would dry up now that Minsk was without alternatives. In the event, things were somewhat more complicated.

For several decades, Belarusian leader Alexander Lukashenko had mastered the art of sitting on the fence, flirting with a multi-vector foreign policy and threatening to move closer to the West in order to force Russia to lower oil and gas prices and do away with oil export duties for Belarus.

All that changed in 2020, when a brutal crackdown on protests against fraud in the presidential election ensured that without major concessions from his regime, there would be no more dialogue with the West. In response, Lukashenko came up with ever more sophisticated ways of extracting help from Russia, such as offering to buy Russian arms or proposing to build a marine terminal in Murmansk, invariably on credit from Moscow.

Despite Belarus’s newfound isolation, Russia did not cut assistance to its neighbor completely. Between August 2020 and February 2022, it pledged $1.5 billion in loans to Belarus, agreed on low gas prices, and deferred debt payments, providing yet another lifeline to the embattled and already indebted Lukashenko.

This paid off, with Lukashenko becoming Russian President Vladimir Putin’s only counterpart in the post-Soviet space to support the war against Ukraine. The cost for Belarus was tougher sanctions, affecting about 70 percent of its exports to the EU, or almost 17 percent of its total exports. Later, Belarus’s exports suffered another blow when Lithuania blocked the shipment of Belarusian potash through its ports.

Since the invasion, Lukashenko has hinted repeatedly that Belarus deserves to be compensated for the losses it has incurred by hosting Russian troops. Yet his comments on the issue betray an outdated view of how Russia financially assists its friends: a pragmatic approach that bears little resemblance to that of the Soviet Union, for which warm relations were often reason enough to grant requests for loans. 

Russia’s share of Belarus’s trade increased from 49 percent in 2021 to 58 percent in mid-2022 and exceeded 60 percent in the fall. However, that had more to do with the contraction of Belarus’s trade with the West and the complete closure of the Ukrainian market to Minsk.

If officials are to be believed, in 2022, Belarusian exports to Russia grew by 40 percent. It’s hard to say whether that resulted from higher trade volumes or just high prices, but analysts at the Eurasian Development Bank suspect the latter, pointing to the devaluation of the Belarusian ruble relative to its Russian counterpart and allowing for the possibility that trade volumes actually shrank. For instance, over a seven-month period in 2022, the volume of Russian orders from the Minsk Automobile Plant fell by 31 percent.

Historically, meat and dairy have accounted for a large share of Russia’s imports from Belarus. In the first half of 2022, prices rose, potentially contributing to export earnings. So, too, might have deliveries of Belarusian oil products (hitherto sold to the EU and Ukraine), and goods to be consumed by the Russian army. None of this speaks to a new generosity from Moscow toward Minsk, as opposed to market conditions.

The consequences of Belarus’s support for the war are not limited to trade, nor for that matter are they all adverse. It has succeeded in deferring debt payments totaling $1.4 billion from April 2023 to 2028–2033. Belarusian banks have been designated as guarantors for the purposes of government procurement in Russia, significantly easing access to the country’s public tenders for Belarusian companies.


In addition, Minsk has opened new opportunities for infrastructure development, albeit in Russia. There was much talk about opening Belarusian terminals at Russian ports through 2022, though no documents have been published yet, and the fact remains that while Russia has allowed Belarus to use its ports for the shipment of oil products, the interests of Russian exporters will always take precedence.

As for energy supplies, Minsk is now buying oil at below-market prices that are most likely comparable to those offered to China and India. It also continues to pay prewar prices for gas. Although Belarus switched to paying for gas in Russian rubles in 2022, having earlier paid in U.S. dollars, whether that has been to its advantage is debatable, given the relative weakening of the Belarusian ruble last year.

A key issue in Minsk and Moscow’s economic talks and their joint response to sanctions has been import substitution. Russia has extended nearly $1.7 billion in credit to Belarus in relation to twelve import substitution projects alone, though it was initially expected that this would take the form of grants. Ultimately, that amount is a small fraction of what Belarus has lost as a result of sanctions: $16–18 billion, as estimated by Prime Minister Roman Golovchenko.

Russia, then, has by no means cut Belarus off since the invasion. But nor has it been overwhelmingly generous in its assistance, giving only enough to avoid its neighbor’s destabilization.

Besides, Belarus has to pay for the aid by deepening integration with Russia across a range of areas. Most notably, last October, the two countries signed an agreement on the joint principles of indirect taxation, which was welcomed by Belarusian oil refineries, as they stand to benefit from a reverse excise tax on oil. This will bring a short-term boon for the industry, though not a solution to the more global problems it faces. For the Belarusian refineries, even increased exports to Russia, oversaturated with domestic production, are no substitute for the loss of access to European markets.

The agreement on tax integration will also gradually force Belarus to adopt Russian indirect tax rates and give Moscow virtually full access to the information of Belarusian corporates through the transparent system of VAT payment. Both consequences constitute an obvious threat to the economic sovereignty of Belarus in the long term.

Indeed, Minsk has little chance of keeping a multi-vector foreign policy viable for itself, except in relation to China, with which it may come to trade more. In 2022, Belarusian exports to China grew by 80 percent to $1.6 billion, a sum that nonetheless pales in comparison to Minsk’s trade with Moscow. Belarus and China may have publicly committed to “an all-weather and all-round strategic partnership,” but that did not stop from China reducing the size of its investments in Belarus.

Whatever the long-term consequences, Belarus is clearly looking to Russia to address its growing problems. While greater cooperation with Moscow may help Minsk alleviate its current economic difficulties, it will also deepen the latter’s dependence on a large yet stagnant economy whose risks it will increasingly also bear.



Source link


What do you think?

Written by


Leave a Reply

Your email address will not be published. Required fields are marked *


The 75 Best Deals We Found at Amazon for St. Patrick’s Day

Celebrate Women’s History Month with the Women’s Coalition