Yauheni Preiherman: New systems of cooperation with Russia and Ukraine might appear in Belarus

In order to compensate for the losses from the possible cutback on export to Russia Belarusan authorities might start working on new forms of trade and economic cooperation.

Last week EU Ambassadors discussed suggestions for limiting the access to funding in the EU military sphere and power industry for Russia. According to European Commission spokesman Jonathan Todd, this week the discussion will continue, and legislative proposals will follow.

“The countries-members are to adopt these proposals in accordance with the corresponding procedures”, - noted Todd.

On July 17 US extended sanctions against Russian citizens and Russian enterprises, including Gazprombank, Rosneft, Kalashnikov concern, and other major banks and energy and defense companies. New sanctions against financial and power economy sectors presuppose a ban on allocation of new loans with maturity of more than 90 days. First sanctions of US against Russia were introduced on March 17.

How painful will be these sanctions for the Russian economy? How anti-Russian sanctions will affect Belarus? Can the official Minsk benefit from the Russia-West confrontation and become a certain bridge between them?

The situation for the “EuroBelarus” Information Service analyzes Yauheni Preiherman, director of research in the “Liberal club”.

- What damage did sanctions imposed by the West already cause for Russia after the occupation of Crimea?

- First and foremost indicator is a sum of more than $70 billiard outflow from the Russian economy after the 6 months in this year. This figure is very considerable: a half-yearly outflow exceeded the yearly indicator of 2013.

 Besides, until last week sanctions were rather symbolic: after their introduction, investors felt uncomfortable; some of them withdrew money, and new investors avoid Russia. But the US sanctions that were introduced last week are more serious: the consequences may be that Russian enterprises won’t have access to loans and funding.

If the escalation of the conflict in Ukraine continues, sanctions will only build up, which will affect not only outflow of money, but also the speed of economic growth, and even recession, i.e. the negative dynamics of the GDP is possible.

- Which losses will Russian economy have because of the sanctions in the end of 2014?

- Now either the GDP will grow within 0,5 per cent or it will go to minus. Situation is suspended and depending on further steps we can forecast absolutely different scenarios.

Recently one of the European newspapers published a leaking document prepared by the European Commission in April. This document describes three levels of sanctions: minor, average, and very serious. For now there are few chances that the sanctions will reach a very serious level, but you never now – now the suggestion to hold a stress-test for the European economy on whether Europe can do without Russian oil and gas is being considered. If this scenario is implemented, Russian economy will break down, as more than 50 per cent of Russian budget is formed at the expense of these sources. According to the calculations of the European Commission, these sanctions can deprive Russia of approximately $300 billion annually, while the budget is about $400 billions. For Russia, these sanctions are a tragedy.

- On June 25 European Commission was considering a list of new restrictive measures against Russia. How big is the possibility that real sanctions are introduced and how painful will be these sanctions for Russia?

- The sanctions that are already introduced pose a very serious threat for the Russian economy, though they don’t affect its most vulnerable places. For now Europe is unwilling to worsen its relations with Russia, as this step will have consequences for Europe, too. Europe is highly dependent on Russia: a number of European countries import almost 100 per cent of energy from Russia. However, in shocking situation, such as the destruction of Malaysian Boeing-777 the relations still might aggravate.

The sanctions that were discussed can be classified as minor sanctions. Nevertheless, if the situation is escalated the EU will at least repeat the sanctions introduced by the US last week.

More than 50 per cent of the Russian budget is provided by the export of power energy, and for Russia it is the EU that is the main consumer of the power energy. Russia concluded agreements with China, but to export energy resources there, expensive infrastructure has to be built, and the volumes are not so huge so as to smoothly reorient the economy.

- Being the closest and the only Russia’s political ally, and having the economy tied closely with Russia, Belarus also feels the consequences of the Western sanctions. Which losses did our country already have?

- For now it is hard to talk about the consequences of the sanctions by referring to concrete figures; we have to wait till the end of the year. But all in all, we can say that it is not the best scenario for us, as more than 50 per cent of trade in Belarus depends on Russia. A lot of goods that we export to Russia are uncompetitive for other markets. The aggravation of financial situation leads to the decline in solvency of Russian population and our counterparties, and all that affects our capacity to sell products to Russia.

We can reflect on how the worsening of Russian economy will affect its power to allocate loans or extra-bonuses for Belarus in the frames of the Eurasian integration, but it is hard to predict. As to the sell of our products, we will face problems; but still, from the experience of Belarus, as soon as such situations appear, Belarusan authorities invent all sorts of schemes, trying to make use of the situation. And new systems of cooperation with Russia and Ukraine that would compensate for the losses from inability to sell Belarusan goods to Russia might appear now.

- Is it possible that Belarus will benefit from the Western sanctions against Russia? Can the official Minsk become a certain mediator between Russia and the EU?

- That is what I’ve been talking about – the schemes can be absolutely different.

After the Russia-Georgia war in 2008, when it was banned to export “Borjomi” mineral water and Georgian wines to Russia, it was Belarus that transported these goods. And similar scenario can be repeated now, for instance, in the sphere of defence. One more possibility is re-export of Ukrainian goods to Russia.

- Belarus considerably reduced the amount of oil products’ supply to Ukraine and reoriented it to Russia. What served as a reason for that?

- It is odd news, as Ukrainian oil products’ market is very important and interesting for Belarus. Last year Ukraine was our second trade partner. Commodity turnoverbetween the countries made 7,8 percent, and what is more important that we had trade surplus, in which export of oil products made 12 per cent. It is oil products that brought such positive balance. The possibility to sell products for Ukrainian market is one of the factors that make balancing possible.

The current situation is introducing total misbalance in worldview and attitude, including the sphere of trade and international relations. For now everything is developing very dynamically and is very unbalanced, so the situation is very confused. It is most likely that we will ­­­be in the red. The other thing is that Belarusan government is accumulating additional arguments to explain our negative balance.