Policy Brief: Belarus-Russia relations after the Vilnius Summit

 

The latest spat between Belarus and Russia arose from a bout of assertive behaviour on the part of Belarusian President Alexander Lukashenka. For those who assume Lukashenka long ago lost his freedom of action vis-a-vis Moscow, this was unexpected. Yet it is easy to explain: Lukashenka perceived an opportunity to increase economic subsidies, by exploiting his status as Russia’s most valuable ally; subsidies he needed to secure re-election in 2015. Given Russia’s strong and publicly declared interest to proceed rapidly toward the creation of the Eurasian Economic Union, Lukashenka’s gambit was likely to succeed – and it did. Russia has now agreed to give Belarus a new loan of 2 billion dollars.

 

 

The immediate cause of the current stand-off in Russian-Belarusian relations is the so-called Baumgertner case, named after Vladislav Baumgertner, a top manager at the Russian potash company Uralkali, who was arrested in Minsk in August. Uralkali and the Belarusian company Belaruskali had a cartel agreement, but this year their cooperation unravelled, to the severe detriment of Belarus. Minsk interpreted the collapse of the cartel as a plot by Russian economic actors.

 

Baumgertner had been invited to Belarus for negotiations with Belarusian Prime Minister Mikhail Myasnikovich. The meeting yielded no tangible results except that Baumgertner himself was detained and placed in a detention cell; and then placed under house arrest. Embezzlement charges were next brought against him. Meanwhile, an international warrant was issued to arrest one of the co-owners of Uralkali, Suleiman Kerimov, one of Russia’s richest businessmen and a Federation Council member for Dagestan.

 

Four other citizens of Russia were implicated in the case; reportedly, the Belarusian secret services tried to abduct one of them in Moscow in October. As a precondition of Baumgertner’s release and transfer to Russia, Lukashenka publicly demanded full compensation of the damages Belarus had allegedly incurred. Baumgertner was extradited back to Russia at the end of November, but only after a criminal investigation was instigated against him back home and, upon his return, Baumgertner found himself again behind bars. Meanwhile, Kerimov’s assets in Uralkali were sold to new owners who were evidently more to Lukashenka’s liking.

 

How was Lukashenka able to issue such an open challenge to Moscow and, indirectly, to the Russian business community? He scored public relations points on the domestic front as an anti-oligarchic campaigner—he took a Russian citizen hostage, demanded ransom, and played a ‘cat-and-mouse’ game that went unpunished. He was also able to paint Moscow’s inaction as a sign of Russia’s weakness when dealing with Belarus, rather than a sign of strength.

 

 

In the meantime, Lukashenka has stepped up criticism of Russia’s most important contemporary foreign policy project, the Eurasian Customs Union (CU). In October, Belarusian Deputy Prime Minister Vladimir Semashko blamed CU regulations for losses to the country’s auto and agriculture machine-building industries. In particular, he criticised the introduction of a new recycling fee on all cars (it was previously levied only on cars imported from outside the CU). This was estimated to cost Belarusian companies $350 million a year. Lukashenka himself has spoken out against Russian duties on crude oil imports, which are refined for export (only crude oil refined for domestic consumption is exported from Russia to Belarus duty-free). For this the price tag is far higher ($4 billion). Lukashenka’s political message is unambiguous: if Russia wants the CU to grow into a meaningful economic union, money has to stay inside Belarus.

 

Furthermore, Minsk has not sided with Russia in its conflict with Ukraine. In line with a foreign policy tradition that included good relations with Mikheil Saakashvili’s Georgia (2004 – 2013) and non-recognition of the independence of South Ossetia and Abkhazia, Minsk has demonstrated an adroit understanding of Ukraine’s desire to turn toward Europe. Lukashenka paid a productive visit to Kyiv in June 2013, and warmly received Ukraine’s Prime Minister Mykola Azarov in Minsk in October. Significantly, Belarus did not join the ban that Russian authorities imposed on the import of Ukrainian chocolates in August. In this case, Minsk’s motivations are classic Machiavellian – if Ukraine were to join the Russia-led Eurasian integration project, Belarus would then have to compete with Ukraine for Russia’s benevolence, and would thereby lose in importance.

 

 

This was not the first time Lukashenka had employed the tactic of creating a problem in relations with Russia that could only be solved by granting Belarus additional economic benefits. His motivation this time was clear: from January to September 2013, Belarus’ GDP grew only 1.1% rather than the ‘planned’ 8.5%, and its trade deficit increased substantially. The country’s economic situation was troubling: without massive Russian subsidies Lukashenka’s political support was likely to suffer, complicating prospects for his re-election in 2015.

 

But the real question is not why Minsk wants more from Russia, but why Lukashenka believes Moscow would be receptive to his demands at this time. One reason for Minsk’s confidence is clear: after it became apparent that Ukraine would not join the CU—regardless of whether it signs an Association Agreement with the EU—Belarus found itself in a key position with respect to the fate of the Eurasian integration project. For Moscow, it has become imperative to make sure Belarus stays on board. Minsk and Astana both have numerous complaints about (and demands on) Moscow’s Eurasian project; it was obviously easier for Moscow to pay off Minsk alone than to face any type of united resistance.

 

 

A similar dynamic holds in the matter of CU enlargement. For now, the prospects for enlargement are uncertain. Armenia’s accession to the CU is much less important for Moscow than simply securing its rejection of an Association Agreement with the EU. It is also doubtful that Tajikistan and Kyrgyzstan, both potential CU members, would be able to guarantee the implementation of any commitments they might make, but if either of them were to become a serious candidate, Moscow could expect a ‘bill’ from Minsk. This is particularly true in the case of Kyrgyzstan, given the open diplomatic conflict between Minsk and Bishkek that resulted from the former’s granting of political asylum and citizenship to overthrown Kyrgyz president Kurmanbek Bakiev. The leaders of the two countries have gone so far as to boycott meetings in their respective capitals: Lukashenka did not attend the CSTO summit in Bishkek in May 2013, and Kyrgyzstan’s President Almazbek Atambaev ‘reciprocated’ by not coming to Minsk for a top CIS gathering in October.

 

Belarus’ role as a Russian military ally is increasing in importance. A Russian air base will be established in Belarus in the near future. Three C-300 air defence complexes have already been deployed in the country and four more are on their way. A large-scale joint exercise (‘Zapad-2013’) was conducted in September and there are plans to hold another (‘Union Shield–2015’). Traditionally, the Belarusian leader has been very skilful at playing on Moscow’s geopolitical phobias and in appealing to the Russian defence establishment. It is likely that Minsk will again be able to turn Russia’s growing military-political dependence on Belarus into benefits for the Lukashenka regime.

 

Furthermore, Minsk is well aware of the infighting among Russia’s ruling elites, including their divided feelings toward Belarus, which makes it impossible for Moscow to have a coherent Belarusian policy. There have always been quarrels between ‘financial pragmatists’ and ‘geo-politicians,’ as well as conflicting economic interests. The novelty of the moment is the interest of Rosneft president Igor Sechin, one of Putin’s closest collaborators and one of Russia’s most influential figures, to concentrate into a single company (Rosneft) all exports of Russian crude oil to Belarus. These flows are currently spread between eight companies. This gives Lukashenka an opportunity for lobbying and making deals (like trading exclusive privatisation rights in a Belarusian refinery, for increased and guaranteed deliveries) with one Russian leading political actor who would then protect his interests in Moscow, if necessary, against the position of the Russian government as a whole. Revealingly, when the Russian cabinet indicated that it was going to cut deliveries of oil to Belarus in connection with the Baumgertner affair, Sechin expressed displeasure with this, and even paid a visit to Minsk.

 

Moscow’s ability to challenge Lukashenka’s position within Belarus is very low, as is the credibility of any threat to ‘find a replacement.’ A defamation campaign that ran in Russia in 2010 did not affect the Belarusian president’s ratings. Moscow’s decision not to protest against political repression, which has included as its victims individuals who advocate retaining close ties with Russia, has undermined Moscow’s chances to create a powerful pro-Russian opposition grouping. 

 

Minsk, moreover, currently requires less political protection from the West. EU policy toward Belarus has proved inefficient and uncoordinated. Targeted sanctions and demands to free political prisoners have gone hand-in-hand with economic co-operation, active diplomatic contacts, and, most importantly, the treating of Minsk as a partner in the context of the Eastern Partnership. This policy culminated in suspending the visa ban against Belarusian Minister of Foreign Affairs Vladimir Makey, formerly the head of Lukashenka’s presidential administration, who shares political responsibility for repressions; and a search for a formula that would enable Belarus to participate in the Eastern Partnership summit in Vilnius at a high political level. Of course, even if EU economic sanctions were a reality, their impact on Russian-Belarusian relations would be unclear. The need to ask greater support from Russia might make Minsk less self-confident, but the perceived legitimacy of the claim of ‘a friend in need’ might also help raise subsidies even higher. Given the reality, however, Minsk is able to simply ignore any EU rhetoric about sanctions.

 

 

At present, the range of scenarios for the evolution of Russian-Belarusian relations in the short- to mid-term is quite narrow. Notwithstanding Lukashenka’s posturing, in general, Moscow ought to be satisfied with current developments. The possibility that Minsk might conduct a more balanced foreign policy has been eliminated; and even hypothetical pre-conditions for this are emerging very slowly, if at all. Although some actions by Lukashenka may be disturbing for the Kremlin, enthroning a more obedient figure in Minsk is impossible, and anyhow would be risky since a substitute would not necessarily be able to run the machinery built by and for the incumbent. If the current state of geopolitical affairs, Lukashenka’s loyalty, and the promotion of integration projects has a price, then it is one that must be paid.

 

The most likely scenario, therefore, was – and will continue to be – one of ‘status quo plus,’ which necessarily involves a bailing out of Lukashenka. In monetary terms, his needs are not exorbitant. Taking into account that in 2012 Russian oil and gas subsidies alone made up almost 16 percent of Belarusian GDP, a modest increase of one or two percentage points would hardly affect the Russian economy, provided oil prices stay high. In addition, some money could return to Russia if, as part of a package deal, Russian companies receive assets in Belarus, and some non-tariff export barriers are lifted. Thus, it was not surprising perhaps that at the October 2013 CIS summit in Minsk, Putin confirmed that Russia would be ready to abolish all oil export duties for Belarus beginning January 2015.

 

A less likely scenario is a ‘plateau scenario,’ which depends less on an active Kremlin and more on factors beyond its control such as the economic slowdown in Russia becoming protracted. If this were to happen, the project of creating the Eurasian Economic Union might have to be postponed. This, in turn, would cancel the urgency of buying Minsk’s consent. However, the level of Russian subsidies would still need to be high, otherwise Minsk could re-activate its search for other external sponsors, in the West or even in China, which might see Belarus as an attractive entry point into CU markets. Popular support for integration with Russia, already in decline, could then plunge abruptly.

 

Overall, it seems that a revision by Moscow of the current political paradigm is unlikely. Anything more would require a much broader overhaul of Russian foreign policy priorities, something absolutely not on the horizon. Lukashenka has long positioned Belarus as Russia’s last remaining geopolitical client state on its Western front; and that is where he intends to stay. For Moscow, the only question is ‘how much?’ 

 

The article was originally published at PONARS Eurasia