Belarus and the Eurasian Economic Union: The view from Minsk

Belarus and the Eurasian Economic Union: The view from Minsk

Commentary

© Dennis Jarvis

This article is part of ECFR's Wider Europe Forum


Belarus's involvement in integration processes with Russia has one condition: that Russia pays. And the EEU is no exception.

As the Eurasian Economic Union comes into force in January 2015, ECFR has asked expert analysts from the current member states about their hopes and fears for their country’s future as part of this Union. Today we feature Belarus, and tomorrow's piece will focus in on Armenia. 

Belarus is well aware of the price of membership of the Eurasian Economic Union (EEU): it has experience with this kind of project, having participated in all the integration processes led by Russia since the fall of the Soviet Union. Since 1996, President Alyaksandr Lukashenka has been building a Union State with Russia. The Union State was supposed to introduce a single currency in 2004, but that never happened. Belarus has also formed part of other projects, such as the Customs Union and the Single Economic Space, in which member countries continued their economic wars in spite of the agreements that bound them together.

None of these projects worked out. However, Belarus remains involved in all of them on one condition: that Russia pays. The EEU is no exception.

Minsk’s hopes: Oil, finance, and exports

Minsk’s main hope for the EEU is that it will provide Belarus with a stable supply of oil and so will enable Minsk to save as much revenue as possible from sales. For this reason, the common market for oil was Belarus’s main focus during the talks on the creation of the EEU. This common oil market will only come about in 2025, but Russia has proposed a temporary compromise: after long discussions in 2014, Belarus will receive an additional $1.5 billion – a duty that it previously paid to Moscow for the export of oil. The figure represents about 2 percent of Belarus’s GDP.

However, the duties that Belarus will pay to Russia will have to be renegotiated every year. In this way, Russia will be able to keep Belarus under control. Belarus was in a strong position to negotiate in 2014 because of the war in Ukraine and Moscow’s pressing need to launch the EEU. But once Minsk’s position is weaker, Russia will be able to put pressure on Lukashenka to gain terms more favourable to Moscow. 

Membership of the EEU gives Belarus the hope that it will always be able to get a loan on preferential terms. The Belarusian economy is now close to repeating the financial crisis of 2011, when the Belarusian rouble devalued threefold. At that time, Russia provided Belarus with a stabilisation loan, which was formally given by the Eurasian Economic Community as a means to show the importance of the institution. It seems that Russia will do the same with the EEU in 2015.

Belarus also hopes that the EEU will work better than its predecessors – although these hopes seem vain. Just a month before its launch, Russia imposed an embargo on the goods of 23 Belarusian companies and Belarus and Russia reintroduced customs checks at their common border. Moscow accused Minsk of not meeting sanitary standards and of smuggling goods into Russia in defiance of Russian bans. Lukashenka called the Russian arguments groundless – and he is right, since the Kremlin has no legal grounds for sanctioning Belarus for the re-export of EU agricultural goods. Therefore, the agreement on the common market appears to mean very little. And any expansion of the market for Belarusian goods in the EEU seems unpromising. Kazakhstan only represents about 1.5 percent of turnover for the Belarusian economy and Armenia represents 0.05 percent.  

What is Belarus afraid of?

First of all, Belarus is afraid of Russia’s recession. Russia accounts for almost 50 percent of trade in Belarus, so the contraction of the Russian market will lead to losses for Belarus. Even an optimistic Belarusian budget forecasts a fall in exports of 3.6 percent and GDP growth of just 0.5 percent. Belarus has already begun the devaluation of the rouble and the economy is in decline. Moreover, Russia’s own financial difficulties mean that there is less chance of it coming to Belarus’s rescue. Lukashenka also seems reluctant to make concessions and has raised the stakes with Russia by establishing friendly relations with Ukraine.  

Belarus also fears that the Kremlin will politicise the EEU, as it tried to do in the first drafts of the EEU’s founding treaty. To try to prevent this, Belarus and Kazakhstan blocked the use of the expression “Eurasian integration” in favour of “Eurasian economic integration”, as well as refusing to allow the creation of supranational bodies with real powers. Even the very idea of the creation of a political union was taken out of the first proposed preamble of the EEU Treaty. Seeing what is going on in Ukraine, Lukashenka wants to shore up his power, not to hand it over to the Kremlin.

Belarusian civil society often expresses the concern that the EEU may affect the country’s sovereignty. This, however, seems like an exaggeration. The EEU Treaty has no provisions that could make this a reality. Anyway, Belarus can just ignore any document it does not like, because EEU member states do not have a culture of promoting the rule of law. If Belarus had fulfilled all of its agreements within the Union State with Russia, it probably would not exist now as an independent state.

Poor prospects

The EEU, as a collection of Russia’s closest allies, presents little prospect for furthering Belarusian development. Belarus will receive more money from Russia, but the market remains limited, shrinking, and uncompetitive. In the forthcoming recession, the EEU’s countries may introduce additional protective measures that will lead to new economic wars and render the EEU meaningless. 

Belarus will insist that the EEU remains an economic rather than political project and will try to profit financially from the ambitions of the Kremlin. And Russia will be more willing to pay for a political upgrade of the union, which will mean that political conflict between the parties will grow.

When Belarus signed the Declaration of the Eurasian Economic Integration in November 2011, the project looked much different. It was supposed to bring about economic benefits, to reduce the need for economic reforms, and to strengthen Lukashenka’s position in his relations with the West.

But Putin’s Eurasian ambitions brought war to Europe and economic crisis to Belarus and its two major trading partners. Now, Belarus needs another axis in its foreign policy to counter-balance Russia and to somehow fix its economy. The initial deal looked much better.

Ryhor Astapenia is an analyst at the Ostrogorski Centre and an editor of the Belarusian internet magazine Idea.  

Read more on: Wider Europe Forum,Wider Europe,Russia

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