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It’s been several months since Belarus disappeared from the front pages of the Russian media, mainly because the rhetoric in relations has—for now—become less emotional. The problems of implementing integration projects between the two countries have not gone away, however, and remain the main source of contention.
In May, the former Russian ambassador to Minsk—the abrasive former security services operative Mikhail Babich—was replaced by Dmitry Mezentsev, who, with his highly courteous public attitude toward Belarus, could not be more different from his predecessor.
Mezentsev makes a point of steering clear of sources of conflict, and constantly refers to the special friendship between Belarus and Russia that will supposedly resolve any differences.
Unlike Babich, Mezentsev has not been given the status of a presidential special envoy, indicating that Moscow has decided to return its diplomatic mission to its previous role, in which the ambassador facilitates dialogue between the two capitals rather than trying to bring discipline to bilateral relations himself.
Babich has been transferred to the Economic Development Ministry as deputy minister for former Soviet states under the ministry’s head, Maxim Oreshkin. This news was not greeted with much joy in Belarus: the technocrat-economists in the Russian government have always been Minsk’s biggest headache, because they are frequently not prepared to fund the costs of Slavic fraternity.
Now their ranks have been swelled by a former security services official who is aggrieved by the Belarusian authorities because he was recalled early from a post that he had launched himself into with obvious enthusiasm.
In June it emerged that Russia was not only bundling compensation for its new energy tax system, which is costing Belarus billions of dollars in lost revenues on oil re-exports, in with integration, but also including the issuing of loans that had been agreed upon long ago. As a result, Minsk was forced to ramp up domestic borrowing to pay off foreign debt, and to ask China for a loan.
Then, when the Belarusian energy minister was asked during ongoing gas talks whether Moscow was also tying in the gas issue with that of integration, he declined to comment.
And so increased integration has become central to the dialogue between Belarus and Russia. For many months, a group of dozens of officials from both countries has been working with the utmost secrecy. A road map for integration is due to be presented to the presidents by the end of this month, and if they approve it, action plans for specific areas of integration through 2022–2023 should be drawn up by November, according to the group’s Belarusian co-chair, Economy Minister Dmitry Krutoi.
According to Krutoi, the countries’ positions on social issues, industry, and financial markets “converge very closely.” The most sensitive areas for Belarus are the banking sector and energy, along with the priority issue of agriculture: Minsk would like to see permanent guarantees of unfettered access to the Russian market for its produce.
It’s not completely clear whether a single currency is being discussed seriously or not. Oreshkin said at the start of June that it was. Elvira Nabiullina, head of Russia’s central bank, clarified that talks were “at a very early stage.”
Belarusian officials have been even vaguer. Krutoi has said that a single currency could only be the cherry on the cake of economic integration, while Ambassador Vladimir Semashko said that a single currency could not compromise the sovereignty of either of its members. This is precisely the kind of rhetoric that Minsk has been using to ward off this topic for the last fifteen years.
The issue of the single currency is a microcosm of the history of integration between Belarus and Russia. In 2000, the two countries signed an agreement on introducing a single currency from 2008. In 2002, a working group was set up on creating an issuing center, and a year later, an action plan was signed on introducing the single currency. That plan was never implemented. In 2009, another plan with the same name was agreed, and subsequently met the same fate.
Now Minsk and Moscow may once again sign a road map, but no matter how comprehensive it may be, that document will still run up against the same reality that thwarted all the previous attempts to turn a declaration into action.
The same will happen in any area in which the two sides decide to fully integrate. The trouble is that it’s impossible to create a single currency or unified customs, tariffs, taxes and excises, budget, financial markets, or agriculture without supranational institutes that would establish the rules of the game, resolve disputes, and print the single currency.
Someone has to head those institutions, and as soon as Minsk and Moscow get to this question, they start squabbling. Belarus wants an equal vote so as not to lose sovereignty. Yet Russia can’t give its small and often unpredictable neighbor a veto right on crucial areas of its economy.
Then there is the mutual distrust of the Belarusian and Russian regimes, and their inherent inability to share power. The most the two sides can do without betraying their sovereign interests is to start coordinating their decisions on various sectors of the economy a little more closely.
This is precisely the approach that can be seen so far in the statements of Krutoi and Oreshkin. The Belarusian minister says that the two countries will remain autonomous, but will have a very close “economic and financial convergence, cooperation, and unification.” His Russian counterpart lists a unified goal for the inflation rate as an example of this convergence.
If it’s really necessary, that could also be described as integration. But there is no place for either supranational bodies with their own authority, or for the monitoring of how joint decisions are implemented. If Belarusian President Alexander Lukashenko sees fit to raise pensions and salaries ahead of elections, an annual inflation goal agreed on with Russia will be the last thing on his mind.
If Minsk manages to extract any concessions from Moscow on oil and gas supplies and loans in exchange for this kind of rough agreement (or typically ambitious yet unfeasible road map), that will be a major success. But it seems that the Belarusian authorities have already begun preparing themselves—and their people—for that not to happen.
Announcing that a Russian loan wouldn’t be delivered before an agreement is reached on integration, Belarusian Finance Minister Maxim Yermolovich said that Minsk had realized that long ago, and had accordingly made plans working on the basis that there would be no loan. If a loan is eventually agreed, the minister continued, then the country will increase its reserves, and won’t have to take out other new loans.
Igor Lyashenko, Belarus’s deputy prime minister for energy, has already emphasized that fuel prices will increase after Russia completes its energy tax system reform in 2024: Belarus will have to pay global oil prices. The deputy head of the state oil enterprise Belneftekhim has said that Belarusian oil refineries are already preparing to work in those conditions by modernizing facilities and optimizing expenses.
By planning for a worst-case scenario with Moscow, Minsk is effectively resigning itself to the situation. If one side is morally prepared for the negotiations to end in failure, then the situation stops seeming desperate, and any willingness to make compromises declines. In this situation, the task is no longer to obtain the previous economic preferences from Russia at any cost—especially if the cost is the country’s sovereignty.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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