Belarus has long been a stalwart ally of Russia and dependable buffer between Moscow and the West. But the country has recently been sending some signals that it may be pulling away from Moscow. Last week, Belarusian President Alexander Lukashenko met with Russian President Vladimir Putin in Sochi and described the talks as “difficult” – a word you wouldn’t expect to be used to describe a visit between two staunch allies. This week, Lukashenko told a group of newly appointed ambassadors to Minsk that his country would pursue equal ties with the East and the West. Yes, these are just words, but if these words portend a shift in Minsk’s loyalties, it would be a very troubling sign for Russia.
For decades, Belarus and Russia have had a mutual interest in maintaining their bilateral relationship. It was an important Soviet satellite state, and its economy became inextricably tied to Russia’s after the fall of the Soviet Union. Half of its trade and foreign direct investment comes from Moscow, according to official Belarusian statistics. Its dependency is strongest in the energy sector. Russia supplies much of Belarus’ oil and nearly all of its natural gas. Russia, meanwhile, needs Belarus as a shield against Western incursion across the North European Plain.
But as Russia’s economy weakened, so too did the potency of its checkbook diplomacy. The Russian government has been so short of funds that it has had to raise taxes and the age of retirement despite widespread protests against these measures. Belarus’ own economy has suffered from Russia’s financial struggles. Hence, why Minsk appears to be softening its tone toward the West.
Lukashenko and Putin have met seven times this year to try to resolve some of their differences, and they are expected to meet again at the Commonwealth of Independent States summit in Dushanbe, which begins today. During talks held in Sochi last week, Putin even suggested that ministers and other Cabinet officials be included in the negotiations – and nearly half of Putin’s Cabinet showed up. The main topics of discussion were similar to those that came up in talks earlier this year: integration associations, economic relations and loans, agriculture and food supply, industry, transport, energy, the tobacco market, excise taxes, and military and political issues. Putin reportedly called Lukashenko a few days later for follow-up talks. The extent of these negotiations and the number of people involved, as well as the frequency of recent communication and the fact that Russia has been driving much of this effort, indicate just how important this relationship is to Moscow.
Energy and, to a lesser degree, agriculture, have been the biggest points of contention. On energy, they are divided on two issues. The first is related to export duties on Russian oil products. Russia wants to reduce the amount of duty-free oil products it exports to Belarus, which then sells some of these products to other countries and profits from the associated charges. From Moscow’s perspective, Russian has been effectively subsidizing the Belarusian budget through its oil products and now wants to limit sales to Belarus so that it can profit from these products itself. One way it plans to do so is through a gradual decrease of oil export duties for other destinations over the next six years. The duties will enable Moscow to sell its oil directly to countries to which Belarus currently re-exports Russian energy products. Belarus is concerned they would slash a key source of budget revenue, and the two countries have so far failed to find a resolution. According to Belsat TV, July figures show that Russian energy supplies have already declined.
The second issue is Belarus’ debt to Russian energy giant Gazprom. Roughly 75 percent of the energy consumed in Belarus is natural gas, which is almost exclusively supplied by Russia. Belarus has accumulated hundreds of millions of dollars in debt for gas supplies, and now Russia wants to collect. There have also been disputes over pricing and sales volume. Belarus has said that further discussions on a resolution will take place in Minsk, likely by the end of the year.
On agriculture, Moscow and Minsk have reached some compromise. Belarus had accused Russia of manipulating its market to benefit its own producers, but the two countries recently agreed to regulate the volume of trade for milk, dairy products, meat and meat products. The deal will see only minor changes in this trade, an indication that neither country can afford disruption in this sector. (Agriculture is Minsk’s second-largest source of exports; nearly 85 percent of Russia’s dairy imports come from Belarus.)
Belarus can’t invite the financial risk that would come from repudiating Russia, but as the weaker partner in the economic relationship, it would likely have to bend to Moscow’s demands. It is therefore looking for new sources of energy, investment and imports. Minsk is considering increasing energy imports from Iran and Azerbaijan. China is a potential source of new investment and a market for Belarusian goods. But perhaps the most promising alternative source for both trade and investment is the European Union. It was announced this week that Germany’s Ausfuhrkredit-Gesellschaft bank has agreed with a Belarusian bank to jointly provide financing for Belarusian companies that trade with EU member states.
Europe can’t be an alternative to Russia in all aspects. In terms of energy, for example, other European countries also rely on Russian supplies and so are in no position to replace Moscow as Belarus’ main source oil and gas imports. But by reaching out to the West in other areas, Belarus can reduce its dependence on Moscow and vulnerability to any potential collapse of or crisis in the Russian economy. It can also create leverage for future negotiations with Moscow – after all, one way to persuade a country to give you what you want is to prove that you can get it someplace else.