Belarus – Ukraine: Between the Customs Union and the European Union

Gennady Maksak

Summary

In 2012 the relations between Belarus and Ukraine remained the same for these two countries when economic cooperation prevailed over building up political dialogue. Summits were held either in the framework of bigger international meetings or were of an informal character and hardly could claim for an attempt to solve the existing problems in mutual relations. The dialogue went on easily without the tension and political scandals observed in 2011.

It did not become possible to realize significant strategic projects either at the political or economic levels. Moreover, Minsk lost its interest in the project of transporting Azerbaijan oil through the Ukrainian oil pipeline “Odessa–Brody” as a result of normalization of relations with Moscow regarding oil transport.

Trends:
Components of the dialogue

In the political sphere the tone of the bilateral interaction is traditionally set by Kyiv while Minsk focuses its attention on the neighboring state as a relevant economic partner. In most cases the initiative of the Ukrainian side in mutual relations is connected with the solution of a wider spectrum of problems in foreign policy, as well as with internal political motives.

In 2012 the drop in activity of Kyiv in the Belarusian direction was motivated by several factors. Firstly, this was the preparation for and carrying out of football championship EURO-2012 in Ukraine. Secondly, the analyzed period was dominated by the fight over deputy mandates in the Supreme Council of Ukraine. Thirdly, last year Ukraine carried out intensive negotiations with the European Union concerning the preparation of the Europe Agreements. Against the background of European criticism of imprisonment of the Ukrainian opposition leaders, the problems of human rights observance in Belarus were not so much highlighted in the Ukrainian media and official releases. Fourthly, Kyiv tried to keep its distance from the various Russian integration projects, which determined also its response to certain actions and statements of Belarus in this context.

On the whole, in 2012 Kyiv policy towards Belarus was determined by the following tasks:

Minsk in its turn built the dialogue with Kyiv under the influence of the following trends and conditions. First of all, it is normalization of relations with Russia in the oil sphere. Low-cost Russian oil made the project of delivery of power resources from the Caspian region to Belarus through the territory of Ukraine economically unprofitable, which led to freezing of the project.

Confrontation with the European Union early in 2012 contributed to the fact that the Belarusian administration became less compliant in implementation of joint Ukrainian-Belarusian initiatives of a pro-European nature. The relevant factor was a necessity to overcome the consequences of the financial crisis of 2011 at the expense of expanding goods turnover with Ukraine.

In this context the following tasks were key to Minsk in the Ukrainian direction:

The Belarusian-Ukrainian dialogue in the system of international and regional coordinates

Early in 2012 it was possible to forecast an active development of the political dialogue, taking into account the events at the end of 2011. What is meant here is the release of tension in personal relations of the presidents of the two countries whereas the new peak of trade turnover of USD 6.2 bn contributed to the development of interdepartmental contacts. 1 At the end of March the visit of the head of the Ukrainian government Nikolay Azarov to Minsk was announced along the diplomatic channels, however the visit did not take place on the scheduled time. 2

In February some events occurred that allowed Kyiv to suspect Minsk of readiness to play up to the Kremlin in its relations with Ukraine, using restraining procedures of the Customs Union. The next day after the introduction of the ban on import of dairy products of some Ukrainian companies to Russia the representatives of the Belarusian agrarian office made statements about the possibility to introduce analogous measures. 3 Though later the representatives of the Belarusian Ministry of Agriculture reported the absence of claims against Ukrainian dairy products, since March 1, 2012 the Ukrainian side introduced the ban on import of meat and dairy products from Belarus (due to the hazard of the African plague and hygiene hazard).

It is remarkable that in reply to the Kyiv actions Belarusian representatives threatened to block deliveries of Ukrainian products not only to Belarus but also to the territory of the Customs Union (CU). Suspicions about the use of the CU by Belarus in the prejudice of economic interests of Ukraine also were aroused concerning the question of blocking of import of Ukrainian rustproof pipes to the territory of the CU. 4

Only on May 3 it was possible to reach a compromise and to lift limits on deliveries of Belarusian meat and dairy products to Ukraine. This happened during the meeting in Minsk of the first Deputy Prime Minister of Belarus Uladzimir Siamashka and the new Minister of Economic Development and Trade of Ukraine Petro Poroshenko. Belarus it its turn lifted all import restrictions on Ukrainian beer. It was since May 2012 that the full-fledged dialogue between Belarus and Ukraine was restarted. A considerable part of bilateral top level communication afterwards was held within the framework of CIS meetings.

On May 15 during the CIS informal summit in Moscow the bilateral meeting of Alexander Lukashenko and Viktor Yanukovych took place at which a number of crucial initiatives influencing the Belarusian-Ukrainian relations were announced. In particular, the president of Ukraine invited his Belarusian counterpart to come to Chernobyl, to get acquainted with new safety measures. This invitation can be regarded as symbolical, taking into consideration the absence of Alexander Lukashenko at the Chernobyl tragedy anniversary in 2011. 5

Besides, Viktor Yanukovych asked to postpone Ukraine’s presidency in the Commonwealth from 2013 to 2014 because in 2013 Ukraine chairs the OSCE. The member countries decided that Belarus would substitute Ukraine as chair of the CIS. 6

The presidents of both countries also had the opportunity to meet informally at the final match of EURO-2012 in Kyiv on July 1. The Belarusian president along with the heads of other states accepted the invitation to visit this event (against the background of the refusal of many European leaders to visit Ukraine).

According to the head of the Belarusian diplomatic representation in Ukraine Valantsin Vialichka’s statements, the sides worked out the official visit of Alexander Lukashenko to Ukraine 7 which was never organized. Nevertheless one more opportunity for the meeting Alexander Lukashenko and Viktor Yanukovych had during the summit of CIS heads of state in Ashkhabad in December 2012. Except for the problems of bilateral cooperation the agenda contained the issue of relations of Ukraine with the Customs Union. 8

The meeting of the heads of the Belarusian and Ukrainian governments also took place during the CIS Summit in September in Yalta. The head of the Council of Ministers of Belarus Mikhail Myasnikovich suggested to his Ukrainian counterpart considering some economic projects, in particular concerning pharmaceutics and aircraft industry. 9

Ukraine is obviously interested in developing economic mechanisms of the Commonwealth for the development of an integration platform as an alternative for the CU. On July 30, the Supreme Council of Ukraine ratified a contract on CIS free trade zone, and in August Viktor Yanukovych signed the law On ratification of Free Trade Zone Treaty. Ukraine became the third country after Russia and Belarus to ratified this document.

In concert with the development of the CIS normative basis in the economic sphere Kyiv tried to actively use the possibilities of Minsk to improve cooperation with CU countries on some considerable issues. On May 25 in Minsk another meeting of the Inter-governmental Belarusian-Ukrainian mixed commission concerning trade-economic cooperation presided over by the first vice-premiers of Belarus and of Ukraine Uladzimir Siamashka and Valery Khoroshkovsky. On the agenda there was a very acute problem of application of a special protective tax concerning the import of rustproof pipes to the territory of the CU, which caused losses of Ukrainian producers and Belarusian consumers. The Ukrainian side applied to the representatives of the Belarusian delegation to settle this issue. And the Belarusian side provided gradual support of Kyiv position in the question of changing the special tax to country quotas within the framework of the reinvestigation held by Russia. 10

As for the international affairs in the Belarusian-Ukrainian relations it should be noted that the attempt of Minsk to use the Ukraine presidency of the OSCE in 2013 in the best interests. In November 2012 bilateral consultations at the level of the Ministry of Foreign Affairs concerning OSCE reform were carried out. During the consultation it was noted that it was necessary to perform further reform of the OSCE, including the improvements of methods and practice of observance during elections. Some days before the consultations at the press conference Alexander Lukashenko had called into question the prospects of the organization and also stated that the OSCE tried to impose nonexistent standards to Belarus and other countries. At the same time he expressed the readiness together with Russia, Kazakhstan and Ukraine to join the process of drawing up such standards. 11

Election process and mutual relations

Elections in Ukraine and Belarus have always influenced the political component of relations between the two countries.

The elections to the House of Representatives of the National Assembly of Belarus which were held on September 23, 2012 were sharply criticized by the European bodies, while the CIS mission recognized them as democratic. Kyiv initially did not actively support the conclusions of the European Parliament and the OSCE. During the Yalta meeting on September 27 Mykola Azarov congratulated his Belarusian counterpart Mikhail Myasnikovich on the outcome of the elections. 12 Ukrainian mass-media almost did not contain any remarks of Ukrainian officials concerning the election results.

Electoral programs of the Ukrainian political parties which according to the results of the election of October 28, 2012 became parliamentary did not contain direct instructions concerning relations with Belarus. The program of the Party of Regions mentioned the strengthening of cooperation within the framework of the CIS free trade zone while the Communist Party of Ukraine was for the country’s entering Customs Union, Common Economic Area, and the Eurasian Economic Community. 13

Taking into account that the Ukrainian parliamentary election campaign received special attention by international and European bodies, positive reports of observers of CIS mission in which Belarusian citizens also took part, became an important part of the necessary informational context for Kyiv. In early October the head of the Ministry of Foreign Affairs of Belarus Uladzimir Makei stated that the Belarusian side hoped for continuation in foreign policy of Ukraine regarding Belarus, and also added that Minsk supports evaluation of the CIS mission of the Ukrainian elections. Belarus did not support the conclusions of the OSCE mission as Ukraine had traditionally done concerning the results of elections in Belarus in previous years.

The elections made their adjustments to the Ukrainian diplomatic staff in Belarus. In November 2012 the president of Ukraine dismissed Vyktor Tykhonov from the office of the ambassador extraordinary and plenipotentiary of Ukraine to Belarus as he had been elected people’s deputy. At the elections to the Supreme Council of Ukraine Tykhonov won in one-mandate district in Lugansk region where he represented the ruling Party of Regions. Officially he managed to work as an ambassador for slightly over a year.

Trade-economic cooperation

According to the results of 2012 Ukraine took the 3rd place when it comes to the sales turnover and export among trading partners of Belarus while Belarus took the 4th place among trading partners of Ukraine. Trade turnover between the two countries was USD 7.9 bn. Belarusian export was USD 5.6 bn, and import – 2.3 bn (positive balance for Belarus made USD 3.3 bn). Traditionally the basis of the Belarusian export to Ukraine are oil products, tractors and bolster-type tractors, metal products, refrigerators and freezers, tires, polyethylene, mineral and potassium fertilizers, trucks, plastic packaging, legwear, parts and equipment for cars and tractors, agricultural machinery, cord materials, synthetic fibers.

In 2012 Ukraine took the second position among buyers of Belarusian oil products and thefirst – among the CIS countries. According to the official data, in 2012 Belarus exported to Ukraine 4.36 million tons of oil products, which is by 44.4% (1.34 million tons) more than in 2011. As a whole, according to the results of the year 25% in the structure of the Belarus export of oil products fell to the share of Ukraine (among the CIS countries – 89.5 %).

At the same time this remarkable dynamics could not but interest Russia that delivers oil to the Belarusian refineries on terms of Customs Union. As a result of inadequate norms of the CU Minsk managed to sell diesel fuel to Ukraine in the guise of biofuel and solvents without paying Russian oil products export tax. In certain months of 2012 delivery of biodiesel fuel to Ukraine made 50% (about 150 thousand tons monthly) of the general import of Belarusian diesel fuel. These local successes of Belarus turned to problems during the signing of the oil balance with Russia for 2013.

In the Ukrainian export to Belarus the share of intermediate and investment products was more than 90 %. These are metals and metal products, oilcake and sunflower oil for the production of mixed feed, varnish and paint, carriages and rolling stock parts. In 2012 the size of the Ukrainian investments into the economy of Belarus was USD 352.6 million, including direct ones – 351.2 million.

Cooperation in the energy sphere was considered by the sides as strategic. However prospective indicators of energy cooperation were not performed by the sides on a full scale. The project of transportation of Azerbaijan oil to Mozyr refinery through the pipe “Odessa–Brody” fell short of expectations. Though the agreement between Belarus and Ukraine provides the transporting of 4 million tons of Azerbaijan oil annually throughout 2011–2012, Belarus accepted only 988 thousand tons in 2011. In 2012 there were no deliveries.

Traditionally, some other cooperation projects (such as building of nuclear power plant, transit of Ukrainian electric power to the Baltic States and joint projects in gas sphere) did not progress in spite of informational and diplomatic activity of the Ukrainian side. 14

Conclusion

2012 introduced new elements to Belarusian-Ukrainian relations which presumably will influence the further course of political dialogue and trade-economic cooperation. At the same time the constant priority is economic achievements.

The Customs Union became a reality in trade relations of Minsk and Kyiv, which at the first stage turned to profits (oil products sale) and losses (trade war) for Belarus.

Minsk refused the idea of energy safety at the expense of establishment of alternative deliveries of hydrocarbon from the Caspian region through the territory of Ukraine. It means that Russian-Belarusian oil crises can jeopardize the economic stability of Belarus at any time thereafter.

A positive point is the articulation at the inter-governmental level of the necessity to develop cooperation in building joint enterprises that produce high tech goods for markets of third countries.

The parliamentary elections in Ukraine did not influence the dialogue with Belarus, despite the fact that in December 2012 the governmental team underwent changes because of the appointment of a new Ukrainian government.

Despite the prolongation of bilateral consultations the problem of final legislative legalization of the Belarusian-Ukrainian state border remains unsolved.