Belarus and Developing Countries: Faulty single-commodity export orientation

Summary

In 2012, the task to find new sales outlets for Belarusian commodities repeatedly articulated by President Alexander Lukashenko was poorly performed. The narrowness of the Belarusian export line in relations with developing countries has not been eliminated and, on the contrary, has become more obvious. Potash and nitrogen fertilizers remain the only significant commodity exported to most countries of Latin America and South and South-East Asia. The same concerns steel products going to many countries in the Middle East and North Africa.

Trade and investment cooperation with China is becoming increasingly disadvantageous, while the official media keep indulging in wishful thinking. Despite the visits of representative delegations to Venezuela, Cuba and Ecuador in 2012, the volume of Belarus’ trade dropped everywhere but Cuba.

A progress in political relations with developing countries helps to ensure their neutral or sometimes positive position on the Belarusian issue in international organizations.

Trends:

• Prevalence of single-commodity trade relations with the most part of the developing world;
• Stepped up relations with the countries of South and South-East Asia, engagement in activities of the Non-Aligned Movement;
• An expansive growth of exports of oil products to Mongolia and Afghanistan;
• Disadvantageous trade and investment cooperation with China;
• Development of military-technical cooperation as an important and controversial area of interaction with developing countries.

There is no established convention for the designation of “developed” and “developing” countries or areas in the United Nations system. Various international institutions use different classifications. For conceptual convenience, the author considers the EU and associated states, the United States and Canada in North America, Australia and New Zealand in Oceania, Japan, South Korea, Singapore, Taiwan, and Israel in Asia, and the Southern African Customs Union “developed” countries and regions. The countries of former Yugoslavia, CIS republics and Georgia are not related to the category of “developing countries” here.

Political and diplomatic relations with developing countries

Belarus pursues several main objectives in relations with developing countries. Firstly, it is legitimization of the political regime in the international arena and demonstration to the Belarusian audience that the country is not experiencing isolation. Secondly, developing countries’ support for Belarus’ position in international organizations. Thirdly, it is a search for potential lenders and investors and new markets for Belarusian commodities. The primary economic task in relations with developing countries set by President Lukashenko is to expand exports.1

Positions of foreign states on the resolution on Belarus discussed at the 20th regular session of the UN Human Rights Council are indicative. The resolution expresses serious concern about violation of human rights in Belarus and calls on the Belarusian government to immediately release and rehabilitate political prisoners. It also contains a decision to appoint a special rapporteur on Belarus.2 The resolution was supported by representatives of 22 countries, which can be nominally treated as developed countries. Representatives of five states – Russia, China, Cuba, India and Ecuador – voted against. All 20 abstainers except Japan and South Korea are developing or post-Soviet states.

Alongside ongoing political dialogue with Iran and Turkey and military-technical cooperation with the states of the Persian Gulf, the following important political and diplomatic events in Belarus’ relations with developing countries should be pointed out.

• Official visits to Ecuador, Cuba and Venezuela, including a tour of President Lukashenko to these countries in June, and a visit of an official delegation of Ecuador to Belarus in October 2012. Despite an advance in political relations, the Belarus-Ecuador trade turnover in 2012 was down three-fold year-on-year mainly due to slumping sales of Belarusian fertilizers. An increase in purchases of Cuban sugar in the past year led to a 250% increase in the volume of imports from Cuba, whereas the discontinuation of purchases of Venezuelan oil since June 2012 (330 thousand tons were purchased in 2012, and 1,127 tons in 2011) resulted in a decline in imports from Venezuela.
• Intensified relations with Southeast Asia. An embassy of Belarus officially opened in Jakarta in June 2012. Attending the ceremony was former Foreign Minister of Belarus Siarhei Martynau who also visited Laos and held meetings with the president and cabinet ministers of Laos. Official delegations led by former Deputy Foreign Minister Siarhei Aleinik (now ambassador to the United Kingdom) visited Indonesia twice (in March and October). In 2012, Aleinik also made official visits to Thailand, Singapore and Vietnam.
• Following the visits to India and Bangladesh in November 2012, Prime Minister Mikhail Myasnikovich announced Belarus’ plans to construct five plants in these countries, including facilities for assembly of tractors and agricultural machinery, high-level processing of potatoes and processing of milk. It is however not clear yet how soon the announced projects will be carried out. In 2012, India was still confirming its interest in acquiring shares of Belaruskali, but no definitive agreements have been reached. Bangladesh is also interested in potash fertilizers supplies from Belarus, which was the main purpose of the visit of Foreign Minister of Bangladesh Dipu Moni to Belarus in May 2012.
• Belarus’ further participation in activities of the Non-Aligned Movement (NAM).3 A delegation headed by Aleinik took part in a ministerial meeting of the NAM Coordinating Bureau in May. New Foreign Minister Uladzimir Makei represented Belarus at the NAM Summit in Tehran in late August 2012. He met with representatives of Iran, Pakistan, Vietnam and Indonesia. Except for Azerbaijan, which joined the Movement in 2011, Belarus is the only European member of the organization.

Trade relations specifics: potash, nitrogen and steel as single-commodity exports

Belarus is a single-commodity exporter for almost all major trade partners in developing countries, which means that one product dominates in its exports. Potash and nitrogen fertilizers are such products in the trade with Latin America, South and South-East Asia and some African countries, and steelwork with the Middle East and North Africa (see Table 1 and 2). Rarely, Belarus supplied oil products (Afghanistan, Mongolia), tractors and truck tractors (Pakistan).4 Among developing countries where Belarus’ volume of trade exceeds USD100 million, exports to China, Venezuela, Iran, Cuba, and Turkey are more or less diverse.

Table 1 shows that the proportion of potash and nitrogen fertilizers in Belarus’ total exports to many developing countries reaches 75% to 99.9%. Among major trade partners in South and South-East Asia, the share of prevailing commodities only decreased in the trade with Thailand and Indonesia. Thailand purchased a large amount of Belarusian steel products, which explains an increase there. Diversification of exports to Indonesia was probably promoted by the Belarusian embassy, which opened in Jakarta in mid-2012. At the same time, the share of potash fertilizers in the total exports to Bangladesh, Vietnam, Malaysia, and the Philippines in 2012 went up or remained at 99.9% year-on-year, like it was with Sri Lanka.

Potash and nitrogen fertilizers also prevailed in exports to many countries of Latin America (Brazil, Argentina, Colombia, Uruguay, Guatemala, and Mexico). Only in Venezuela and Cuba, the share of fertilizers made up one third of Belarusian exports, which are generally more diverse with regard to these countries. Among other significant items of Belarusian exports to Venezuela are milk and cream powder, tractors and truck tractors, and a variety of products of the machine building industry in many respects owing to construction of facilities for assembly of MAZ (Minsk Automobile Plant) vehicles and tractors. Alongside fertilizers, Cuba buys products of the Belarusian machine building industry and tires. Belarus and Cuba are planning on setting up service centers in Cuba to carry out routine maintenance of machinery of Belarusian manufacture.

As seen in Table 2, among major trade partners of Belarus in the Middle East and North Africa, steel products are not predominant in Belarusian exports to only three states – Egypt, Turkey and Iran. Tractors and spare parts for them are an important item in Egypt; Iran purchases cargo trucks and synthetic fibers, and Turkey purchases oil products, nitrogen and potash fertilizers, synthetic fibers and other petrochemical intermediates.

Besides potash and nitrogen fertilizers and steel products, Belarus basically focuses on supplying oil products and engineering goods. The export of oil products to Mongolia considerably increased in 2012 (83,000 tons), and even more to Afghanistan (141,000 tons), which was ranked one of the top ten importers of oil products from Belarus in 2011. Among the developing countries, with which Belarus has appreciable commodity turnovers, Pakistan is the only one where Belarus’ engineering goods dominate in the import basket. In 2012, tractors and truck tractors constituted 74% of the total Belarusian export to Pakistan (USD 39.8 million out of USD 53.9 million).

Diversification of exports through diplomatic efforts

Given the prevalence of a single-commodity export to most of developing countries, swings of demand or fluctuation of the market (especially when it comes to potash fertilizers) result in abrupt jumps in supply contract values and, consequently, the volumes of exports. For instance, in 2012, statisticians reported a significant decrease in exports to Brazil, Argentina (dropped more than 7-fold), India, Indonesia, Colombia and Uruguay, and a slight increase was observed in Malaysia, which was a direct consequence of transactions in potash and nitrogen fertilizers. An increase in exports to Egypt, Tunisia and Turkey, and a decline in total exports to Lebanon were determined by supplies with Belarusian steel products.

On the other hand, one export item also prevails in many developing countries. It is soybean oil cake in Argentina, and sugar in Cuba and Brazil. Belarus mainly buys grown rubber in South-East Asia, and natural phosphates in the Middle East and North Africa (Morocco, Syria).

These foreign trade specifics cause a relatively poor interconnection between political and diplomatic efforts of the Belarusian government and dynamics of trade relations. The world’s largest importers of potash fertilizers – China, India and Brazil – have large trade turnover with Belarus regardless of political activity of Minsk in comparison with some political allies of Belarus (Iran and Venezuela).

At the same time, this interconnection is strong when it comes to exports diversity. Belarusian export items vary more in relations with the countries that have been maintaining active political cooperation (China, Iran, Venezuela, Cuba, and Turkey).

Relations with China: expectations and reality

Trade and investment cooperation with China is becoming increasingly disadvantageous, while the official media keep indulging in wishful thinking. Firstly, although the turnover with China is the greatest among developing countries, China’s share in the overall volume of trade with Belarus is relatively modest and even decreased from 3.3% to 3.1% in 2012 year-on-year.

Secondly, Belarus’ deficit in the trade with China is going up. In 2012, Belarusian exports shrank in comparison with 2011 as against the imports from China, so the deficit has approached USD 2 bn. Chinese exports to Belarus vary markedly; whereas Belarusian exports to China are quite limited in terms of diversity, although their variety is greater as compared with other developing countries (see Table 3). Potash fertilizers constitute almost a half of export revenues, around 40% comes from the trade in petrochemical products (heterocyclic compounds, oil products, synthetic fiber bundle, etc.), and only around 10% account for mechanical and electric engineering products.

Thirdly, the increasing amount of Chinese loans is not accompanied by a significant increase in the amount of Chinese direct investment in the Belarusian economy contrary to expectations of the Belarusian government. According to the national Statistics Committee, Belarus received USD 28.5 million in direct investments from China in 2010, and USD 9.4 million in 2011.8

The investment environment in Belarus is a problem. The history with Obuv–Luch (Luch Footwear) is a striking negative example. In October 2012, Luch shareholders recognized that the offer of Chinese Foshan Nanhai Chengming Trade Co., LTD “fitted the status of a strategic investor the most.” The Belarusian government thus attempted to increase its stake in the company and, pressurized by the authorities in light of the policy pursued in the 4th quarter of 2012, the shareholders had to approve the transfer of 5.4% of shares to the government at an extraordinary meeting. Georgy Badey, Chairman of the Supervisory Board of Luch, was unable to forecast the future of negotiations with the potential Chinese investor after that.9

Military-technical cooperation

Military-technical cooperation remains important to Belarus in relations with developing countries. It was discussed during a visit of Prime Minister Mikhail Myasnikovich to the United Arab Emirates in February 2012 and the visit of Alexander Lukashenko to Ecuador in June 2012.

Cooperation with a number of developing countries (Venezuela, China, Ecuador, some countries of the Persian Gulf, etc.) is a well-known example. Belarus is heavily criticized for alleged arms deals with hardline authoritarian regimes and violation of international law. There is no comprehensive information, and finding hard evidence is too much complicated, so the allegations about breaches of international obligations by Belarus remain unproved. The frequency of such reports and messages gives rise to concern, though.

The most scandalous events and statements connected with Belarus’ alleged military-technical cooperation with developing countries in 2012:

1. In the report released in March 2012, the Stockholm International Peace Research Institute claimed that Belarus was the largest supplier of conventional weapons to Yemen and second largest supplier to Syria in 2007–2011.10
2. In response to a number of media allegations about Belarus’ arms supplies to Cote d’Ivoire in violation of UN sanctions, Belarusian Foreign Ministry Spokesman Andrei Savinykh said in April 2012 that “it was not even an accusation, but a phony attempt of some journalists to muddy the waters.”11
3. In June 2012, the Libyan military court sentenced three Belarusian nationals to 10 years in prison as mercenaries together with 19 Ukrainians and two Russians. They were accused of helping the Gaddafi troops to repair combat equipment during the civil war. The convicts argued that they arrived in Libya to work in the oil industry.12
4. In September, the U.S. Department of Treasury imposed sanctions on Belarusian Belvneshpromservis accused of supplying the Syrian army with fuses for aerial bombs. According to the United States, Minsk established business relations with the Army Supply Bureau of Damascus.13
5. Amnesty International claimed in September 2012 that Belarusian arms were supplied to Darfur despite the UN embargo.14

Conclusion

In 2012, Belarus was trying to step up cooperation with countries of South and Southeast Asia, as well as to deepen (Cuba and Venezuela) and expand (Ecuador) relations with Latin America. However, no fundamental changes in relations with developing countries took place. The main trends remain the same: narrowness of Belarusian exports, instability of the volumes of trade with many countries caused by single-commodity orientation (often bilateral), and botched attempts of official delegations to promote economic relations with some countries. Only potash fertilizers and a certain amount of steel products remain essential in Belarusian exports.

The lack of structural reforms in the country and new competitive industries, dominating public sector of the economy and the lack of advanced big and medium national businesses are the objective factors, which impede the economic communication between Belarus and international partners and expansion of exports to developing countries. Given the circumstances, it would be too optimistic to hope for qualitative progress in foreign economic relations with developing countries in the near future.