Belarus–Russia: the Golden Age of Planning

Summary

Since the developments of the second half of 2020, Minsk’s “multi-vector” diplomacy has been consistently phased out, and its leverage in disputes with the Russian leadership has been growing weaker. As a consequence, the Lukashenko regime had to pay the highest possible price for Moscow’s political and economic backing. The transformation of Belarus' territory into a de facto military and strategic platform for Russia is the most dramatic geopolitical transformation in Eastern Europe since the disintegration of the Soviet Union. Furthermore, the Belarusian leadership had to meet halfway with the Kremlin in terms of political reform and make concessions — unprecedented since the formal emergence of the Union State of Belarus and Russia in 1999 — when it came to economic integration. Minsk ceded its transit role to Moscow, and its connections between the Belarusian and the global economy now largely depend on Russia.

Trends:

• clear emphasis on the militarization of relations;

• loss of Belarus' military and strategic sovereignty;

• increased economic dependence on Russia;

• reappearance of the oil rent;

• big logistic maneuver: redirection of Belarusian export supplies from the West to the East.

Preamble: war “according to plan”; war as a cure for the pandemic

Wars help generate challenges without which political elites would be unable to validate their authority. This is the only possible rational justification for war, although a contemporary armed conflict does not guarantee domestic political stability, let alone benefits that could cover the costs of such an undertaking. An illusion prevailed in the Kremlin at some point, though, that a quick victorious war was the most adequate response to the various contemporary “geopolitical challenges”.

In modern warfare, Umberto Eco reminds us, calculations and intentions of the main actors are irrelevant, because de facto we are dealing with the dynamics of a neural network.1Actors involved are not at all single-headed and monolithic, and live in terms of permanent making and breaking of consensus. Russia’s so-called Special Military Operation in Ukraine (SMO) is an inclusive conflict that does not set one homeland in opposition to the other — due to the buildup of the number of powers in this game, the initial payloads are distributed quite unexpectedly. China selling drones to both Ukraine and Russia, Belarus torn between peacekeeping and escalation are all typical storylines of such a conflict.

The CSTO’s “roundtrip” peacekeeping mission to Kazakhstan of early 2022 that lasted only seven days will go down in history as the shortest international mission of its kind. The reason for this brevity is simple: the situation had not called for external intervention in the first place. There had been nothing in Ukraine to suggest a WWII-style military invasion, with the massive use of aircraft, tanks and artillery. This version of war — Europe’s largest in the past 77 years — came as a surprise even to those who had not ruled out a proxy conflict of certain intensity.

“Everything is going according to plan” will become the fundamental meme of this war, and “Putin’s plan” will turn into a symbol of deliberately false and unattainable goals, which were officially formulated as “prevention of NATO enlargement”, “denazification”, “demilitarization”, etc. None on this list has been achieved, although some positive externalities were obvious: the war became a good cure for the pandemic.

Three Union shells: transition, complicity, integration

By the end of 2021, Belarus and Russia had reached consensus on three basic sets of issues, which needed to be resolved for the former to enjoy the latter’s comprehensive economic and political support. As subsequent events showed, the Belarusian regime paid an exorbitant price for each of the three positions:

• a constitutional reform to institutionalize political transition in Belarus;

• intensification of military and political cooperation;

• implementation of 28 Union integration roadmaps.

I. The referendum amending the Belarusian Constitution was held on February 27. It never generated any major interest inside the country, because topping the agenda was the invasion of Ukraine that began on February 24; its results were not recognized internationally. The key idea of the amendments was to give the All-Belarusian People’s Assembly an extraordinary status, but it was never about the redistribution of powers between the legislative and executive branches. The All-Belarusian People’s Assembly is a forum of Lukashenko’s supporters, and participation is regulated by administrative methods; it will include the current and former presidents, representatives of the legislative, executive and judicial branches, etc. The People’s Assembly can cancel any laws and decisions of all state bodies.2

Within the framework of political transition, this institutional trick should ensure that the collective Lukashenko retains his monopoly on power while circumventing the risky election procedure. Indeed, Lukashenko cemented the moment of stability — but as long as the history of Belarusian elites is not a particular case of the “graveyard of aristocracies” scenario, the penultimate episode of which envisages transition from a personalist regime to collective rule. And only as long as the Kremlin, which has made it clear on numerous occasions that political transition in Belarus is not exclusively Belarus' internal affair, genuinely approves of the current status quo. Lukashenko’s regime, therefore, assumes the current risks of the Russian political class.

II. For eight years, Minsk managed to dodge an agreement with Moscow on the establishment of a military base in Belarus, but in September 2020 everything changed drastically. Lukashenko spoke about the need to expand and deepen military and political cooperation, including a tighter schedule of exercises. One such military exercise was agreed with Putin in December 2021. The strategic game “Union Resolve–2022”, which was launched on February 10, was based on a scenario of a major regional war between the Union State of Belarus and Russia, on the one hand, and NATO countries with Ukraine joining them, on the other.

Belarus entered the war against Ukraine having an ambiguous status of an “occupied territory”3 and an accomplice in aggression. The global community recognized the latter role by promptly applying restrictive measures to Minsk (in addition to those already in place). Among others, Belarus' largest exporters were targeted by the sanctions. As a result, Belarus felt a double impact of sanctions, direct and indirect — through the negative consequences of the restrictions imposed on Russia.

Lukashenko had made sure that necessary funds were invested in the armed conflict well in advance. Over the prior 18 months, he had sought escalation with the West in a way that Russia’s relationships with the West escalated simultaneously. He also completely neutralized the potentially anti-war “fifth column”, thus providing a favorable environment for Russian troops stationed in Belarus.

The ensuing events developed according to the same logic of escalation, and Lukashenko often interpreted the Kremlin’s unilateral decisions as “agreements”. The February exercise “Union Resolve–2022” became a veil for the preparation and mobilization of the Russian invasion forces, and the missiles that hit Ukrainian settlements from the north became a “preventive” strike. In the same manner, the unified regional grouping of forces proposed by Minsk eventually turned out to be a cover for coaching newly mobilized Russian troops at Belarusian training grounds.4 In September 2022, Lukashenko activated the “madman theory” rhetoric, making threatening remarks about doomsday weapons, and six months later, an “agreement” on the deployment of tactical nuclear weapons in Belarus was announced. The Belarusian dictator seemed to anticipate his Moscow boss’s wishes before they even condensed as such, and throughout the duration of armed hostilities in Ukraine, Lukashenko actively worked as the Kremlin’s press secretary, justifying all its decisions. The Belarusian armed forces were never sent to Ukraine, although experts discussed prospects of their direct involvement in combat operations throughout the year.

III. If you have yielded in negotiations over the creation of a foreign “military base” in your country, then there are probably very few reasons for you to resist economic integration — the ultimate memorandum was signed in November 2021 at a session of the Supreme State Council of the Union State. It turned out that integration almost completely boiled down to the discourse of “import substitution”, a strategy aimed at making up for the deficit of critical imports and ensuring partial transition to national self-sufficiency, a.k.a. autarky.

Virtually all sectors of the Belarusian and Russian economies scheduled and announced import-substituting projects, but as of the beginning of 2023, outcomes were exclusively negative. Many manufacturing and service enterprises, which the economic authorities had expected would promptly occupy the empty niches vacated by withdrawing Western campaigns, reported losses for the fiscal year.5When it comes to economic mergers, though, Belarus and Russia did remarkably well, having achieved an impossible number of intergovernmental and interagency agreements and other transactions, some of which can indeed be categorized as “integration”. According to official statistics, by November 2022, 50% of Union State projects had been implemented, by December, 60% of all projects, and by the start of 2023, up to 70%.6 Out of 28 programs, seven were completed — those related to the traceability of goods, finance, accounting, nuclear energy, as well as currency, transport, veterinary and quarantine controls.

These statistics might be far-fetched, and yet it is obvious that Minsk stopped resisting integration on a number of fundamental positions. This certainly includes the treaty on general principles of indirect taxation (VAT and excises) signed in October, which envisages amendments to the Belarusian Tax Code, and in the future — the creation of a supranational tax committee. Such a decision could inflict serious costs on the Belarusian economy (including its unofficial part) — with the exception of the oil refining sector, which was offered an opportunity to effectively navigate within the perimeters of the so-called “tax maneuver” of the Russian government.

All this could be categorized as an integration breakthrough, but Belarus has not yet benefited from any noticeable progress resulting from the implementation of union programs in such fundamentally important sectors as energy, industry, and transport. Lukashenko specifically pointed to the lack of headway at a meeting focusing on the Belarus–Russia relationship in early 2023. Summarizing his statement, one can draw the conclusion that at that stage, Minsk had miserably lost a number of critical disputable points in the trade of sovereignty to the Moscow establishment.

“Putin’s Plan” for Belarus

Economic support for Belarus in the form of cash, energy subsidies, other benefits and exemptions was provided in amounts that the Kremlin had determined as necessary and sufficient to avoid destabilization in the neighboring country. Incidentally, the “martial laws” did not radically affect the amounts of aid compared to the previous period.7

At the end of 2021, the Belarusian government requested $3.5 billion from the Eurasian Fund for Stabilization and Development to restructure the state debt. This request remained unanswered. Then, following an increase in import substitution in bilateral relations, the Belarusian side formed 30 thematic bids and placed the price tag on them — about $2.5 billion of investment (i.e. soft loans or even grants that do not need to be repaid). The amount of the “import substitution” loan finally agreed in November 2022 amounted to RUB 105 billion (over $1.7 billion).

The postponement of the deadline to repay previous debts amounting to a total of $1.4 billion from April 2023 to the period from 2028 to 2033 came as an additional bonus. The Belarusian government filed a corresponding request in March citing the “difficult financial situation”.

“Sensitive parameters”, in Putin’s language, concerning pricing in the energy sector were agreed without debate. The contractual natural gas price for 2023 was fixed at the same level (about $128.52 per 1,000 cubic meters), but recalculated in Russian rubles. Over the past six years — despite disputes and scandals — almost nothing has changed: since 2017, the natural gas price has fluctuated just a bit below  $130 per 1,000 cubic meters. A special achievement is arguably the agreement fixing the natural gas price for three years in advance for the first time in the history of Belarusian–Russian relations. There is no official data on crude oil imports or refined oil exports. Based on indirect data and the discount of the Russian Urals blend to the benchmark Brent, BEROC economists believe that in 2022, Belarus' profits from transactions with Russian oil amounted to about $1.7 billion. If the favorable market situation persists and export supplies are re-established, Belarus will have an estimated  $2.7 billion in profits in 2023.8 These calculations suggest that oil rent is back, as well as that Belarus has benefitted from the sanctions imposed on the Russian oil industry for at least a short term.

Also high on the Belarus–Russia agenda is the major transport and logistics pivot prompted by the restrictions. Literally within a year, Belarus turned from a transit country into a “closed” region connected with external markets almost exclusively via Russia’s transport infrastructure — railroads and access to the sea. Throughout 2022, Minsk eagerly shared its plans to buy into Russian ports and build its own facilities for shipping significant volumes of exports, but there are no clear prospects in this regard. This issue (as in the case of the construction of the Belarusian Nuclear Power Plant) ultimately comes down to the Kremlin’s willingness and ability to extend additional loans to Belarus.

Trade

In 2022, trade between Russia and Belarus reached a new all-time high of about $50 billion, according to the Belarusian leadership. The figure looks more like the original target for the year, not the actual performance. The official data reported by the Russian side differ significantly (by at least $6.5 billion): mutual trade turnover amounted to $43.4 billion in 2022, which included exports from Russia worth $21.4 billion and imports worth $22 billion.9 For the sake of simplicity and clarity, we will use intermediate mathematical indicators (see the table) based on the assumption that each party is lying, having its own ulterior motives.

The marked increase in two-way trade (by 17% year-on-year according to Belarus and 12% according to Russia) did not come easy to Belarus and became a result of a complete loss of the Ukrainian market and a significant reduction in trade exchanges (by up to 70%) with the EU. However, economic analysts attribute the rapid growth of Belarusian exports to Russia to growing prices rather than physical volumes and point to the depreciation of the Belarusian ruble against its Russian counterpart.

Meat and dairy accounted for a considerable portion of Belarusian export deliveries to Russia, alongside oil products, and (probably) goods for the Russian army.

Conclusion

Having lost both its transit potential and several chessboards to play its foreign policy games, Lukashenko’s regime was left alone with the only actual counterparty. In the near future, Minsk can only rely on benign intentions of the Kremlin’s elites and a favorable foreign economic environment (and does so).

Belarus' heightened dependence on Moscow, however, is not tantamount to Putin’s absolute control over Lukashenko, who will not always seek approval by Russia’s top leadership when making all of his decisions. He will try to play his own game, which, however, is fatally limited by the progress of the war in Ukraine, sanctions, scarcity of resources and political and economic isolation of the Union State.

For what it’s worth, Lukashenko’s regime has moved towards the final phase of its development, i.e. it has entered the phase of extinction, in which risks are high and benefits are elusive and ambiguous.