Belarusian Experts’ Polemics: the EEU Needs New Growth Drivers
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What are the ideas and projects that Belarus intends to realize within the EEU? What does the Belarusian society think of integrating into the new union? What reasons generate emerging economic tensions between Minsk and Moscow within the EEU? How to achieve a broad consensus among association members and to avoid tensions in the future? We have asked Belarusian experts Denis Melyantsov, Senior Analyst at the Belarusian Institute for Strategic Studies, Arseny Sivitski, the Director of the Belarusian Center for Strategic and Foreign Policy Studies, and Alexei Dzermant, Researcher at the Institute of Philosophy of the National Academy of Sciences of Belarus and Coordinator of the Citadel socio-political project, to share their insights on these issues.
Following an agreement reached in December 2010 on establishing the Eurasian Economic Union (EEC) in the Common Economic Space of Belarus, Kazakhstan and Russia, Alexander Lukashenko together with the Russian and Kazakh leaders welcomed the new integration project. But after the signing in Astana in May 2014 of the Treaty working towards the establishment of the EEC, the Belarusian president noted that the document did not fully meet the country’s expectations. Minsk did not expect the Treaty to provide exemptions in bilateral trade, especially in oil, gas and medicines. Falling trade regulation in these areas under bilateral negotiations incurred Belarusian authorities’ displeasure.
Shortly after the EEU officially launched on January 1, 2015, Belarus made it clear that it reserved the right to leave the Union if agreements reached under the EEU were not observed. This statement was prompted by the restrictions imposed in January by Russia’s Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) on the supply of particular products from Belarus to Russia, bypassing the EEU.
The EEU is expected to become an effective economic union, bringing partner countries’ economies closer to each other.
With all this going on, the Belarusian authorities have repeatedly stated that the EEU integration is a priority for the country and Minsk supports the efforts to accelerate creation of common energy, transport and electricity markets within the new economic union. At he same time, the government is holding negotiations with the World Trade Organization, and on September 13 the parties agreed on a road map on Byelorussia’s accession to the organization. Russia has promised to help Minsk to become a WTO member.
Belarus views the EEU as an economic union that can survive global turbulence.
What are the ideas and projects that Belarus intends to realize within the EEU? What does the Belarusian society think of integrating into the new union? What reasons generate emerging economic tensions between Minsk and Moscow within the EEU? How to achieve a broad consensus among association members and to avoid tensions in the future? We have asked Belarusian experts Denis Melyantsov, Senior Analyst at the Belarusian Institute for Strategic Studies, Arseny Sivitski, the Director of the Belarusian Center for Strategic and Foreign Policy Studies, and Alexei Dzermant, Researcher at the Institute of Philosophy of the National Academy of Sciences of Belarus and Coordinator of the Citadel socio-political project, to share their insights on these issues.
How are the goals and objectives of the EEU understood in Byelorussia?
Denis Melyantsov:
Minsk regards the EEU as an opportunity for an unhindered access of Belarusian goods to the Russian market (the EEU market), as well as for gaining access to cheap energy. The EEU is expected to become an effective economic union, bringing partner countries’ economies closer to each other.
Belarusian society has always favored integration projects involving Russia, whether it be the Union State, the Customs Union or EEU. However, emphasis in any integration with Moscow is put on the economic, not political dimension. In Russian-Belarusian relations, Minsk is deeply interested in Russia’s support on the world arena and also in closer military cooperation.
Arseny Sivitski:
. Minsk is interested in the EEU not only with a view to expanding the market for its products, but also with the goal being to cooperate in the industrial sector with its partner countries, and to establish joint Euro-Asian corporations in order to defend their economic interests in foreign markets.
Belarus shares the objectives spelled out in the EEU Treaty. They include stable development of the economies of the association members, forming a common EEU market for goods, services, capital and labor, and the modernization and enhanced competitiveness of national economies. Minsk is interested in the EEU not only with a view to expanding the market for its products, but also with the goal being to cooperate in the industrial sector with its partner countries, and to establish joint Euro-Asian corporations in order to defend their economic interests in foreign markets.
Alexei Dzermant:
Belarus views the EEU as an economic union that can survive global turbulence. The Belarusian economy is open and export-oriented, so the EEU is expected to offer opportunities for equal access to markets, for cooperation, and for concerted industrial and financial policy. As a result, the EEU should become a significant economic pole on a global scale.
How might the EEU promote or hinder the solution of economic problems in Belarus?
Belarus is interested in establishing equally profitable prices with Russia on energy and also in the absence of trade barriers. This was the main incentive for EEU integration.
Denis Melyantsov:
Belarus is interested in establishing equally profitable prices with Russia on energy and also in the absence of trade barriers. This was the main incentive for EEU integration. If trade restrictions are lifted, and genuine freedom of movement of goods, services, people and capital is ensured, EEU integration will boost member countries’ economic growth. When ratifying the Treaty on the EEU, Belarus expressed readiness to comply with all its commitments, provided that all trade restrictions are lifted. However, the current state of integration within the EEU testifies to the fact that reaching the set goals means overcoming numerous obstacles that are often artificial and politically motivated.
Arseny Sivitski:
Belarus has significant industrial potential and the EEU is regarded as an alliance that could strengthen member states’ industrial ties. In future, EEU countries should go on to develop a common industrial policy. During its time as EEU president, Belarus is acting on the assumption that the Union should become a powerful resource for the modernization and improved competitiveness of participating countries’ national economies. But for this to happen, technological innovations need to be developed and industrial cooperation enhanced, in order to create Eurasian transnational corporations in EEU member states. This will allow the countries to combine their efforts in foreign markets, rather than competing with each other in the EEU internal market. Creating Eurasian multinational corporations (for example, from the Belarusian MAZ and the Russian KAMAZ holding) may, in fact, lay the foundations for a common, coordinated industrial policy. For the time being, there are no ready-made solutions acceptable to all parties for the economic challenges the EEU faces, but if the countries start to cooperate harmoniously, these ambitions will be transformed into reality.
In future, EEU countries should go on to develop a common industrial policy.
Joint scientific and technical programs and their subsequent localization in joint ventures could become another tool to stimulate industrial cooperation among EEU countries. To this end, there is the experience of programs carried out under the Union State. They include “Improving the system of protection of general information resources of Belarus and Russia based on high technologies for 2011-2015”, "Development of space- and ground-based means for providing customers in Russia and Belarus with Earth remote sensing data”, and “The development of innovative technologies and equipment for the production of competitive composite materials, matrices and reinforcing elements in 2012-2016” among others. Thanks to these programs, Belarus got its own satellite and the Belarusian-Russian supercomputer SKIF was created.
The EEU needs new growth drivers in order to develop. Free movement of goods, services, labor and capital is not enough, but the joint scientific and technological projects could do the job.
Alexei Dzermant:
In order to maintain the competitiveness of Belarusian goods, Minsk is keen to see restrictions on the energy market lifted and removed. As the most industrially developed republic, Belarus is interested in launching the process of re-industrialization within the EEU. This will update existing industrial facilities and create new ones. If the EEU integration process is accompanied by half-measures and energy-related withdrawals continue to take place, Minsk could call into question the expediency of the Union for hindering the development of member states’ national economies.
How might the EEU’s creation impact Belarus’ relations with other countries or international organizations?
Denis Melyantsov:
Belarus’ relations with the EU and the U.S. are at a very low level; given the sanctions imposed against the country, the impact of its integration into the EEU on relations with the West will be minimal. Alongside other post-Soviet countries, Belarus is involved in the EU’s Eastern Partnership program, but has never set the target of concluding an association agreement with the EU or of joining the EU. Minsk is interested in establishing good, mutually beneficial relations with the EU and the U.S., but it is Western demands for Belarusian democratization, rather than its EEU integration that stand in the way.
In order to maintain the competitiveness of Belarusian goods, Minsk is keen to see restrictions on the energy market lifted and removed.
Arseny Sivitski:
Belarus is not yet a WTO member, while Russia joined in 2012, and Kazakhstan accession negotiations in 2015. Accordingly, the EEU was created with due regard to the principles and rules of the WTO. Paradoxically, Belarus is forced to comply in its activities within the EEU with WTO rules even though it is not a member, and derives no benefits from it. Minsk is interested in speedy accession to the WTO and EEU membership could contribute to it.
Minsk is interested in establishing good, mutually beneficial relations with the EU and the U.S., but it is Western demands for Belarusian democratization, rather than its EEU integration that stand in the way.
The Belarusian authorities are interested in active cooperation between the EEU and the EU in the economic sphere with the goal of creating a common economic space stretching from Lisbon to Vladivostok. Belarus has positioned itself as the gateway to the EEU market and may well boast this status, subject to structural reforms and economic liberalization.
It is generally thought that Belarus’ participation in the EEU has a positive effect on negotiations with other international organizations. Minsk faces no political or economic pressure from world powers over its involvement in the EEU. On the contrary, Belarus’ mediation in resolving the Ukrainian crisis has stimulated interest in the country from the EU, the United States, and China.
Paradoxically, Belarus is forced to comply in its activities within the EEU with WTO rules even though it is not a member, and derives no benefits from it.
The EEU is an economic union; therefore, military-political cooperation remains a national issue. Belarus’ fundamental security architecture is the joint Russian-Belarusian group of forces under the Union State, as well as mechanisms for coordinating foreign and security policy with Russia. But this does not prevent Minsk from cooperating with other regional security structures such as the Collective Security Treaty Organization, CIS force structures, the NATO Partnership for Peace program, the OSCE, and the Eurasian Group on Combating Money Laundering and Financing of Terrorism, among others.
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Alexei Dzermant:
It will produce a positive effect. So, the EEU’s creation has gave momentum to relations between Belarus and China, and made it possible to carry out a wide-ranging Sino-Belarusian project - The Great Stone Industrial Park. The common customs area, common market, infrastructure and transport projects under the Customs Union and the EEU create opportunities for the emergence of more similar areas of growth. Belarus, as an EEU member, is attractive for EU investors, and also interested in cooperation with Russia and China. Minsk appears to offer a natural platform for developing the idea of “integration of integrations” and the creation of a common economic space that stretches from Lisbon to Vladivostok.
Economic integration implies readiness to share the risks among all members of the Union. In your opinion, how might economic crises in other countries involved in the EEU impact your country’s economy?
Minsk faces no political or economic pressure from world powers over its involvement in the EEU.
Denis Melyantsov:
Belarusian economic cooperation with Kazakhstan, Armenia and Kyrgyzstan is weak, so the crises in these countries cannot exert a significant damaging impact on the country’s economy. Belarus’ main trading partner is Russia (48 percent of Belarusian exports are destined for Russia), and difficulties in the Russian economy have an immediate impact on Belarus. The devaluation of the Russian ruble, food bans introduced in response to sanctions, as well as trade barriers Moscow regularly imposes on Belarusian goods have already prompted the Belarusian authorities to announce their plans to diversify the country’s exports as soon as possible and to become less dependent on Russia in trade.
Minsk appears to offer a natural platform for developing the idea of “integration of integrations” and the creation of a common economic space that stretches from Lisbon to Vladivostok.
Arseny Sivitski:
The Russian economic crisis resulting from Western sanctions over Ukraine, as well as internal structural problems in the Russian economy have had a negative impact on the economic development of Belarus. Real GDP growth in 2014, largely due to the crisis in Russia, amounted to just 1.6 percent, even though the government had planned for 3.3 percent. This testifies to the strong dependence of the Belarusian economy on Russia. In the medium term this dependence is likely to continue, while the forecast for the Russian economy appears to be generalized negative growth.
Difficulties in the Russian economy have an immediate impact on Belarus.
This economic slowdown and decreased purchasing power in the Russian market reduced Belarusian exports to Russia. The Belarusian authorities offered to carry out a joint anti-crisis plan with Russia to mitigate the negative effects of the crisis on both countries. Belarus is ready to share the economic risks to the extent that Russia is ready to make joint efforts to mitigate them.
The Belarusian authorities to announce their plans to diversify the country’s exports as soon as possible and to become less dependent on Russia in trade.
Alexei Dzermant:
The recent devaluation of the Russian ruble has dramatically reduced the competitiveness of many Belarusian goods. Authorities in Minsk have been forced to smoothly devalue their national currency. The Russians’ reduced purchasing power results in reduced sales of Belarusian products. In this situation, the Belarusian authorities are forced to think about diversifying their markets, although it is no secret that the Russian market cannot be easily replaced. On the other hand, Western sanctions on Russia have boosted supplies of Belarusian agricultural products and opened up new avenues for cooperation in the military-industrial sphere. It seems that cooperation between all EEU participants has great potential to minimize risks and address the consequences of the crisis.
The EEU should be fully up and running by 2025. How do you see the Union in 10 years’ time?
Denis Melyantsov:
The situation in the post-Soviet space is unstable. I think the oil price, the situation around Ukraine, the political elites’ ability to modernize the economies of their countries will shape the future of not just the EEU, but of the entire CIS. Integration under the EEU could freeze should Russia fail to become an attractive pole of integration (in terms of technology, innovation, culture, etc.) and a donor for post-Soviet countries. Amidst the crisis, EEU member states would probably prefer to solve their problems independently.
Arseny Sivitski:
By 2025, the formation of the common market and the removal of all obstacles to the free movement of goods, services, capital and labor should be completed. The experience of European integration shows that, sooner or later, the EEU will discuss establishing a single currency area. So far, there is no consensus on this issue. The task now is to transition to payments in national currencies in mutual trade among EEU countries.
It seems that cooperation between all EEU participants has great potential to minimize risks and address the consequences of the crisis.
For the time being, the EEU does not intend to establish common funds for infrastructure and industrial projects similar to the Great Silk Road Fund, the Asian Infrastructure Investment Bank or the European Fund for Strategic Investments. However, they are clearly needed in order to boost economic growth within EEU countries.
Integration under the EEU could freeze should Russia fail to become an attractive pole of integration.
Regarding long-term geopolitical tensions between Russia and the West, the EEU will face new economic impediments that will discredit the goals set out in the EEU Treaty and lose integration attractiveness for members. Eventually, this may result in a crisis of the Eurasian integration processes and lead to a possible collapse of the EEU.
I hope that in 10 years’ time the EEU will become an integration union operating at full capacity and a global economic pole.
Alexei Dzermant:
I hope that in 10 years’ time the EEU will become an integration union operating at full capacity and a global economic pole. It’s likely that in 10 years’ time the EEU will unite not only post-Soviet states, but countries from other regions as well. We may witness the imposition of a single currency for EEU countries. The possibility of closer political integration among the Union’s member states on the model of the Union State of Russia and Belarus, but providing sufficient sovereignty for nation states, is also left open.
The debate among Belarusian experts on the prospects and risks of participation in the EEU has shown that:
- Minsk hopes the EEU will help stabilize the country’s economy in these times of crisis in the world economy and provide free, equal, and politically unmotivated access to trade, energy resources, capital;
- Belarus has significant industrial potential, and adopting a coordinated industrial policy under the EEU could enhance this;
- Russia is the major economic partner of Belarus in the EEU. Commercial, industrial, financial ties between Minsk and other EEU member states, namely Kazakhstan, Kyrgyzstan and Armenia, are underdeveloped;
- To diversify end markets for its products, Belarus is interested in developing economic relations not only with Russia and EEU members, but also with the EU, China and other partners.
- Minsk would like to renew economic cooperation with the EU through the EEU, and to become a WTO member in the near future.
Prepared for publication by Galia Ibragimova, Consultant, PIR-Center for Policy Studies
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