Cheap gas for deepen integration of Russia-Belarus Union State


Nikola Mikovic

Leaders of Russia and Belarus can’t break a deadlock over the Union State integration plans. Presidents Vladimir Putin and Alexander Lukashenko recently discussed the future of this entity, but they failed to reach an agreement on key issues such as single currency, gas price, and common monetary and fiscal policies.

In principle, they agreed to deepen integration between the two countries by December 8, which is the day that they will mark twenty years since the Union State Treaty was signed. However, at this point, there is no indication that Moscow and Minsk will resolve these crucial problems that prevent further integration by then.

On the one hand, Russia insists on a firm alliance between the two countries, although in June this year Putin stressed that unification is not on the agenda. According to the Russian President, the Union Treaty has many uniting elements “up to the creation of a union parliament and launching a common currency.”

There is no doubt that the Kremlin would be interested in the introduction of a common currency – printed in Moscow – be it a Russian ruble or a common ruble. The Belarussian leader is aware that a single currency assumes a partial loss of the country’s independence. In that case, Minsk would not have the ability to independently determine monetary policy or to regulate the currency market in a way that the exchange rate is beneficial to the economy.

The primary goal for Belarus is to find solutions for current issues such as reducing gas prices and receiving compensation for the tax maneuver which was recently introduced by Russia. According to Anton Siluanov, Russian First Deputy Prime Minister, the tax maneuver will help Russia create good modernization conditions for its oil-processing enterprises.

“Russia is not going to provide new loans to Belarus, nor discuss possible compensation for tax maneuver in the oil sector until the two countries agree on a vision for their further integration”, said Anton Siluanov.

Since Russia already supported the Belarusian economy with $4 billion annually, providing any compensations for the tax maneuver would result in an additional $3–4 billion support package. At this point, it is not probable that the Kremlin would make another concession to Belarus.

According to the Belarusian finance ministry, the country’s budget revenue losses from the tax maneuver in 2019 alone were estimated $300 million, and that the losses might total $2 billion by the end of 2024. However, in December, Lukashenko’s spokesperson said in a televised interview that Minsk already lost $3.6 billion due to Russia’s cut of energy subsidies to Belarus.

Minsk has long benefited from buying subsidized oil products from Russia and re-exporting them. Naturally, Belarus is interested in keeping the status quo, but the Kremlin has another agenda. Moscow is willing to start gas supply talks with Belarus only after the two countries find solutions for integration issues, which seems to be the Russian primary goal.

It is unlikely that the endless Belarus-Russia gas dispute will be resolved any time soon since the integration process has been on the table for the past twenty years without any results

When it comes to a single currency and common market issues, Belarus strongly opposes any idea that the economic and financial policies would be decided exclusively in Moscow.

“The most important thing is to ensure genuine equality of all economic entities, both in Belarus and Russia. Belarus has consistently advocated this position. We do not want preferences. We want equality in relations between our entities. If it manifests itself in practice then the union will become a reality,” said Igor Marzalyuk, Chairman of the Belarusian Education, Culture and Science Commission of the House of Representatives.

Due to a large disproportion between the two countries (Russia being 82 times larger than Belarus), as well as the economic and military strength, it would be impossible for Belarus to have an equal status in the Union State. Quite aware of that, Lukashenko is actually seeking a balance between Russia and the West. So far he has managed to keep most of the Belarusian companies out of Russian oligarchs’ sphere of influence, and also out of the IMF backed privatization plans.

The idea of the Union State of Russia and Belarus has been discussed since the 90s, and Lukashenko himself proposed it to former Russian President Boris Yeltsin. In 1999, both sides signed an agreement on the creation of a Union State. Ever since, the Union State of Russia and Belarus exists only on paper, with the exception of the emergence of several supranational bodies and the media. Originally, this federal-type entity was supposed to have a common parliament, government, customs, currency, judicial and tax systems.

Since the two countries were not able to increase the efficiency of the Union State for the past twenty years, it is unlikely that they will make significant progress by December 8. That does not mean, however, that the Union State will cease to exist. Presidents Putin and Lukashenko can easily blame their governments, or working groups if another integration plan doesn’t go through.

Nikola Mikovic a contributor of Blitz is a Serbian freelance journalist and geopolitical analyst. He writes for several publications such as Geopolitical Monitor, Global Security Review, International Policy Digest and Global Comment. He is also a regular contributor for YouTube geopolitical channel KJ Vids. Nikola covers mostly Russia, Belarus, and Ukraine.


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