This report of “Our House” aims to examine the impact of the economic sanctions of Europe and the United States on the economy of Belarus and, in particular, on the economic situation of women in Belarus.
Sanctions: from freezing – to lifting
The West is gradually lifting sanctions against Belarus. On 12 July 2017, it has been done by Canada. However, the sanctions were frozen more than a year ago, so their current withdrawal is, rather, the official recognition that Alexander Lukashenko is no longer considered as “the last dictator of Europe.” However, it is noteworthy that Western sanctions have never influenced the Belarusian economy (we will explain further in the text why they did not influence). Other barriers – not political ones, influence it.
Canada: later than Europe, earlier than the USA
Two events have almost coincided. First, on 11 July, at the meeting in Minsk dedicated to the priorities of Belarus’ foreign policy at the current stage, Alexander Lukashenko again began to talk about the importance for Belarus to develop cooperation with the East and the West equally, without making a choice between them.
“Today, for the sake of strengthening the authority of the country, we need to expand the circle of business partners and reliable allies. Do not quarrel, do not conflict, but be friends with everyone. It is of fundamental importance to develop cooperation with the East and the West equally, without making a choice between them. It is necessary to establish contacts everywhere so that we are known, understood and eventually accepted. Only then we can confidently rely on the establishment of mutually beneficial relations”, — the press service quotes the head of the state[1].
In particular, the leader of Belarus counts on the promotion of his initiative under the provisional name “Helsinki-2” (at a recent session of the OSCE Parliamentary Assembly in Minsk, Lukashenko took the initiative on a new Helsinki process). If this ambitious plan can be realized, Lukashenko will be able to declare himself as the main European peacemaker.
Nevertheless, the moment connected with the economy is even more important. At the meeting on July 11, Lukashenko demanded to grasp the moment to improve the global market for the promotion of Belarusian goods.
“I appeal to all participants of the meeting: not only to the Ministry of Foreign Affairs and ambassadors but also to the government, to the main exporters. We cannot miss the moment of improving the situation in the world economy and the conjuncture for carrying forward our goods. At the same time, we must exclude the situation when we rush to places where we are not welcomed, leaving the most profitable tested markets of the nearest countries”, — he said.
The normalization of relations with the European Union remains among the foreign economic priorities[2].
It is clear that such normalization of relations between Belarus and the West is simply impossible while political and economic sanctions against the country are applied. However, it is proper to say – “were applied.” For some reason today, many politicians and journalists around the world believe that sanctions against the official Minsk were still in force. Nevertheless, that is not exactly true.
Here is the second key event: from July 12, Canada’s economic sanctions against Belarus had ceased to be operative. The corresponding decision of the Canadian Government was published on June 26. It states that Belarus is excluded from the list of countries (in addition to Belarus, North Korea also was included in this list) that require an export permit from the Ministry of Foreign Affairs and Trade of Canada[3].
“Canada is lifting economic sanctions from Belarus, as the United States and the European Union did the same thing, — Canadian Foreign Ministry commented on the decision of the Government. — The revised approach reflects Canada’s recognition that the Government of Belarus has made progress in key areas, including the release of political prisoners and the holding of peaceful presidential elections in October 2015”.
The statement also notes that Canada recognizes the constructive role of Belarus in facilitating negotiations on the settlement of the situation in Eastern Ukraine. On 7 May 2016, Canada announced the beginning of the procedure for the lifting of sanctions from Belarus, introduced on December 14, 2006, in connection with human rights violations in the country.[4] Previously, the USA and the EU took similar steps. In October 2015, the United States decided on a partial easing of sanctions against Belarus and in February 2016, the sanctions were partially reversed by the European Union. However, the positions of different countries and unions on the “Belarusian issue” distinguish significantly. We will try to figure this out further.
Lukashenko: is a dictator or not?
Economic and political (personal) sanctions against Belarus were imposed in December 2006. In that year presidential elections were held in Belarus, in which immovable Alexander Lukashenko won the election once again. Whereupon street protests of people disagreed with the results of the elections were severely suppressed, and many opponents of Lukashenko were imprisoned or went to forced emigration. Those elections were deemed by the OSCE to not be democratic, which was a formal reason for the imposition of sanctions by the United States and the European Union, as well as by their allies, including Canada. Personal sanctions were imposed against Alexander Lukashenko, his sons Viktor and Dmitry, the head and the secretary of the CEC (Central Election Commission) Lydia Yermoshina and Nikolai Lozovik, the Minister of Information Lilia Ananich, Chairman of KGB (Committee for State Security) Valery Vakulchik, the head of the TUFB (the Trade Union Federation of Belarus ) Mikhail Orda, the former Chairman of Belteleradiocompany Alexander Zimovsky and others.
To the list of Belarusian enterprises, which were sanctioned by the EU, were included “Beltechexport”, “Beltech Holding”, “Spetspriborservis”, “Dynamo” football club, “Traypl” and “Rakovsky Brovar”, “Prostor-Trade”, “AquaTrain”, “QuartzMelProm”, “Berezovsky combine of silicate products”. Four companies of the Belarusian businessman Yuri Chizh were included in the separate sanction list: “Traypl Metal Trade”, “Traypl Techno”, “Traypl Agro” and the ski resort “Logoisk”. A complete list of individuals and companies in respect of which sanctions were imposed (and then withdrawn) can be seen here: [5]
Official reasons for the imposition of sanctions were violation of the Vienna Convention, violation of human rights in Belarus by state bodies, the authoritarianism of Alexander Lukashenko’s regime. In 2004, the United States spelled out conditions: the release of everyone who was imprisoned because of political and religious convictions; the withdrawal of the charges from independent journalists. “The Democracy and Human Rights Act” was adopted in 2011, and in 2012, President Lukashenko, his two sons, and 157 officials were prohibited from entering the US. In 2013, sanctions were extended.
In October 2014, in a press release of the EU Council, it was stated:
“Today, in accordance with the annual review, the Council (EU) extended the restrictive measures on the part of the EU against Belarus until October 31, 2015. This decision was made because of the fact that not all political prisoners were released and rehabilitated, and no significant progress in the respect for human rights, the rule of law and democratic principles was observed in Belarus”. [6]
Later, both Europeans and Americans (we will talk about the US sanctions separately) extended the sanctions annually. At some point, it seemed that there would be no lifting of sanctions at all – after the 2010 presidential elections, which was accompanied by riots in the center of Minsk and unusually brutal suppression of them. In 2012, the set of sanctions was even expanded – in particular, the entry of Belarusian officials (more than 170 people, including the president personally) to the territory of the European Union was restricted, and a condition for the lifting of the sanctions was the release of all political prisoners. The sanctions against all above-mentioned enterprises were also preserved.
However, in 2015 – for the first time since 1994 – violence, arrests and judicial prosecutions of the opposition did not accompany the next re-election of Alexander Lukashenko. Moreover, in August of the same year, all political prisoners were released from prisons, and some political emigrants were able to return to the country. After that, the “collective West” started to change its policy – most of the sanctions were frozen. In particular, the sanctions against all officials were frozen, except four people, who are accused by Europe of involvement in the disappearances of politicians and journalists in 1999-2000. That is, Viktor Sheiman, Yuri Sivakov, Vladimir Naumov and Dmitry Pavlicenco remained under sanctions.
Full history of sanctions against Belarus
Relations between Belarus and the EU were complicated in 1996 due to the conduct of a referendum on changing the constitution of the country when the term of presidential authority was extended and a new countdown of this term was started. Then the West considered that the results of the referendum were falsified, and the president got unrestricted authority. After the presidential elections in 2006, the EU introduced economic sanctions against Belarus, as well as visa restrictions for Belarusian officials, including Lukashenko, accusing the country’s president of the conduct of non-free elections. The “Blacklist” included 41 people. In 2008, visa sanctions against Lukashenko and some officials were lifted.
In November 2009, the foreign ministers of the 27 EU countries decided to extend the sanctions against certain state officials of Belarus until October 2010 but the regime of non-application of visa restrictions against certain Belarusian senior officials was extended for one year.
In October 2010, the EU Council extended the ban on entering the EU states for a group of current and former senior officials of Belarus led by President Alexander Lukashenko until October 31, 2011, in all 41 people. At the same time, the regime of non-application of visa restrictions was retained in respect of 36 of them, including Lukashenko, and the ban on entry was valid only for five people out of them. Two former Ministers of Internal Affairs Yuri Sivakov and Vladimir Naumov, ex-Prosecutor-General Viktor Sheiman, the head of CEC Lydia Yermoshina and former commander of Special Forces of the Minsk Yuri Podobed did not get into the moratorium.
Thus, the sanctions imposed in 2006 were suspended. The events that took place on 19 December 2010, in Minsk, where the opposition organized an unauthorized rally after the end of voting in the presidential elections, served as the reason for the EU to introduce new sanctions against Belarusian citizens and Belarusian companies and organizations. The authorities detained hundreds of protesters, including opposition presidential candidates. The European Union strongly condemned the Belarusian authorities and announced its intention to apply sanctions against Minsk as a retaliatory measure.
On 31 January 2011, the foreign ministers of 27 EU countries at the meeting in Brussels agreed on the decision to impose sanctions against 158 representatives of the Belarusian authorities, including the president of the country, Alexander Lukashenko. Among the Belarusian officials, who were affected by the sanctions imposed by the united Europe, the elder sons of the President of Belarus, Viktor and Dmitry Lukashenko fell over.
As part of the sanctions, they were banned from entering the EU states, and their available financial assets were frozen.
On 23 May 2011, the foreign ministers of the EU countries expanded the “Blacklist” of Belarusian officials by another 13 persons, which are subject to “restrictive measures”, including the freezing of their accounts and the ban on entry to the European Union. Persons “involved in the repression of the Belarusian opposition”, as well as judges and prosecutors who participated in the legal proceedings against the opposition were among new individuals.
On 20 June 2011, the foreign ministers of 27 EU countries decided to expand sanctions against Belarus by imposing an embargo to the country on deliveries of “weapons and materials that can be used for internal repression.” The ministers also expanded the list of Belarusian individuals who were banned from entering the EU and whose assets in Europe were frozen. The names of sanctioned Belarusian individuals and companies were not provided in the statement for the media.
On 10 October 2011, the European Union decided to impose sanctions against 16 more representatives of the Belarusian authorities. It was not reported which of the Belarusian officials was sanctioned.
In December 2011, the Foreign Affairs Council of the European Union approved the expansion of sanctions against Belarus, according to which more than two hundred Belarusian officials were banned from entering the EU.
In February 2012, the EU Council adopted a resolution paving the way for additional sanctions against individuals and legal entities in Belarus, who, according to the EU, are implicated in violations of basic human rights in the country. The Council (EU General Affairs) added 21 persons responsible for suppressing civil society and democratic opposition in Belarus to the list of those who are prohibited from entering (the EU) and whose assets are frozen.
The expansion of sanctions caused an aggravation of the Belarusian-European relations, Minsk recommended the ambassadors of Poland and the EU to leave the country for consultations. The European Union has withdrawn all the ambassadors of the EU countries accredited in Belarus, and at the end of March, once again expanded the list of Belarusian officials and companies subject to sanctions. Then another 12 citizens of Belarus and 29 companies were included in the “Blacklist”, which, according to the EU, are involved in human rights violations in the country. The number of Belarusian citizens in the “Blacklist” sanctioned by the EU reached in total 243 family names.
On 23 April 2012, the foreign ministers of the EU countries modified the sanctions regime against Belarus. In particular, the Foreign Affairs Council of for Foreign Affairs approved legal acts on the standard exclusion from the EU sanctions regime, which considers the freezing of assets of Belarusian legal entities, the funds of diplomatic missions and missions to the international organizations.
On 8 June 2012, it became known that seven countries outside the European Union joined the restrictive measures introduced earlier by the EU against the authorities of Belarus. Croatia, Macedonia, Montenegro, Iceland, Serbia, Albania, and Liechtenstein has joined sanctions against the authorities of Belarus, adopted by the EU Council on 23 March 2012.
In August 2012, tension in the EU-Belarus relations reached a new level after the expulsion of the Swedish ambassador from Minsk, who, according to Swedish Minister of Foreign Affairs – Carl Bildt, “was too active in advocating for human rights.” The EU also criticized the parliamentary elections in Belarus in September 2012, which, according to Brussels, did not meet international democratic standards.
On 15 October 2012, the European Union decided to extend sanctions against the Belarusian authorities until October 31, 2013, as stated in the document, because of the absence of a general improvement in the situation with human rights, rule of law and the respect of democratic principles in the country.
On October 29, 2013, the European Union extended the “restrictive measures” against Belarus until October 31, 2014. The EU Council also left 232 individuals, 25 companies, and enterprises on the list of individuals and legal entities that are prohibited from entering the EU and whose assets are frozen on the territory of the union.
On 30 October 2014, the Council of the European Union extended the “restrictive measures” against Belarus until October 31, 2015. In return, the EU Council found no reason to retain the names of 24 individuals on the list who were previously banned from entering the EU and whose assets were frozen in the EU. Furthermore, restrictions were lifted from seven Belarusian enterprises.
In October 2015, after Minsk has released all political prisoners and the peaceful conduct of presidential elections in the country, the EU decided to weaken the sanctions regime significantly, by extending the sanctions for four months and simultaneously suspending its action against all individuals on the list, except for four people whom EU considers personally responsible for disappearance of persons. The sanctions temporarily ceased to apply to the President of Belarus as well.
The measures continued to operate against four persons from the sanctions list: Vladimir Naumov (former Minister of Internal Affairs), Dmitry Pavlichenko (commander of the special internal forces of the Ministry of Internal Affairs), Viktor Sheiman (former Prosecutor-General) and Yuri Sivakov (former Minister of Internal Affairs). The European Union also upheld the arms embargo in respect of Belarus.
In 2006, the USA introduced sanctions, which included the blocking of property and assets of ten leaders of the Belarusian government, including President Alexander Lukashenko. Since then, the decree has been renewed annually. Thus, in 2007 sanctions were imposed on “Belneftekhim” concern, in 2010 – against two banks of Iranian origin operating in Belarus.
In October 2015, the US partially lifted sanctions against nine Belarusian companies that were imposed in 2006 for t “disrupting democratic development.” In particular, earlier prohibited transactions with the Belarusian state concern Belneftekhim and its American division, the tire manufacturer OJSC “Belshina”, the ammonia and fertilizer producer OJSC “Grodno Azot”, OJSC “Grodno Khimvolokno”, OJSC “Lakokraska”, OJSC “Naftan”, OJSC “Polotsk-Steklovolokno” and “Belarusian Oil Trading House” were permitted [7].
The ineffectiveness of EU sanctions
In practice, the imposition of EU sanctions practically did not affect the business of the companies that were under these sanctions. There are several reasons for this. Two main ones are their business is connected with the state, which, in turn, helps companies to work in the market; additionally, the business of the sanctioned companies is mostly connected with Russia and other countries outside the sanction field.
In 2012, for the month that has passed since the EU introduced sanctions against the companies of the Belarusian oligarch Yuri Chizh, they have only improved their positions in the rating of the largest taxpayers of the Belarusian capital. According to the results of January-April 2012, the company “Traypl” was the third in the top 10 of the largest taxpayers in Minsk (after “Beltransgaz” and “Lukoil-Belarus”).
A month after the introduction of sanctions, Yuri Chizh managed to declare two major projects that are not related to the European Union. One of them is the creation of a joint enterprise for the assembly BelAZ trucks in the Kemerovo region; the second is the construction of an assembly plant for tractors of the Minsk Tractor Plant in Pakistan. In addition, the businessman has a huge package of orders for the construction of objects inside the country, as well as an “oil outlet” in the form of the Ukrainian market of petroleum products.
Let us not forget that the EU sanctions have affected not all oil businesses that are associated with Yuri Chizh. For example, ODO “Belneftegaz” was in the fourth position among the largest taxpayers in Minsk in January-April, which turned to be out the “Blacklist” of European officials[8].
The position of the European Union
“These sanctions are not against the country, but against officials and firms, however, generally they are perceived as sanctions against the country. This is a ban on the entry of officials and businesspersons into the territory of the EU, freezing the assets of these officials in the EU if any are found. Nevertheless, there is no information that either of the officials kept their money in the EU, — explained the situation, senior analyst of the Belarusian Institute for Strategic Studies (BISS) Denis Melyantsov. — In addition, the EU countries pledged not to supply or sell weapons and some special facilities that, according to the EU, could help the Belarusian police in the dispersal of the opposition. — There were also sanctions against a number of enterprises. By and large, that is all. However, sanctions have an indirect effect as well. For example, many European and American investors are afraid of coming to Belarus and invest their money, knowing that the country is under sanctions.
That is, these sanctions can be called symbolic, they are lenient enough. In general, they do not lead to the economic damage of the country. This is not the kind of sanctions that have been imposed on Iran and Russia. Nobody imposed a ban on the purchase of Belarusian goods; no one restricted the access to loans, as, for example, in the case of Russia. The trade that was going on between Belarus and the EU continues. But the sanctions affected the reputation of the country”[9].
That is, from the very beginning, the Europeans have focused on political sanctions. That is, Belarusian officials were not allowed to enter Europe, thereby severely restricting the circle of their communication with European counterparts. Additionally, Belarus is still not represented in any political structure of Europe, except for the OSCE. Since 2006, European countries have consistently rejected all applications of official Minsk for membership in various political structures in Europe.
The fact that Canada lifted the sanctions imposed 11 years ago is a kind of sign: the West no longer considers Belarus as the “last dictatorship in Europe”. Another similar sign is the recent OSCE PA session, which was held for the first time in Minsk on July 5-9.
However, it all began much earlier. On 25 February 2016, the Council of the European Union officially confirmed the decision that sanctions will not be extended against 170 citizens and three legal entities of Belarus, which was due to expire on February 29. The corresponding political decision was adopted shortly before that – on 15 February[10].
The sanctions were suspended, including against Alexander Lukashenko and his two sons Victor and Dmitry, the head of the CEC Lydia Yermoshina, Minister of Information Lilia Ananich, the head of the KGB (Committee for State Security) Valery Vakulchik and his predecessor Stepan Sukhorenko. Also, 10 companies were excluded from the “Blacklist”: “Beltechexport”, “Beltech Holding”, “Spetspriborservis”, “Traypl”, “Rakovsky Brovar”, “Dynamo” Football Club, “Prostor-Trade”, “AkvaTraple”, “QuartzMelProm”, Berezovsky combine of silicate products.
However, at the same time, the EU officially extended for a year the arms embargo against Belarus and the sanctions against four people suspected of being involved in the disappearance of Lukashenko’s opponents – politicians and a journalist. These are Vladimir Naumov (former Minister of Internal Affairs), Viktor Sheiman (former Prosecutor-General) and Yuri Sivakov (in the period of the disappearance of politicians, he held the post of the head of the Ministry of Internal Affairs), Dmitry Pavlichenko (commander of the special internal forces of the Ministry of Internal Affairs)[11].
On 17 February, Norway, which, following the EU, introduced restrictive measures against Belarus, also announced their partial withdrawal.
“Norway will lift those restrictive measures regarding Belarus, the decision on which has been adopted by the EU”, — said a spokesman of the Ministry of Foreign Affairs of Norway Astrid Sel[12].
Position of the USA
American sanctions against Belarus were introduced for the first time in October 2004, when the document “The Democracy Act in Belarus” was adopted. It contained an analysis of the Belarusian political reality and legislation. Eleven paragraphs of the document were dedicated to describing the signs of authoritarian regime of Alexander Lukashenko: from the disappearances of critics of the political system and the brutal suppression of peaceful demonstrations to the assumption of power and the formation of a rubber-stamp parliament.
In addition to the sanctions, the Act contained the description of the types of assistance that can be applied by the president of the United States according to the right granted by Congress. “Gingerbread” for Belarus consisted of supporting the opposition segment of civil society through increasing allocations for television and radio broadcasting in Belarus. In addition, a support from media independent of the state (including those operating abroad), international exchanges for opposition representatives, and support for the opposition parties were expected. The document listed in detail top State officials of Belarus, however, no sanctions were imposed on them. “Knut” (“Stick”) banned granting loans and investments to Belarus from governmental and all government related US organizations. The same ban needed to be implemented by the US representatives in all financial institutions, where the US is a member (i.e. the World Bank and the IMF).
In doing so, sanctions did not apply to products of humanitarian purpose, agricultural products or medicines. They would be imposed until the Belarusian government complied with the conditions of US: the release of those who imprisoned because of political and religious convictions; the elimination of politically motivated accusations against all opposition figures and independent journalists; investigation of their disappearances; cessation of all forms of persecution and repression against independent media, political organizations and trade unions, religious organizations; holding free and fair presidential and parliamentary elections – in accordance with OSCE principles.
In 2006, the US Congress adopted the “Verifying Act on Democracy in Belarus” by extending the sanctions of the previous act for another two years and increasing the funding of the opposition and independent media. Sanctions still did not concern personally the officials.
In 2011, a new “Act on Democracy and Human Rights in Belarus” was adopted. 10 out of the 22 “indictments” concerned the suppression of the protest on 19 December 2010, when 700 people were detained, including most of the presidential candidates. The document expanded the circle of the mentioned officials by adding to them the law enforcement officers. In addition, the United States called upon the International Ice Hockey Federation to suspend preparations for the World Cup in Minsk in 2014 and imposed sanctions against certain Belarusian enterprises by banning business contacts with them and freezing their assets.
Finally, at the beginning of 2012, the President Lukashenko, his two elder sons and the officials mentioned above -157 individuals in total were banned from entering the US territory (the US did not recognize Lukashenko as a legitimate head of state). In 2013, the sanctions were extended for another year[13].
In October 2015, the US Treasury partially suspended sanctions against a number of companies from Belarus. This is “Belneftekhim” and its subsidiary in the USA (Belneftekhim USA), “Belshina”, “Grodno Azot”, “Grodno Khimvolokno”, “Lakokraska”, OSJC “Naftan”, “Polotsk Steklovolokno”. Further, this decision was extended for six months in April and October 2016, and then in April 2017.
On the other hand, on 13 June this year, US President Donald Trump extended sanctions against some representatives of the Belarusian authorities.
“I have sent a notice to the Federal Register for publication that the regime of emergency will continue after June 16, 2017, in connection with the actions and policies of certain members of the government of Belarus and other persons, which undermine the democratic processes and structures in this country, — is indicated in the Trump’s letter that was addressed to the leaders of the US Congress. — There are human rights violations related to political repression and corruption in this country. This poses a threat to the national security and foreign policy of the United States“.
The White House does not disclose the full list of “banned” Belarusian officials, but it is known that in addition to Alexander Lukashenko, his oldest son, Viktor Lukashenko, former deputy heads of the President’s Administration Natalia Petkevich, head of the Central Election Commission Lydia Yermoshina and Administration of the Presindent Viktor Sheiman are on the list.
On the same day (July 13, 2017), the Chargé d’Affaires of Belarus in the United States, Pavel Shidlovski, told reporters that Belarus is working on a total lifting of US sanctions.
“Relations between Belarus and the US are developing. This process is quite sustainable. Normalization has been occurring over the past few years. There is a movement towards, but there are still certain stereotypes, the American sanctions still have not been completely removed. They are suspended against the enterprises of “Belneftekhim”. We are working to ensure that these sanctions are completely removed”, — said Pavel Shidlovsky.
According to him, improving the atmosphere of bilateral relations between Belarus and the United States allows to develop a cooperation in a number of areas, including trade, economic and investment.
“We are establishing a dialogue with the new Administration of the President of the USA. A visit of the deputy of Foreign Affairs Minister of Belarus and political consultations with the State Department were conducted. Other structures of the US continue to keep positive contacts with the State Department. The United States supports the sovereignty and independence of Belarus, and an integral part of this support is a support of economic independence. Consequently, economic contacts between two countries are developing”, — added Pavel Shidlovsky.
In early July, a member of the US Congress Senate and a delegate of the OSCE PA session, Roger Wiker, told what Belarus should do to abolish American sanctions. He mentioned registration of non-governmental organizations and political parties among the first measures that could lead to the improvement of bilateral relations between Belarus and the US. According to the politician, he said this also personally to Alexander Lukashenko during their meeting in Minsk[14].
The impact of sanctions on the economy of Belarus
In Belarus, the lifting of Western sanctions has not become a matter of public discussion. In the daily life, nobody really felt the impact of these sanctions: the Belarusian economy is “tied” to Russia and China, and they did not impose any sanctions. On the other hand, the main products that Belarus supplies to the European Union market are refined oil products, timber, potash and nitrogen fertilizers, and metal rolling. Europeans never sanctioned these groups of goods. Accordingly, there are not and cannot be any statistics on them.
American economic sanctions were relatively painful for Belarus. According to experts, the annual losses of Belarusian exporters because of US sanctions exceeded $ 200 million. Suppliers of potash fertilizers suffered the most of all: their exports amounted to $ 100 million per year. Exports of oil products to the US, the total volume of which was $ 240 million in 2006 and 2007, decreased to the minimum levels during the period of sanctions. OJSC “Belshina” had been losing about $ 20-25 million annually because of a decrease in supplies. “Grodno Azot” whose average annual revenue in the US market since 2008 was estimated at $ 50 million also underfunded significant amounts of money. Nevertheless, the US sanctions were not felt in practice in the scale of the entire Belarusian economy for ordinary citizens. The reason for this is that all listed enterprises are directly or indirectly controlled by the state. And it is the state who provided compensation in the form of both internal state orders and a facilitated access to the markets of the post-Soviet countries in the conditions of fall of these enterprises trade volumes with the US because of sanctions[15].
However, experts believe that the suspension or lifting of sanctions does not because rapid growth of Belarusian exports to the United States and countries of the EU. On the other hand, the fact of sanctions lifting is affecting the investment and business climate in Belarus in a positive way. Last year, Official Minsk already got an access to financial instruments of the European Investment Bank (and has recently placed its Eurobonds there), as well as to EBRD programs. Minsk counts also on EU assistance on the issue of Belarus’ accession to the WTO and facilitation of the visa regime (negotiations about this are already at the final stage). Finally, the receipt of macro-financial assistance from the EU in the form of grants for supporting social and economic development is being discussed.
Well, in the medium term, Belarus seems to have the opportunity to develop and sign an Association Agreement and a Strategic Partnership Agreement with the EU.
In addition, one more moment. The economics of Belarus are hit hard by the economic sanctions that the world community has imposed on Russia because of its aggression against Ukraine. But the impact is indirect, it manifests itself in three ways:
- Because of the sanctions, the purchasing power of Russian citizens and enterprises has plummeted. Accordingly, the demand for Belarusian goods decreased, for which the Russian market is the main.
- Under sanctions, the Russian government began to implement import substitution programs. That is, Russians are starting to produce goods themselves, including ones that were previously purchased from Belarus.
- Because of the sanctions, the Russian ruble rate collapsed, which resulted in a sharp drop in income of Belarusian enterprises operating on the Russian market. The consequence was the devaluation of the Belarusian currency that is more significant than the collapse of the Russian ruble.
When the official representatives of the Ministry of Finance of Belarus held meetings with investors in Europe and the US during the placement of Eurobonds, they presented a presentation for investors, which also included the risk factors associated with investment to the Belarusian economy. The relevant section lists 15 risks, including the state’s vulnerability to corruption, external shocks, the instability of the Belarusian currency, complicated relations with the European Union and the United States, the impact of the conflict in Ukraine, etc.
Several risks, which the Belarusian Minister of Finance decided to warn potential investors about, are directly or indirectly related to Russia, the largest trading partner and the largest creditor of Belarus. In addition to the standard warning that, “the deterioration of relations with Russia could negatively affect the supply of fuel and energy resources to Belarus and Russian investments in Belarus,” the Finance Minister pointed at the “indirect negative effect” on the Belarusian economy from Western sanctions against Russian and Ukrainian individuals and companies. “Sanctions imposed against certain Russian individuals and companies by the United States, the European Union, and other countries may not allow Belarus to trade with some Russian counterparties, which could have a significant negative impact on trade and the economy of Belarus”, — is outlined in the presentation[16].
Not sanctions, but instead of sanctions
The real problem of the impact of the West on the Belarusian economy is not politically motivated sanctions, but various measures by which the European Union closes its market for producers from outside the EU. That is, the European Union simply protects its own producers – for example, by introducing anti-dumping sanctions against specific product items of specific manufacturers, or by accepting an excessively strict quality standard for imported products. There are other reasons for closing the market for certain producers, for example, use of slave labor by these producers or engagement in corrupt schemes.
It is important to note that such actions have not absolute political motivation and are applied not only to Belarusian enterprises. Nevertheless, the official Minsk prefers to interpret them as political ones.
“In the world economy, the principle of national protectionism is increasingly being strengthened (…). This complicates the promotion of our products. For example, while there has been some convergence with Europe, nevertheless, it still does not give a course to a number of Belarusian products, —said Lukashenko on April 21, 2017, while delivering an annual message to the Belarusian people and the National Assembly. — We are not allowed to get into the EU market… And why do not we answer? Why are not we defending ourselves? Why reciprocally has the value of Belarus not been shown to them in absolutely symmetrical and adequate manner? If we cannot find additional opportunities to increase the supply of Belarusian products abroad, it will be difficult to raise our economy to a new level[17]”
It can be assumed with high probability that the interpretation of purely economic actions as political ones is an attempt by the Belarusian leadership to justify its failures in industrial policy.
There is one more point that is important to note in this context. Generally, there are no damage assessments that Belarus incurs, due to the difficulties in accessing its enterprises to Western markets, or due to occasional restrictions imposed by anti-dumping duties. First, it is mainly about loss of profits – and the Ministry of Economics simply does not have appropriate methods to assess it on a nationwide.
Secondly, there works such an effect: often the heads of enterprises (usually state property) do not even make efforts to enter the EU markets, explaining this by saying that “they will not be allowed anyway “. And they try to work on already developed markets of Russia, post-Soviet states and/or Third World countries. To assess the damage of such a “motivated immobility” is impossible as a matter of principle.
Official Minsk aims to completely normalize relations with the European Union and sign a basic agreement on partnership and cooperation in the next five years. Obviously, this agreement will take into account the participation of Belarus in various integration projects both in the post-Soviet space (CIS, EEA, and Union State) and in other initiatives, for example, in the Economic belt of the Silk Road.
The signing of such a basic agreement with the EU, as well as the entry of Belarus into the World Trade Organization (WTO), will undoubtedly greatly facilitate the output of Belarusian products to the markets of the European Union, as well as the to the United States and Canada[18].
Example of challenges of working with the European Union
On 19 June 2017, the European Commission (EC) introduced a final 10.6% anti-dumping duty for the period of 5 years for the import of hot-rolled reinforcing bars from the Republic of Belarus – that is, the Belarusian Metallurgical Plant (BMP), which is the only exporter of reinforcement in the country.
The decision was made based on the results of the anti-dumping investigation, which showed that metal products from Belarus were sold in the EU “58% below the normal market value,” the EC said. The European Union expects that import duties will protect European producers from unfair Belarusian competition in the next five years.
An anti-dumping investigation concerning the import of Belarusian armature began in March 2016, and in December 2016, the European Commission imposed a temporary duty of 12.5%. Then the investigation continued for another six months. After that, a decision was made on a permanent anti-dumping duty. The only manufacturer of building fittings in the country is the Belarusian Metallurgical Plant (BMP). Charges of dumping are being rejected by BMP.
“BMP operates under market conditions and exclusively in accordance with market rules. The enterprise cannot afford the sale of metal products at prices that do not correspond to the costs of its production”, — said CEO of BMP Anatoly Savenok in an interview to the newspaper “SB. Belarus Today “.
In his opinion, the EU, during start of the anti-dumping investigation, most likely focused exclusively on the situation in 2015, when BMP temporarily increased its exports to Poland and the Baltic countries.
“Among other things, the closure of two factories (in Latvia and Slovakia) contributed to this, — explained Savenok. — BMP has filled operatively the resulting niche, by redirecting part of the volume from the less profitable Russian market at that time. “
At the same time, in 2016 imports from Belarus to Poland and the Baltic States decreased again, having almost reached the previous level. “On the basis of the same goal of maximizing profit, BMP has returned to the supply of fittings to the Russian Federation, where the ruble rate strengthened and demand arose due to the increase in sales to far abroad countries by Russian producers”, — was pointed out at the Zhlobin factory.
The anti-dumping investigation started upon the complaint of the European Steel Producers Association (Eurofer) on behalf of companies, which accounted for 25% of the EU armature market. Among them are Celsa Huta Ostrowiec, Feralpi Sideruglica and Riva Acier. Eurofer said that the volume and prices of imports had a negative impact on sales volumes and the price level in the EU market, which leads to significant adverse impacts on the financial situation of EU industrial enterprises[19].
The management company of the BMF Holding Company noted at the Belarusian enterprise OJSC BMP (that fell under the “blow” of the European Commission) that for more than 25 years BMP supplied the European market with fittings that are used for the construction and reconstruction of facilities in many European cities.
“We would like to emphasize that the marketing policy pursued by BMP was absolutely fair and correct, it showed the European Commission a market-based approach of the company, — commented on the situation partner Van Bael & Bellis Richard Luff, who represented the interests of BMP during the antidumping investigation. — Indeed, even after the acceptance of various dubious “adjustments,” the Commission was able to establish “undermining” of the prices of European producers at a level of only 2.8%. This means that, on average, imports from Belarus were sold to the EU at the same prices as European producers sell.”
He stressed that the only reason for introducing a duty of 10.6% was that instead of comparing prices by countries and during the same period, the Commission conducted average calculations in accordance with its own practice, without taking into account differences in countries sales of products, periods, etc.
“This has resulted in that the margin was 10.6%, which, in our opinion, is artificial. Nevertheless, many experts note the general result of the investigation against the import of Belarusian armature: over the past 20 years, the EU has never imposed such low anti-dumping duties on steel products. The low level of duty (10.6%), established despite Eurofer’s demand for 25%, and even at a time when the steel industry in the EU behaves aggressively enough in order to obtain high protective duties at all costs, is a confirmation of the excellent work of the team BMP to protect its interests” — Laff believes.
The BMP stressed that the introduction of an anti-dumping duty, temporarily closing the European market to the Belarusian armature, did not become a shock to the Belarusian metallurgical plant that could cause a serious damage to its economy.
“First, the share of fittings shipped to the EU countries during the 2012-2015 in average was 12.3% of the total volume of BMP exports. Secondly, even at the stage of the announcement of preliminary results, the company developed a strategy on the basis of which it conducts a relocation of the released volumes of products to other areas”, — summed up in the company.
According to the interlocutors of the S&P Global Platts agency, the duty made the EU market unattractive for BMP, at least the value of the euro against the dollar remains at the current low level of $ 1.1 until now. If only the euro rises to its previous value of $ 1.3, this duty may be reduced to an almost insignificant value, and then the market will again become interesting.
BMP has already reduced its sales of fittings to the EU. For example, in January-May 2016, he sold 60,000 tons to Germany, 10,000 tons to Poland and 15,000 tons to the Netherlands. During the same five months of 2017, these countries did not receive any supplies of reinforcement from Belarus.
However, this does not mean that the factory capacity of the armature remains unloaded, and this does not mean that BMP loses its gross output, since the plant has increased sales of products (mainly rolled steel products for machinery) with a higher benefit. At the same time, BMP keeps the volume of reinforcement sales. Strategically, it is aimed at increasing sales in Russia – where the economy returned to growth by the end of 2016, and its need for steel began to rise. In addition, sales in non-EU countries such as Norway, Iceland, Serbia, and Montenegro are growing. In addition, as it has become known to S&P Global Platts, BMP is working on restoring supplies to the countries of North Africa and the Middle East, where the factory used to sell a lot of fittings before the “Arab Spring”[20].
Analytical Center «A&A»
“Our House”
[1] http://belapan.by/archive/2017/07/11/eu_911506/
[2] http://president.gov.by/ru/news_ru/view/soveschanie-po-prioritetam-vneshnej-politiki-belarusi-na-sovremennom-etape-16653/
[3] https://sputnik.by/economy/20170627/1029497034/kanada-snimet-s-belarusi-sankcii-12-iyulya.html
[4] http://belapan.by/archive/2017/07/12/911576/
[5] http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.284.01.0062.01.ENG
[6] https://ria.ru/world/20141030/1030965961.html
[7] https://ria.ru/spravka/20160215/1374712143.html
[8] http://wwww.kurs.by/news/biznes/belorusskim-oligarkham-sanktsii-evrosoyuza-ne-pomekha
[9] https://www.kp.by/daily/26445/3316244/
[10] https://sputnik.by/politics/20160225/1020411676.html
[11] https://news.tut.by/politics/484831.html
[12] https://sputnik.by/politics/20160217/1020214384.html
[13] http://www.foreignpolicy.ru/analyses/sanktsii-v-belorussii-priveli-k-tomu-chego-pytalsya-izbezhat-zapad/
[14] https://news.tut.by/economics/551171.html
[15] http://www.zautra.by/art.php?&sn_nid=19824
[16] http://www.rbc.ru/finances/15/06/2017/59429d019a79476202fd9b73
[17] https://www.interfax.by/news/belarus/1223320
[18] https://sputnik.by/columnists/20170111/1026902356/o-chem-budet-novoe-soglashenie-o-partnerstve-mezhdu-es-i-belarusyu.html