Mysterious summit

Meeting of the Supreme Eurasian Economic Council, which was held in Minsk on April 29, was a kind of test in anticipation of the announced signing of the agreement on the establishment of the Eurasian Economic Community (EAEC) in Astana at the end of May 2014. However, this test showed that the partners on Eurasian integration had fundamental differences. It is obvious that the parties have different views on the future of the Eurasian Economic Union.

The meeting itself was the only positive moment of the summit as the leaders of the three countries could more or less openly express their wishes concerning the content of a future agreement on the EAEC.

However, the general impression of the summit was negative. Four days after its completion the Belarusian president made a demarche towards Russia: “We are in negotiations primarily with Russia on ways to get these issued fixed. In the near future these issues will be fixed because we are supposed to sign the treaty on establishing the economic union in late May, this is why all the issues are to be fixed. Otherwise we will not be able to join the economic union to the detriment of our interests on unequal terms. Although I would like to stress it once again we are very much interested in it and have done a lot for the establishment of the economic union” (http://naviny.by/rubrics/politic/2014/05/03/ic_news_112_435536/). It should be noted that Alexander Lukashenko’s statement looks very ambiguous and politically opportunistic in the context of the Russian-Ukrainian and already the US-Russian crisis.

It’s interesting that both Russian and Belarusian media are trying to neutralize the failure of the summit. Russian state TV channels have paid minimum attention to the event in Minsk. However, Russian media focused mainly on the statement of Vladimir Putin on the situation in Ukraine.

 In turn, Belarusian official media talked about the difficulties and vicissitudes of the integration process and “fair” demands of the Belarusian leadership to Russia (first of all energy prices). It is worth recalling the main statements of Alexander Lukashenko on this issue: « They suggest leaving unresolved issues as they are, though these issues were supposed to be removed at the previous stages. We strongly believe that we should reach certain milestones, one of them is a full-fledged Customs Union. No restrictions should be left between its member states, no matter how sensitive these issues are” (http://naviny.by/rubrics/politic/2014/05/03/ic_articles_112_185385/) and “we need equal conditions. If something is cheap there, so it's going to be cheap here as well and visa versa… If there are no equal conditions, so we do not need Common Economic Space”. (http://www.centrasia.ru/news2.php?st=1320726300)

Palace

Even the luxurious interiors of the Palace of Independence could not disguise the failure of the summit. It is worth recalling that the presidents of Russia and Kazakhstan had already visited that Palace during the meeting of the Supreme Eurasian Economic Council in October 2013. Belarusian president gave a tour of the building to his distinguished guests. By the way, construction cost, including the trim and equipment, was quite commensurate with the amount of the next Russian loan.

Vladimir Putin and Nursultan Nazarbayev clearly know unhealthy addiction of Alexander Lukashenko to the royal luxury standards of the past centuries. However, the problem is not that the Belarusian president looked funny at the background of the Palace chambers, but that the Palace has already accepted the second summit of the Eurasian integration project. And like the first summit, it showed that the differences between the parties were not reduced. It seems that the Palace justifies its name and is a kind of mystical trap for integration processes.

Oil

However, in this case there is no any mystic. The matter is in the owner of the palace, who is trying to solve extremely false political puzzle: fake integration.  Oil is the basis of this formula. Russian oil allows Minsk to position itself as an oil country at world market. The flow of Russian oil guarantees is not only the economic survival of the Lukashenko regime, but the republic itself. Energy dependence of Belarus on Russian energy supplies is the basis of integration with Russia. No doubt that if Belarus had a relatively affordable own natural energy resources, the Russian-Belarusian relations would remain in the format of Russian-Azerbaijani or Russian-Uzbek relations.

Only integration can provide Alexander Lukashenko access to cheap Russian oil.

It is worth recalling once again that the meeting of the Supreme Eurasian Economic Council took place in Minsk on October 24-25. Even at that time the meeting of the Presidents of Belarus, Russian and Kazakhstan has caused great discussion in Russian expert community. The fact is that in addition to the issue of participation of Armenia and Ukraine in the Customs Union, the summit discussed the prospects for the Common Economic Space. In particular, the sides discussed free movement of goods, services, capital and labor within the Common Economic Space. This caused such a harsh criticism of Russia by the presidents of Kazakhstan and Belarus that Moscow even talked about the meaninglessness of integration with Minsk and Astana.

It is interesting to note that at the October summit the President of Kazakhstan attacked the Russian president. By the way, he had a long meeting with the Belarusian president before the meeting of the Council (it is worth recalling that Belarusian-Kazakh meeting was held and just before the April summit).

Alexander Lukashenko actually used Nazarbayev, who had his own set of claims to Russia, in October 2013. According to Astana and Minsk, “four freedoms” should relate solely to the Russian market. In particular, the President of Kazakhstan did not like the expansion of Russian insurance companies and banks in the local financial market and the insurance market. Alexander Lukashenko as the host of the summit formally held the "mediating" position, but in fact pitted Nursultan Nazarbayev against completely immovable Putin.

It is clear that Minsk had its own claims to “four freedoms”. In particular, we should mention the issue of Russian goods at the Belarusian market. Admission of Russian investors to the Belarusian public sector is a separate problem.

At the same time, official Minsk has transformed Belarus into a large-scale smuggling hub and delivered the products of third countries to the Russian market.

However, in October 2013 Alexander Lukashenko aimed to get absolute access to the Russian energy at domestic prices without payment of export duties. Alexander Lukashenko repeatedly mentioned this pledge of Vladimir Putin in 2013. At the same time he ignored the conditions for granting this option - economic policy of the Belarusian authorities in the Belarusian market. Formally, the liberation of Minsk from paying taxes to the Russian budget should become a kind of payment for Belarus’ entry into the Eurasian Economic Union (EEC). Belarusian authorities lobby cancellation of export duties in such unilateral format.

Both Belarusian and Russian expert communities actively discussed the “price tag”. The question is about $ 3-4 billion, which would lose the Russian budget. However, in fact we are talking about only the amount of export tax, which the Republic pays to the Russian budget for the year. In this case there are some the nuances that can deeply change the vision of the loss of the federal budget:

- It is worth recalling that the problem of “solvents” and “diluents” in the Customs Union still exists.  A. Lukashenko continues to rob his single ally. Minsk has only changed the nomenclature of petroleum products exported to the European market. Today it is “varnish” and other refined products that are not covered by export duties within the Customs Union and produced on technologically new production lines;

- Do not forget that Belarusian oligarchs should be the main beneficiaries of the duty-free access to Russian oil as they protect the interests of the “family” in the Belarusian petrochemical complex.

So, in case of political concessions from Moscow the amount of losses of the Russian budget according to various estimates could reach 30-35 billion (half the GDP of the Republic of Belarus).

It should be noted that the Russian leadership did not agree on such financial losses in October 2013 and would not agree in May 2014 not only because of missing trust in the relations between Moscow and Minsk, but also because of the Russian- Ukrainian crisis. It is worth recalling that an independent Ukraine received a multibillion-dollar support from Russia for more than two decades. The result is well known... $ 15 billion loan to Ukraine in December 2013 caused a scandal in the Russian political class and the expert community, Russian government was forced to give explanations.

We should also note that the official Minsk did not condemn the actions of Ukrainian nationalists in Odessa on May 3, which resulted in the death of 43 people. Belarusian authorities made only official regret. Alexander Lukashenko sent condolences to Alexander Turchynov, actually the main culprit of the terrible tragedy in Odessa along with A. Avakov, Y. Tymoshenko and A. Yatsenyuk: “It is with great sorrow that the Republic of Belarus learned the news about the tragic events in several regions of Ukraine that resulted in human casualties. I express sincere condolences to the people of Ukraine, to the families and friends of the victims, and wish speedy recovery to the injured”.  (http://news.tut.by/society/397494.html).

Mystery

"Eastern Partnership" summit in Vilnius, which was scheduled on the end of November 2013, became the main stimulus for the October press of Alexander Lukashenko on Vladimir Putin. Ukraine, headed by Viktor Yanukovych at that moment, was close to the association process with the European Union. And Minsk hoped that Moscow would be under the impression from the turn of Kiev to the EU, and Alexander Lukashenko could receive a new level of subsidies. However, the hopes of the Belarusian side did not come true...

In late April, the Belarusian leadership, as well as and Kazakh, used the Russian-Ukrainian crisis in their own purposes and believed that Moscow was not able to manoeuvre in respect to Eurasian partners.

Furthermore, Minsk and Astana believe that EAEC is a top priority of Vladimir Putin and the Russian leadership will go to any expense in order to save the Eurasian integration. Hence the reason for the failure of the summit on April 29, 2014.

Nevertheless, there was a sense that Moscow was not so concerned about militant intransigence of Alexander Lukashenko. It seems that Vladimir Putin provokes the Belarusian president to make increasingly tough statements ... This is the main mystery of the summit.

The fact is that the logic of reflection of the Belarusian authorities is only partially true. Several factors are forgotten. And two of these factors are simple. First of all, it is clear that the Eurasian integration project is an important priority for the Russian president. But nevertheless Russia was and would be the main priority of Vladimir Putin. Experience in supporting of Ukrainian independence has been very negative, and it could not be ignored. Especially since Alexander Lukashenko has many integration skeletons in his own closet.

Secondly, Minsk and Astana start to forget that until today Russia continues to play the main role in the process of legitimization of the local authorities in the CIS countries. In this case, recognition and support from the U.S. and the EU will not help. Ukraine is a good example in this case, as Moscow does not recognize the Kiev authorities and the country is on the brink of a civil war. I wonder if Alexander Lukashenko realizes his destiny in the case of non - recognition of 2015 the presidential election results by Russia…?

 Taking into account the abovementioned facts we can confidently say that the Belarusian president will sign the Treaty on the establishment of the Eurasian Economic Union at the end of May 2014. And what do you think?

А. Suzdaltsev, Moscow, 04.05.14 

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