Why Lukashenka Wants to Make Friends with the New Ukrainian Government

By Vadzim Smoke

On 12 March at a meeting of the Security Council of Belarus, Lukashenka confirmed that Belarus would maintain contact with the new Ukrainian government. He emphasised the close economic ties between Belarus and Ukraine and gave guarantees to Ukrainian business that their fruitful relationship would continue unscathed.

Belarus' large stake in trade relations with Ukraine can be seen as the primary motivation for Lukashenka's affirmation of continued good will. Ukraine, after all, is Belarus' third largest export market with around $5bn in annual trade. As Ukrainian oligarchs continue to play a role in Ukrainian politics and Ukraine's economy, Lukashenka will have no choice but to work with them, despite the political orientation of the new government.

80% of Belarus' exports to Ukraine, however, come from refined petrol products that are made with Russian oil, making Belarus' lucrative oil scheme vulnerable to Russian pressure.

To mitigate this and other possible threats that may arise as a result of a potential disagreement with Russia over the Ukrainian crisis, Lukashenka is trying to play the military card and raise his anti-NATO rhetoric game to appease Belarus' ally to the east.

We are Ready to Support the Ukrainian People

Lukashenka's recent public addresses demonstrate that he is trying his hand at playing a rather peculiar role in the ongoing Ukrainian crisis. Despite giving an order to conduct military manoeuvres and let more Russian fighter jets to be stationed in Belarus as a response to NATO's own manoeuvres in neighbouring EU countries, he also stated that the position of Belarus towards the Ukrainian situation remains unchanged, or in other words, Belarus continues to support the territorial integrity of Ukraine.

Moreover, Lukashenka has made several comments on the economic interests of Belarus in Ukraine and expressed his readiness to work with the new Ukrainian government to maintain the economic ties of the two countries. Lukashenka, at a recent Security Council gathering, stated:

Currently in Ukraine some politicians are trying to tackle the nation's problems. We, by no means, are going to interfere with them. Moreover, we have not broken any ties with Ukraine, especially not our economic ties. We have always done our best to meet the demands of Ukrainian business and still do so…We supplied Ukraine with energy resources and food, amongst other things. We are ready to support the Ukrainian people in this difficult situation.

Oil and Energy Trade at Stake

Ukraine is an important outlet for Belarusian exports, and is its third largest market after Russia and the Netherlands. Both for Ukraine and the Netherlands, refined petrol products make up an overwhelming majority their imports from Belarus. Petrol products remain the most lucrative market for Belarusian exports. In 2012, Belarus sold oil and petrol products to the Netherlands for $5.6 bn and sales reached $4.2 bn with Ukraine according to national statistics.

Over recent years, the export of petrol products grew to two-thirds of Belarus' overall share of exports to Ukraine. Belarus itself depends on Russia to supply its oil refineries. Belarus has increasingly become more and more dependent on trading refined Russian oil, while other formerly strong sectors of the economy, such as manufacturing of heavy machinery, are lagging behind and have become non-competitive abroad.

Furthermore, Ukraine is Belarus' fourth largest import partner, with electric energy topping the list of imports, giving Belarus also depends on Ukrainian energy supplies. This middling position places Belarus in a doubly difficult position, as it depends on continued oil exports and electricity imports. Lukashenka has little choice then but to do business with the current Ukrainian government, despite any political inconvenience that it may cause. This role, however, is not entirely unfamiliar for the Belarusian ruler, who has typically put the Belarusian economy before any political considerations in the past.

New Government, Old Oligarchs

According to Lukashenka, and something that he has oft repeated as of late, the Ukrainian corrupt oligarchic political system was the primary reason for Maidan and the subsequent Crimean crisis. According to Lukashenka, a Belarusian Maidan is unthinkable, if not impossible, due to stark differences in the two nations' political system and the substantially lower level of corruption in Belarus.

Indeed, Belarus does appear to have a stronger grip on corruption, and the trials of corrupt officials are a regular event in Belarus. The World Bank estimates that corruption in Belarus in 2012 is two and a half times lower than in Ukraine.

The difference between these two cases can be explained by the countries’ internal development over their respective periods of independence after the collapse of the Soviet Union. In Ukraine, vast privatisation schemes created a group of oligarchs who gained control over whole industries that were formerly state property. The oligarchic elite also acquired new influential institutions like media outlets and banks.

Before Maidan, oligarchs and the Yanukovych "family" (a group estimated to be around 100 persons in all) controlled 80% of the nation's wealth. In reality, oligarchs became the main force in Ukrainian politics long ago, and their business interests defined the nation's political dynamics domestically and even externally.

After the ousting of Yanukoych, Ukraine's oligarchs, far from disappearing, have been able to reaffirm their roles Ukrainian politics and its economy, though a noticeable shift towards more "opposition" friendly (opponents of the Yanukovych regime) oligarchs gaining power has occurred.

Some of them recently received posts in eastern regions of Ukraine to help the new government defend the nation's territorial integrity and quell pro-Russian uprisings, a move that many consider very clever on the part of the new Ukrainian leadership. Others, like Rinat Akhmetov and Viktor Pynchuk, have voiced their public support for the new government and Ukraine's territorial integrity.

In fact, Ukrainian businessmen are the main partners of Lukashenka's oil trade. And as long as Ukrainian oligarchs remain in power, Aliaksandr Lukashenka will have to deal with them, regardless of their political leanings. So long as they buy Belarusian refined oil and petrol products for the vast Ukrainian market, they will remain friends of Belarus.

Lukashenka's Oil-Defence Game

It is beginning to appear that, given Lukashenka's own recent speeches and actions, that he is trying to elaborate his own policy towards the Ukrainian crisis. On the one hand, he does not support the Russian invasion of Crimea, fearing that such precedent can create grounds for an intervention in Belarus in the future.

To compensate for his diplomatic dissent with Belarus' closest ally, Lukashenka has invited additional Russian fighter jets to equal those of NATO on Belarus' border. By doing so he is symbolically showing his loyalty to Russia within the existing defence agreement.

However, Belarus' economic interests force Lukashenka's hand to continue to build good ties with the new Ukrainian government and to continue the export of oil to Ukraine and the import of Ukrainian electricity.

This arrangement remains quite vulnerable, as Russia can try to manipulate oil prices and supplies to Belarus in order to force Lukashenka to support its military excursions. Therefore Lukashneka will continue to try to trade military cooperation, coupled with anti-NATO rhetoric, for cheap Russian oil.

Belarus Digest