The Customs Union, soon to be the Eurasian Economic Union (EEU), is having problems again. This time it is a misunderstanding between Russia and Belarus. As the phrase goes, it is nothing personal, just business or, to be more exact, finances.
The tax maneuver Russian is going to carry out next year suggests a drastic cut in oil and oil product export duties and an increase of the mineral resources extraction tax (severance tax). It is worthwhile to discuss why this maneuver is being conducted and what effect it will have on Russia’s domestic policies. We will focus on the problems that have suddenly arisen as a result of this in Russian-Belarusian relations. According to the Belarusian agency Telegraph, “this may lead to a considerable oil price hike in 2015 and reduction of revenues from the distribution of export oil duties which Belarus expected to fetch an annual 1.5 billion dollars.”
At present, Belarus remits to the Russian budget export customs duties on the oil products made from Russian oil and exported outside the Customs Union. It remitted 3.1 billion dollars in 2011, 3.9 billion in 2012, and 3.3 billion in 2013. Under the EEU treaty, Belarus will keep about 1.5 billion dollars for itself from the next year onwards. In May, Moscow and Minsk made a deal that, from 2015 on, Belarus’ budget should retain at least $1.5-billion-worth duty revenues. In response, Alexander Lukashenko agreed at last to sign the EEU Treaty. But Minsk was thunderstruck on October 1 to learn that Moscow had decided to make up for its losses. If duties go down, so do the revenues they fetch.
Hearing the report of Prime Minister Mikhail Myasnikovich, President Lukashenko was noticeably irritated. “As is known, Russia is conducting sort of a tax maneuver as a result of which we may lose all that we agreed upon with the Russian Federation last year. It is about remitting to Russia’s budget [revenues from] the oil product duties collected on the border. As far as I know, this problem is being negotiated and it must be settled,” he said.
To offset the losses, Minsk suggests that revenues from all the export customs duties on the products made from Russian oil be left at its disposal until 2017. This proposal was made at a meeting between Belarus’ First Vice-Premier Vladimir Semashko and Russia’s Vice-Premier Arkady Dvorkovich. Moscow showed no enthusiasm. As Sergei Rumas, the representative of Belarus at the Eurasian Economic Commission, commented on the negotiations, “I cannot say that Russia has supported the solution we have suggested.”
Formally, Russia has made a purely domestic change in taxation, which violates no international agreements, but the Belarusian budget is none the better for this. This is obviously an intention to undo the damage caused by the May agreements between Moscow and Minsk. Moreover, it is an overt attempt to somewhat sting the ally.
Also formally, these squabbles between the Customs Union and EEU members have nothing to do with Ukraine. But in reality there is a direct link.
From the very outset, the Belarusian “father of the nation” demonstratively took a neutral attitude to the Crimea and Donbas problem. Moreover, he would receive Ukrainian leaders at rather tense moments. He even suggested that Belarusian peacekeepers be sent to disengage the Ukrainian soldiers and the terrorists. Although Moscow’s representatives took part in the Minsk talks that resulted in signing the well-known protocols, the Kremlin was not exactly in rapture over this position of the Belarusian leader.
This was followed by the “father’s” not very pro-Moscow comments to the Euronews TV channel: “I said at the very outset that I did not accept, for example, the Novorossia project. I favor the unity and integrity of the Ukrainian state. I oppose any kind of frozen conflicts, any zones like Transnistria or Nagorno-Karabakh, which always harbor the danger of explosion. As a human and as President of Belarus, I do not want this because we are situated next to Ukraine.” He also expressed discontent over the decision of Russia to annex Crimea on the grounds that it “was wrongly given to Ukraine.” “Let us then get back to the times of Batu Khan, the Mongol-Tatar yoke, – almost the whole territory of Russia, Western and Eastern Europe will have to be turned over to Kazakhstan, Mongolia, and somebody else,” he said. To show neutrality, he also tipped his hat to Moscow: “Do you mean Moscow’s actions in Crimea were revenge for the Maidan events? Absolutely not. It is the result of the wrong actions the Ukrainian leadership took at the moment.”
Clearly, the Kremlin keeps an accurate account of such comments from its supposedly closest ally and always responds to them, albeit indirectly – for example, by means of a tax maneuver.
But problems are not confined to this only. As Valery Karbalevich, an expert at the Minsk-based analytical center Strategy, told the Naviny.by portal, Russia’s actions in Ukraine have scared the Belarusian leadership very much. “Russia has shown that, to pursue its interests, it is prepared to use force to protect and control the so-called Russian World, identifying it with Russian-speaking people. Lukashenko himself has more than once spoken out this threat,” he says.
The expert points out that this raises “in a completely new way” the question of Russian military bases and facilities on the territory of Belarus. “We know the way Russia used its military base in Crimea to occupy the peninsula. What is Lukashenko to do now with the Russian military facilities and the Russian air force base which has been so much talked about and on which Russia insists?” he says.
Indignant and somewhat perplexed, the Belarusian leader knows very well that Moscow will not opt for a big quarrel because ratification of the EEU agreement is at stake. Russia’s State Duma has already ratified it, with Kazakhstan’s parliament to do so in the near future. But Minsk is not in a hurry. Even preparatory ratification procedures have not yet begun. Moreover, Lukashenko has shared his views with House of Representatives members and urged them to defend the interests of Belarus when discussing ratification of the EEU Treaty. The MPs do not need to be urged, for it is not they who must care about their country’s interests. This is a message to the Kremlin that it is a wrong way to treat the closest ally – if you want to alter your taxes, nobody will interfere, but you should also abide by the agreements. You should not give something with one hand and immediately take it away with the other.
The Belarusian authorities know very well where the “red lines” of the Kremlin’s policy are. They will not cross them. On the other hand, the more and more internationally isolated Russian leadership needs no quarrels with its Eurasian allies. Besides, when Moscow has no other integration resources than money, its range of choices is narrow.
Making attempts to get back a billion dollars, Minsk will go on pursuing a neutral, or even partly independent, policy. There is a warmer relationship now between Lukashenko and the West – with due account of problems between Gazprom and Naftohaz, transit of gas across Belarus is assuming major importance for Europe and Russia. Moscow will make some concessions and respond to some of Lukashenko’s complaints, which was to be proved. The Belarusian leader’s tactics are so far bringing him success – it only remains to be seen for how long.
