Sunday, October 12, 2014

Window on Eurasia: Belarusian Economy Not Ready to Integrate with East or West, Economist Says

Paul Goble


            Staunton, October 12 – Most discussions of the prospects for the integration of post-Soviet states in Vladimir Putin’s Eurasian Economic Union or alternatively the EU are based on the assumption that, despite difficulties, these countries can more or less quickly integrate into one or the other.


            But a Belarusian economist has warned that his country’s economy is not in a position to integrate with either, a problem that is likely to echo well into the future regardless of which “choice” Mensk declares it has made and one that will at the very least slow down integration projects in either direction (


            Yaroslav Romanchuk, head of the Mises Center in the Belarusian capital, says that it is a mistake to think that the signing and ratification of an economic integration agreement with the Russian Federation will mean very much anytime soon given the Belarusian economy as presently constituted is in no position to integrate with any other country or group.


            “In relations between Belarus and Russia,” the economist says, “the letter of international agreements is always secondary to the words and spirit of relations,” and consequently, no one, not in Belarus or anywhere else should put much faith that what has been agreed to will be carried out or even can be.


            Just as the Russian leadership is likely to find it harder to garner the high levels of support it has if oil falls to 60 dollars a barrel, pay is cut and the banking crisis intensifies, so too, Romanchuk says, the Belarusian leadership needs to recognize that “the main sources of the relative well-being of the country will run out by 2017.”


            The next two years “will pass very quickly,” and one “cannot exclude the possibility” that the difficulties Belarus will soon be facing will mean that a future Belarusian parliament will be “ordered to denounced the accord that it just adopted” almost without debate.


            To avoid that scenarios – and Romanchuk suggests that it is a likely one – Mensk would have to come up with an effective system of targeted state assistance to those who will be hit hardest by expanding market relations with Russia. “Unfortunately,” he says, “the government does not have on its desk any fresh ideas” on how to do that.


            Consequently, instead of using the money that Alyaksandr Lukashenka has extracted from Moscow to join the Eurasian Economic Union for fundamental transformations, it is far more probable that the Belarusian government will spend it on current account needs and do nothing to prepare for the future.


            The Mensk regime “for years has been conducting a policy of isolationism, protectionism, and self-sufficiency,” even though “on paper” it has signed “numerous integration accords” which call for the free flow of goods, services, capital and labor. And it has exploited on occasion the more liberal economic arrangements in other countries, including in Russia, without offering the companies of those countries similar possibilities at home.


            That creates problems in relations between Belarus and Russia, and it makes almost impossible any thought of integrating Belarus into the EU.  Those are “two different worlds … not only politically but economically,” and it is far from clear that anyone in Mensk is prepared to pay what would be required to change that either.


            For any integration project to work, Romanchuk says, the Belarusian government would have to engage in “complex structural reforms, the diversification of the economy, the acquisition of the habit of not living beyond one’s means, the promotion of competitiveness, and the defense of property.”


            “If we successfully will do [that] homework,” he says, “then we will be ready for any integration.”  Sadly, Belarus today is not ready to take those steps and thus is not ready for any integration, eastward or westward.




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