Hidden $100 billion: how Russia supports Belarusian economy

Russia and Belarus have reached the next anniversary of the Union with a crisis in bilateral relations. RBC has estimated how much it costs for Russia to support its "special relationship" with Minsk.
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April 2 marks the 20th anniversary of the Union of Russia and Belarus, but the "brotherly" states meet a round date at the lowest point of their relations for at least the last six to seven years. The Belarusian-Russian relations are experiencing "a full-scale complex crisis, which includes both disagreements on specific issues of economic content and contradictions on fundamental issues of a strategic and military-political nature," the Minsk Center for Strategic and Foreign Policy Studies said. Shortly before the jubilee of the Union, in February, Belarussian President Alexander Lukashenko complained that Russia was "kicking in the tail and in the mane" agreements between the two countries, including the price of Russian gas. One of the reasons for this Moscow behavior, according to Lukashenka, is certain forces in the Russian establishment, but not President Vladimir Putin whom Lukashenka called "a brother" on March 28 (they will meet in St. Petersburg on April 3).

Over $ 100 billion over 11 years

The Kremlin responded on the same day when Lukashenko, at his big press conference, blamed Russian authorities for 15 minutes in a row, replied with figures from which it follows that "the Russian side has been and continues to provide large-scale economic, political and other assistance to Belarus." As an example, the press service of the Kremlin resulted in the allocation of more than $ 6 billion in loans to Minsk in different directions and the annual duty-free oil supply in the period from 2011 to 2015 in the amount of 18 million to 23 million tons. "In total, our Russian budget in this period was underpaid $ 22, 3 billion. All this is nothing more than the direct and indirect support of our union Belarusian state, "the statement said.

What are the real dimensions of Belarus' economic dependence on Russia? "If you look at the figures presented by the IMF, you will see impressive figures of implicit and direct support for the Belarusian economy," Putin told Putin in late February at a press conference in Bishkek. Indeed, in September 2016, the IMF estimated the total support of the Belarusian economy by $ 106 billion only for the period 2005-2015, or about $ 9.7 billion per year (see infographics). In different years, the amount of "total net support" from Russia ranged from 11 to 27% of Belarusian GDP, according to the IMF data provided by RBC. But it can be seen that in recent years, Russian aid to the Belarusian economy has been shrinking, and this can partly explain Lukashenko's recent discontent.

The simplified model of relations can be described as follows: "financial and economic support is exchanged for a certain degree of political loyalty on the part of Belarus," says senior economist Raiffeisen Bank International for Central and Eastern Europe Andreas Schwabe. "The Belarusian economy is unstable without Russian support. It's amazing how President Lukashenko managed to ensure unceasing Russian support for such a long time, 20-25 years, "Rwanda said. But recently Belarus demonstrates signs of "political disloyalty" (it does not support the Ukrainian policy of Russia, counterforce), and Russia begins to limit financial and economic support (reduces oil supplies to Belarus, raises gas prices, reduces purchases of Belarusian industrial goods), argues the economist , Stipulating that, despite all the disagreements, the fundamental relations between Russia and Belarus remain "surprisingly stable".

The IMF considers total support as the sum of two components - hidden subsidies at the expense of discounts on Russian energy resources and net financial support. The broadest estimate is obtained, as the IMF takes into account not only interstate loans but also the balance of mutual direct investments, as well as loans for Minsk through the Eurasian Stabilization and Development Fund (EFSR, the former EurAsEC anti-crisis fund), whose resources are 88% Formed by Russian contributions (at the end of 2015, Minsk owed the fund $ 1.94 billion, and in 2016 it took another $ 800 million).

State support

Such an approach may not be entirely honest if it is required to evaluate state financial assistance, says Dmitry Kulikov, an analyst at ACRA. "Foreign direct investments are private, they can bring real income when dividends or interest are returned to Russia." In his opinion, it would be prudent to take Belarus's debt for state credits (including loans from Russian state-owned banks to the Belarusian government) and the amount of accumulated subsidies for oil and gas supplies, and not to take into account direct investments.

The debt of Belarus on intergovernmental loans from Russia at the end of 2015 was $ 6.02 billion, it follows from the balance of payments of the union state, available on the Bank of Russia website (there is no review for 2016). The Russian Finance Ministry refused to disclose the current debt of the Belarusian government to RBC, and the Finance Ministry of Belarus did not respond to RBC's request. The last time an intergovernmental loan was publicly reported in July 2015, when Minsk received a Russian loan of $ 760 million. As follows from the balance of payments of Belarus with Russia in 2016 (available on the website of the Belarusian National Bank), last year the net borrowing of the Belarusian government in Russia Amounted to $ 250 million, but it could be loans from Russian state-owned banks. Their help is a big channel of Russian injections into the Belarusian economy.

In 2012, Vnesheconombank agreed to provide Belarus with up to $ 10 billion for the construction of the Belarusian nuclear power plant under an intergovernmental agreement, but so far only the first tranche of $ 500 million (in May 2014) has been allocated, and only $ 248 million was selected from it, VEB head Sergei Gorkov said in December . Sberbank credited the state "Belaruskali" - by $ 900 million in 2011 and by $ 550 million in 2015. In general, as of October 1, Russian banks held assets in Belarus at $ 4.9 billion (minus their obligations there - $ 3.7 billion). VEB, Sberbank and Gazprombank did not respond to RBC's requests, and VTB reported that the loan portfolio of its Belarusian subsidiary to local enterprises with state participation is about $ 75 million in recalculation from Belarusian rubles.

The largest investor

Russia's direct investment in the Belarusian economy occupies 57 to 64% of the total foreign investment in the country, according to the National Bank of Belarus for 2010-2015. Russian FDI to Belarus is shrinking, according to the statistics of the Russian Central Bank (see infographics): net accumulated investments reached a peak in 2010 ($ 5.6 billion), and as of October 1, 2016 were $ 3.4 billion.

Official Russian statistics underestimate the amount of investments in Belarus, the Center for Integration Studies of the Eurasian Development Bank (EDB), which conducts its own monitoring of mutual direct investments in the CIS, says. If, according to the Central Bank, the amount of accumulated investment from Russia to Belarus in 2015 was $ 3.6 billion, then EDB monitoring shows a figure of $ 8.3 billion. The bank, among other things, analyzes corporate reporting and media reports; In addition, unlike the Russian regulator, it takes into account investments through off-shores and other "transshipment bases" of capital. The indicator of the Central Bank includes exchange rate, market revaluations and other changes.

Belarus is the leader in terms of Russian incoming investments among the countries of the Eurasian Economic Union. However, this was mainly due to the purchase by Gazprom of Beltransgaz (now Gazprom Transgaz Belarus), to which the concern spent $ 5 billion in the period from 2007 to 2011. Other significant Russian projects are investments in VEB's and MTS's subsidiaries, Transneft's trunk pipeline and Mozyr refinery.

How much is Russia losing?

Up to 90% of Russia's economic support from Russia in the IMF's understanding is due to hidden subsidies for the supply of gas, oil and oil products. Sergei Agibalov, head of the Economics and Finance sector of the Institute of Energy and Finance, estimates that the total volume of Russian subsidies to Belarus with preferential energy supplies since the beginning of the 2000s amounted to almost $ 100 billion, or more than 200% of the Belarusian GDP for 2016. Subsidies for gas in 2001-2016 were $ 49.4 billion, for oil - $ 46.9 billion, follows from the calculations of Agibalov for RBC. And unlike loans that return with interest, oil and gas benefits for Belarus are the irrevocable indirect losses of the Russian budget. "This is not discarded for us - these are calculated steps in the expectation of a future result," Vladimir Putin assured at the end of February.

"All the years of independence, Belarus received gas from Russia on extremely favorable terms - in certain years it bought gas at times cheaper than all neighboring European countries," Agibalov said. He calculates gas benefit as a difference in the price of imports with Germany (this is a comparable large consumer, the price of Russian gas on the border with Germany is published in open sources, and it can be considered a market competitive price, he explains). But in 2016 the gas subsidy fell sharply - only to $ 350 million from $ 2.2 billion a year earlier, according to Agibalov's calculations; And the Russian authorities by the end of March 2017 have already counted $ 700 million of Belarus' debt for the gas supplied.

Russia delivers Belarus crude oil duty-free, and refined petroleum products are shipped by Belarus abroad with the collection of duties and crediting it to the Belarusian budget. Subsidies on the part of Russia have recently declined due to the specifics of the export duty. The decline in world oil prices leads to a lower decline in import prices for crude oil that Belarus imports from Russia, compared to the decline in prices for petroleum products that Belarus exports, is a consequence of the tax maneuver in the Russian oil industry, the Eurasian Development Bank explains. "With high oil prices, Belarus bought it twice as cheap as the market price, and now it is 25% cheaper," says Alexander Knobel, director of the Center for International Trade Studies of the Russian Academy of Science and Technology. "Russia depends on oil and gas, and Belarus is just as dependent on the Russian oil and gas situation. If it worsens, the problems become more acute."

Will Belarus be able to escape from Russia?

Against the backdrop of a decline in Russian economic support, Minsk is trying to diversify sources of financial assistance and foreign trade based on Russia, but it is difficult to do, said Sergei Pukhov, a leading expert at the Center for Development of the Higher School of Economics. Since 2015, Belarus has been negotiating with the IMF about a potential loan of up to $ 3 billion, and the EU sanctions, which were lifted in 2016, have opened the possibility for loans from the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank.

"In terms of trade, Belarus, of course, is trying to diversify its exports, establish supplies to the European Union, does not want to lose the Ukrainian market in any case," adds Alexander Knobel. - Russia for Belarus is half the trade, the second half is Ukraine, the European Union (mainly Poland and the Baltic states), Russia is the main partner, but Minsk wants this share to reduce and increase its presence in European markets. "

But Andreas Schwabe says that under Lukashenko, Belarus can hardly turn away from Russia. "The West, in exchange for substantial financial support, will probably require economic reforms from Minsk, which would weaken Lukashenka's control over the economy and the state as a whole-and this is unacceptable for him," the economist argues. Yes, and after 2014 Russia has shown its policy in the post-Soviet space that it will not "allow" Belarus to take such a step.