Belarus-Russia Relations. Towards Realism Prof. Dr. Alexei Pikulik

The agenda of the presentation: Mapping the contexts: Belarus as a rentier-state. The political creation of the external rents. From the pre-elections rhetoric in the Russian media to the post-election realism. Demystifying Russia's ambitions in Belarus. When the political and the economic logic meet: Belarus as the offshore zone for Russian business and the geopolitical/integrational partner of Russia. What is next? The post 2012 election scenarios.

Preambule: The Belarus-Russian relations are generally non-transparent, hence the presentation will contain certain speculative arguments and assumptions. Yet, we have enough evidence to see the forest beyond the trees and to draw the conclusions, although the data is not alwasy that hard.

Mapping the contexts: the receipt of Lukashenka's political survival (the pre-2011 trend) Politically create the external economic rents needed for maintaining an inclusive autocracy. Tunnel the rents into the economy to maintain a socialist-mixed welfare state. Preempt democratization (learning from the fellow autocrats), by making a) exit simple, b) protest expensive and c) loyalty lucrative.

The sources of the external rents (up to 30% of the GDP): Discounted oil refined in Belarus and exported to the EU (Russian companies used Belarus as the oil offshore since early 2000s) Discounted gas (products competitive pricewise) Unlimited/administratively stimulated demand for Belarusian goods on the Russian market Assymetrical interstate institutions with Russia (loopholes in the customs institutions, smuggling, barter, price arbitrage, etc.) OVERALL: The Russian budget was the sponsor of the 'Belarusian economic miracle'.

The pre-eleciton anti-Lukashenka rhetoric in Russian media. To lower down Lukashenka's approval rating in Russia. To send a signal to the Belarusian political elites (in case anyone would volunteer to become a president). To get extra levers on Lukashenka

The three main myths about Russia's ambitions in Belarus: Russia wants to absorb Belarus politically. Russia wants to privatize the Belarusian economy for 1 dollar. (sad story in Ukraine) Russia's main existential fear is that Belarus might re-open the dialogue with the West.

Towards the realism: Belarus is a key-partner in the new integrational game of Vladimir Putin. (key-point) Economic rents are made available to Lukashenka again via loopholes in the Custom's Union. Russia wants to increase its ROI in Belarus via rationalization of the economic relations. Russia wants economic reforms in Belarus and will welcome turning Belarus into a new quasi-offshore zone

Belarus as the new offshore zone for Russia? In the light of the capital flight from Russia (estimates are about 60 bln USD/year) AND In the light of the new conditions for Russian capital is Switzerland, Luxemburg and Latvia, there is a need for a new offshore Belarus is turning into one (i.e. Gambling, banking operations, oil trading, etc.)

The political implications The Western leverage/linkage are diminished by the Russian game—hence-- the political warming up might be postponed for another 6 months. In the light of the crisis, and the society 'standing in between', there is less chance for the managed democracy to come about in Belarus. In the light of the diminishing rents from Russia, the regime is turning into an exclusive autocratic: rents are not given away generousely to the many, but the access to rents is granted to the some.

-Russia will increase its pressure on Belarus after 2012 elections. What's next? -Russia will increase its pressure on Belarus after 2012 elections. -But will it be really able to afford supporting the integrational allies?

THANK YOU!