Tensions between Kremlin and Minsk rise after 'Integration Ultimatum'

Four sacks of potatoes and a piece of lard were the Christmas gifts president Lukashenko brought for his meeting with Putin on  December 29. But tensions about sovereignty of Belarus have risen again, in the wake of prime minister Dmitry Medvedev's 'ultimatum' connecting financial support to progress towards a Union State of Russia and its most loyal neighbour. It's an old power play between Minsk and Moscow. Arseny Sivitsky, director of the Belarusian Centre of Strategic Studies in Minsk, analyses the concerns from the point of view of Belarus. 

poetin loekasjenko december 2018 Putin and Lukashenko met in december 2018 (picture Kremlin.ru)

by Arseny Sivitsky

Again relations between Russia and Belarus have deteriorated into an explicit conflict. During the routine dispute on Russian oil and gas prices for Belarus the Kremlin in December 2018 raised the stakes and sent an ‘integration ultimatum’ according to the formula ‘cheap energy resources in exchange for sovereignty’. Moscow openly declares its ambitions of incorporating Belarus, making discounts for oil and gas conditional to deeper integration between Russia and Belarus within the so called Union State, a project that dates back to 1999.

The Kremlin has a number of internal and geopolitical reasons for this ambition: Putin’s rating dropped, he needs a new social contract with the population but also geopolitical successes. Despite being the closest strategic ally of Russia, since the Russia-Ukraine conflict of 2014 Belarus has felt growing pressure. Russia has been testing the economic, political and security vulnerabilities of Belarus, preparing the ground for interference by military and non-military means. But now, openly airing its ambitions of incorporating Belarus, the Kremlin is testing first and foremost the reaction of the international community. But as there is no chance that president Alexander Lukashenko will make concessions that will undermine sovereignty, independence or his personal power, tensions will keep rising.

Strategic Deal with Russia

From the very beginning of his presidency Lukashenko announced economic and military-political integration with Russia as the main priority of the foreign policy of Belarus. He struck a strategic deal with the Russian Federation. Mid 1990s he signed a number of economic, political and military treaties with Moscow, culminating in the agreement of establishing a Union State of Belarus and Russia in 1999.

The essence was that Belarus, in contrast to other post-Soviet states, renounced its Euro-Atlantic aspirations of integration with the EU and NATO. In return, Moscow promised preferential energy supplies, privileged access of Belarusian products to the Russian market and financial assistance. According to this strategic deal, Belarus had to safeguard the security and defence of the Russian Federation towards the West.

To the background of the collapsing geopolitical heritage of the Soviet Union in the 1990s, this satisfied the Kremlin. Back in 1996, analysts of the Russian Institute for Strategic Studies of the Foreign Intelligence Service (SVR) concluded that geopolitical interests should prevail in Moscow’s strategy towards Minsk. And (military) cooperation between the two countries should not be solely guided by economic terms. For Russia strengthening of Russian-Belarusian relations was a strategic interest. It guaranteed its national security in western direction, as it allowed the normal deployment of Russian troops in Kaliningrad.

This strategic deal with Russia helped Lukashenko not only to preserve the old Soviet industrial heritage and state-dominated economy, avoiding shocking market reforms and maintaining a social-oriented model in Belarus, it also made him the most popular politician for the Russian regional elites, confronted with the dramatic consequences of liberal reforms and privatization. Lukashenko’s Soviet sentiments, his criticism of the oligarch system with its criminal privatization in Russia, as well as his exploitation of the topic of social justice and equality for the population gave him a firm footage in the Russian political scene.

His popularity and the support of the Russian regional elites and the Kremlin fuelled his ambitions to become the next master of the Kremlin. There were rumours that for him this was what the Union State was all about: Belarus and Russia would form a new state, adopt a joint constitution and create the position of president of the Union State by the end of 1999. Lukashenko would then beat Boris Yeltsin in elections for the president of the Union State and would become the first leader of this new entity. Ofcourse, nothing came of it, especially because of the resistance of the Russian tycoon Boris Berezovsky, who promoted Vladimir Putin as successor for Yeltsin and it ended all there.

poetin loekasjenko december 2018 3

What remained of it was Lukashenko’s successful exploitation of Moscow’s phobia for the West, so as to secure the necessary resources to support his socio-economic model with a prevailing role of the state. Around the turn of the century Belarus was the only ally of Moscow with a clearly pro-Russian orientation. Simply put it was Russian financial and economic support in exchange for a certain degree of geopolitical loyalty and integration aspirations on the part of Belarus. But with the Kremlin’s recent new ultimatum for the Union State project Belarus seems to have fallen into an integration trap artfully set by Moscow.

Ultimatum of the Kremlin

Economic statistics, especially IMF data, show Russia fulfilled its obligations until 2015. There were earlier trade wars between Minsk and Moscow, but since 2014 they became a permanent feature of the relationship. Over the period 2005–2015, the ‘integration subsidies’ (discounts on Russian energy and net financial support) for Belarus amounted to $ 106 billion, or about $ 9.7 billion per year. Over the years, the volume of ‘total net support’ from Russia ranged from 11% to 27% of Belarusian GDP.

However, starting in 2015, Russia began to restrict its support for the Belarusian economy and stepped up the economic pressure by reducing oil supplies, increasing gas prices, restricting access of Belarusian agricultural and industrial goods to the Russian market. 

Before 2015 Belarus bought Russian oil for half the market price – now that has been reduced to a discount of 25-30%. This discount is a result of agreements with Russia, that allows Belarus to buy Russian oil without paying export duties to Russia. Recently the Russian government has announced a tax maneuver in the oil industry, replacing export taxes with an extraction tax, paid by Russian oil companies. With the formation of a single market for oil, gas and oil products in the Eurasian Economic Union by 2025 Belarus will have to pay standard market prices and that will mean the end of the Russian ‘integration subsidies’ for the Belarusian economy.

According to analysts from Vygon Consulting, specialized in Russian energy, the losses for Belarus will amount to about $10 billion (one sixth part of 2018 Belarus’s GDP) in the course of the years 2019 – 2025, when this tax measure will be gradually implemented. The Ministry of Finance of Belarus calculates that without compensation within six years the ‘global losses’ for Belarus will amount to about $10-12 billion given an oil price of about $70 per barrel.

In fact, reduction of ‘integration subsidies’ has become a permanent source of tensions and conflicts in relations between Minsk and Moscow. Belarus on the one hand is asking for compensation of losses due to tax manoeuvring in the oil industry of Russia, whereas the Kremlin demands serious concessions in exchange for economic support to Belarus. Russian senior officials try to avoid speculations about political-military integration and promote the idea of further economic integration. But stressing the need for  a joint currency and joint financial, fiscal and custom policies can end up with the loss of national independence.

From Belarusian perspective Moscow currently is unilaterally reviewing the terms of the strategic deal with Minsk, undermining the political and economic basis of Belarusian-Russian relations. Russia also has less resources to provide Belarus with economic assistance, but this is more than a change in trade and economic relations between Belarus and Russia, as it becomes clear that it affects the military-political sphere.

Scenario's for 2024

Russian experts speculate about possible scenarios of power transfer after Vladimir Putin’s last presidential term in 2024. The first scenario emplies a more or less regular transfer to a  successor who can guarantee the continuity and stability of the political system of Putin and his closest circle, and give them political and economic safeguards for the future. The second scenario assumes a change of the Constitution to lift restrictions on the number of presidential terms. The third is based on the formation of a new ‘State Council’, that would co-opt the old generation of the Russian elite under Putin, while the executive power would be transferred to a younger generation of technocrats.

Finally, the fourth scenario envisages finalization of the Union State of Belarus and Russia through in-depth economic and military-political integration with a common Constitution, presidency, army and currency. In this option Putin after 2024 can become President of the newly born Union State.

There is evidence that the Kremlin now checking out all options simultaneously. That is why Russian elites now aired the ‘integration ultimatum’ and began offering the Russian and Belarusian population narratives on the Union State.

There are internal and geopolitical reasons why Belarus could become the next target of Russian foreign policy. The ‘Crimean consensus’ has lost its effectiveness and Russians are increasingly worried by socio-economic problems. Putin’s rating dropped significantly. Russian authorities have no idea how to solve these problems and integration with Belarus in a Union State could be presented as a new geopolitical success, distracting Russian society from the socio-economic crisis, as well as providing a new ground for legitimacy for the Kremlin.

There is even a theory that suggests that Putin needs incorporation of Belarus in exchange for concessions on his dispute with Japan on the status of the Kuril Islands. Offering two of the four Kuril Islands to Tokyo will lead to Japanese investments in Russia’s Far East. This will help to contain China and might even be an interesting option for the United States. Rumor says that this anti-Chinese alliance was discussed during National Security Adviser John Bolton’s visit to Moscow. Putin could use the unification with Belarus to compensate the loss of the Kurilles in the eyes of patriots in Russia.

Then there is the possibility of a military confrontation with Ukraine, EU and NATO. In that case Belarus plays an important role in the Kremlin's strategic military planning and 'heavy metal diplomacy' (large-scale use of military force as an intimidation method).

Russia’s strategic phobia’s

Be that as it may, the original source of tensions in the relations between Belarus and Russia is a lack of trust between Minsk and Kremlin. Since 2014 Russian military analysts and the intelligence community like a mantra have been predicting that the West wants to separate Belarus from Russia and incorporate it in the Western sphere of influence.

The Kremlin is also worried about the growing presence of China in Belarus and the strengthening of the strategic partnership between Minsk and Beijing in economic and military-political spheres.

Major-General Sergey Afanasyev, Deputy Head of the military intelligence, formulated these fears in his 2018 report The international situation and threats to Russia’s national security as follows: ‘Washington and Brussels continue to put informational, political, financial and economic pressure on Belarus in order to reorient it to the West and reduce the level of military and military-technical cooperation with the Russian Federation.’ This forecast sounds fantastic and problematic, as the Western countries perfectly well understand the limits of normalization and engagement policy with Belarus, whereas Minsk has been the main initiator of this balancing act exactly in response to increasing pressure from the Kremlin.

Some Russian security analysts have proposed a ‘contingency plan’ how to deal with the ‘Belarus problem’. At the end of last year, the Center for Military-Political Studies of the influential the Institute of International Relations (MGIMO) published its report The World in the XXI Century: a Forecast for the Development of the International Situation by Countries and Regions. When it comes to Belarus, to prevent an ‘Ukrainian scenario’, either the option of a regime change, replacing Lukashenko with a more pro-Russian politician, or even a Crimea-like annexation scenario by 2025 are openly advocated.   

According to Anton Siluanov, Russia’s First Vice Premier and Minister of Finance, the distrust between Belarus and the Kremlin is due to the grey re-exporting schemes of banned Western agriculture products to the Russian market and Russian petroleum products to Ukraine and EU countries via Belarus. However, the list of complaints is not limited to economics. Belarus is wary of Russia’s aggressive policy towards Ukraine or towards the West, doesn’t take part in Russian military operations in Donbass or Syria and doesn’t recognize the independence of South Ossetia and Abkhazia, as well as the annexation of Crimea.

Evidence of strategic change

There is a lot of evidence that the Kremlin has decided to change the strategic relations with Belarus. For example, in 2015, the Kremlin decided to open an air base on the territory of Belarus, without prior consent of the Belarusian authorities. The purpose was evident – to increase geopolitical control over and transform Belarus into its military outpost and engage in confrontation with NATO, EU and Ukraine. Minsk refused to give permission.

In 2016 Moscow started transferring troops to the Belarusian border, in particular the 144th motorized rifle division. This division is subordinated to the 20th combined army, redeployed near the border with Ukraine in connection with the conflict in the Donbas.  One of its regiments is stationed in Klintsy, Bryansk region, 40 km from the Belarusian border, and the second one is located in Yelnya, Smolensk region, 90 km from the border, just next to two main railway hubs of Belarus – Orsha and Gomel. These motorized units could very well be used for crisis intervention under the guise of a ‘joint anti-terrorist operation’. Judging by the scenario’s of the 2015 military drills Interaction and Slavonic brotherhood, the Kremlin is considering the option of deploying troops to 'stabilise the situation and restore the constitutional order' in response to unrest or destabilization in Belarus.

In 2016, the Russian Ministry of Defence Sergey Shoigu proposed to complete the formation of a joint military organization of the Union State. This means in-depth integration of the military and security apparatus of Belarus and Russia with a joint decision-making center in Kremlin. In addition, Russia continues to reinforce border controls and infrastructure on the Belarusian frontier, deploying operational formations of the FSB border service, that have never existed before.

In February 2017 units of the Federal Customs Service were installed at the border. Officially these are meant to protect the Russian market from the embargo on Western food products which pass through Belarus and other member-states of the Eurasian Economic Union, but they may easily be turned into an economic blockade.

In August 2018 Michail Babich, former Plenipotentiary Representative of the Russian President in the Volga Federal District, was appointed as the new Russian Ambassador to Belarus. He has a solid background in the security services and is considered as one of the closest persons to Vladimir Putin. He combines an astoundingly amount of positions: Ambassador Extraordinary and Plenipotentiary of Russia to Belarus, Special Presidential Representative for Expanding Trade and Economic Cooperation with Belarus, Deputy Head of the Interagency working group of the Government of the Russian Federation on trade and economic cooperation with the Republic of Belarus. His nomination demonstrates that Belarus has become a strategic priority for the Kremlin.

All in all, evident is that Moscow ponders several options for Belarus. The first one is consistent economic, political, military and informationial pressure on Minsk and Alexander Lukashenko personally in order to persuade him to make strategic concessions, that undermine the sovereignty and independence of Belarus (brutal blackmail, step-by-step forced integration, deployment of Russian military bases). This option is being implemented by Moscow now.

The second option is a regime change scenario either as a result of a power transfer by force or a coup à la  Montenegro). The third option assumes a military intervention as in Crimea or Donbass, which under the current conditions at the moment is the least probable solution, be it that the Kremlin believes that it is irreversibly losing Belarus.. But the Kremlin’s contingency plan for Belarus could as well combine all these three options.

As there is no evidence that Lukashenko is going to give up independence and sovereignty, the  pressure of the Kremlin will push Minsk for seeking greater diversification of its foreign policy and economic ties with the West and China. In response the swinging pendulum of Belarusian foreign policy will feed the strategic security concerns of the Kremlin, provoking new tensions that could lead to coercive scenarios.

The strategic intention of the Kremlin is very clear - to increase its geopolitical influence in and control over Belarus. Because of the growing International chaos and a prdicted global economic crisis at the turn of 2019 and 2020 there is a risk that nobody will pay attention. It might, however, be smarter to prevent these scenario's than to afterwards have to defend the EU and Ukraine against Russia.


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