Published January 08, 2015
As relations between Russia and the West have deteriorated, there's one country that's reaping rewards — Belarus, whose authoritarian leader was once dubbed "Europe's last dictator" by the United States and the European Union.
President Alexander Lukashenko is relishing his new role as broker of the Ukraine peace talks, and his country of 10 million people is profiting handsomely by reprocessing or simply repackaging European food banned by Moscow in retaliation to Western sanctions. In the most stunning example, exports of sea fish from the landlocked nation have doubled during the last three months — a sure sign that something curious is afoot.
Food exports to Russia have been a major hard currency-earner for cash-strapped Belarus, worth $5.7 billion in 2013. This year's figures aren't available yet, but a sharp rise in imports of food from Europe signaled that the country, which is sandwiched between Russia and EU members Poland and Lithuania, quickly took advantage of Moscow's ban.
"Lukashenko hopes to turn Belarus into a bridge between the East and the West, for which both sides will have to pay," said Alexander Klaskovsky, an independent Minsk-based analyst. "Lukashenko loves a proverb: A friendly calf sucks two mothers."
With Lukashenko friendly with the leaders of both Ukraine and Russia, Belarus has been able to serve as neutral ground for peace talks over the situation in Ukraine. Both Russia and the West would like Belarus to continue playing host to the negotiations.
With Russian President Vladimir Putin now in the West's bad books, Lukashenko is no longer a prime target of criticism despite his continuing crackdown on dissent and independent media. "Belarus is undergoing a transformation from a pariah to a respectable player," Klaskovsky said.
Lukashenko is looking to take advantage of that. His government is currently in talks with the International Monetary Fund on a prospective new loan, and Lukashenko's economics minister recently attended a London conference intended to lure foreign investors.
"Lukashenko realizes that the Kremlin subsidies will dwindle significantly because of Russia's economic downturn, so he's looking for other financial sources," said Yaroslav Romanchuk, the head of Mises Research Center in Minsk.
The Belarusian leader, who has been in power for two decades, is preparing to seek re-election in a vote set for next November, and the country desperately needs cash. Next year, Belarus has to pay $4 billion in foreign debts, a significant amount for a nation that only has $5.8 billion in hard currency reserves.
"Lukashenko will make an imitation of democracy like he did every time when he badly needed cash," said Stanislav Shushkevich, Belarus' first post-Soviet leader turned opposition politician. "The West has quite a short memory."
The IMF, however, has made prospective aid contingent on reforms, including economic liberalization and privatization of state assets — the demands Lukashenko, who has maintained Soviet-style controls over the national economy, would be unlikely to accept.
Despite Lukashenko's overtures to the West, Russia, which has provided Belarus with cheap energy and loans, will likely remain his main sponsor. While Moscow is angry over Belarus' sanctions profiteering, it needs to retain a major political and military ally.
Earlier this year, Russia, Belarus and Kazakhstan signed an agreement to create the Eurasian Economic Union — Putin's pet project intended to boost cooperation between the ex-Soviet nations.
The new alliance moves on the existing Customs Union and is supposed to coordinate the members' financial systems, regulate their industrial and agricultural policies along with labor markets and transportation networks.
However, the ambitious project has already run into trouble, most recently over Russia's efforts to stem the flow of contraband via Belarus.
According to Russia's government agricultural oversight agency, some Belarusian companies make food out of European meat and other products, while others simply repackage banned European food to change the country of origin. Whisking products into Russia on fake documents has also reportedly taken place. Another ingenious way of smuggling is to provide documents purporting that a shipment of European food is bound for Kazakhstan, while in effect it's intended for Russia.
Russian authorities began by lodging protests, and then launched random checks that spotted more than 7,500 metric tons of contraband European meat and 11,000 metric tons of fruit and vegetables smuggled into Russia via Belarus in recent weeks.
Russia has retaliated by restricting the imports of some of Belarus' own meat and milk for alleged sanitary reasons, its usual tactics in political or economic disputes with neighbors.
Lukashenko has rejected the smuggling allegations. He acknowledged that Belarus had increased the imports of European agriculture products for reprocessing and subsequent sale to Russia, but defended it as a legitimate practice in conformity with the Customs Union rules.
He denounced the Russian checks on transit shipment as "unseemly" and responded by re-establishing customs checks on its side of the border with Russia.
Despite his dependence on Russian subsidies, Lukashenko has firmly stood his ground in disputes with Moscow in the past, resisting its attempts to win control over Belarus' economic assets.
"You don't pressure us!" Lukashenko said during a recent meeting. "We have been and will be your reliable friends, but if you try to hurt us, I won't tolerate that. We aren't puppies to be taken on a leash."
Vladimir Isachenkov in Moscow contributed to this report.