Common Economic Space – Belarus and Russia: Facts and figures

Baltic Rim Economies

Halina Haurylka,
Ph.D. in Economics, Associate Professor,
Faculty of International Relations, The Belarusian State University (BSU),
Belarus

How are the economies of Belarus and Russia connected?

Belarus ranks No.4 among all trading partners of Russia. According to the results of five months of 2021, the Belarusian-Russian trade turnover increased by 30% compared to the same period of 2020. At the same time, Belarusian exports to Russia increased by 20.8%.

Foreign trade between Belarus and Russia

Russia’s share in Belarus’ foreign trade with the world is about 48%, with the republic depending on Russia for imports at 56%. The European Union is the second largest trade partner, accounting for 18.1% of foreign trade turnover.

In mutual trade with Belarus, Russia is a net exporter: in 2019, Russian goods worth $20.8 billion were delivered to Belarus and products worth $13.1 billion were imported from Belarus.

In 2020, Russia’s export advantage sharply decreased: exports to Belarus in the first half of the year amounted to $6.9 billion and imports amounted to $5.7 billion due to the fact that hydrocarbons – oil, oil products and natural gas – account for 46% of Russian exports to Belarus (according to 2019 data). In 2020, oil and gas prices fell, and Russia reduced its oil exports under the OPEC+ agreement. In January-June 2020, Russia supplied hydrocarbons to Belarus amounting only to $2.3 billion, less than a quarter of the total value of the same period in 2019.

With the exception of oil and gas which Russia supplies to Minsk (and meat and dairy supplied to Russia by Belarus), the commodity composition of mutual trade is very similar: in 2019, Russia exported to Belarus goods from the Electrical Machinery, Nuclear Reactors, Boilers and Equipment, Surface Transportation Equipment and Plastics and Plastic Products categories totaling $3.7 billion, and imported from Belarus products from the same categories for a total amount of $4.2 billion.

As can be seen from the above, Russia is the main market for many Belarusian goods as well as the main energy supplier. The two countries are united by a common cultural space, the Russian language, territorial proximity, the victory in the Great Patriotic War (WWII) and many other factors.

Direct investment

Russian capital is the largest source of foreign direct investments in Belarus. According to the Russian Central Bank, in 2018-2019 investors from Russia invested $0.65 billion annually in the Belarusian economy, and by early 2020 the total accumulated investment from Russia in Belarus was $4.26 billion.

However, these figures underestimate the true amount of investments of Russian origin in Belarus. The Bank of Russia takes into consideration only direct investments into Belarus, and transit investments through other countries (e.g., Cyprus) are not counted. According to the National Statistical Committee of Belarus (Belstat) and the local Ministry of Finance, only in 2019, the country received $2.87 billion in direct investment from Russia, or almost 40 percent of the total ($7.2 billion). This is more than four times the amount listed in the statistics of the Bank of Russia.

Government loans

Russia is the main source of external borrowing for the Belarusian government: according to the Ministry of Finance of the Republic Belarus, the Russian loans amount to about 48% of the external public debt of the republic (at the end of the first quarter of 2020), or $7.92 billion. The figure includes intergovernmental loans and loans from the VEB.RF state corporation. China that provided Belarus with a loan of $3.3 billion runs second.

Since 2008, the Russian government and VEB have granted at least eight loans to Belarus (RBC data). By the end of March 2020, Minsk owed about $7.5 billion to the Russian government and another $0.44 billion to VEB.RF (loan for construction of the Belarusian nuclear power plant).

Analysts specify the following positive aspects of the integration of Belarus and Russia relevant in 2020-2021:

  • for the past 30 years, Russia has provided up to 85% of all fuel and energy resources consumed in Belarus,
  • more than 45% of investments in the Republic of Belarus come from Russia,
  • Russian companies have set up more than 2,200 production facilities in Belarus,
  • More than 65% of Belarusian citizens take a stand in favor of the EEU integration.

The main bonuses that Belarus receives within the Union State are as follows:

  • The budget of the Union State is $100 million, most of which Russia allocates to Belarus (an average budget of a major Belarusian city);
  • The Union State is being in development stage: in 2021 the tax systems will be united; single customs policy will be coordinated; common energy policy has already been developed; fuel and energy, industrial, agricultural policies will be more coordinated.

Belarus and Russia face the task to create single markets of oil, petroleum products, gas, electricity, transport, to unify tax and customs laws by January 1, 2022.

Expert article 3078

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