Minsk is trying to monetise its participation in conflict resolution over Ukraine
Official Minsk is trying to become an active participant in the settlement of the conflict in eastern Ukraine, whose role would go beyond the ‘technical’ assistance in organising talks. The Belarusian authorities hope to obtain short-term diplomatic and financial benefits, due to the greater attention of the international community to negotiations in Minsk. In addition, the Belarusian government expects to take all political issues off the Belarusian-European agenda thanks to the President Lukashenko’s special role in the de-escalation process.
On February 18th, at a meeting with EBRD President Sir Sumomo Chakrabarti, President Lukashenko said that Belarus could play an important role in resolving the Ukrainian conflict, in particular, in Debaltsevo. The president said: “We are ready not only to mediate, but to put a stop to the conflict in the Debaltsevo region with good grace and withdraw all troops from Ukraine with our guarantees that they will never fight again”. Interestingly, previously official Minsk has repeatedly denied its role as a mediator in the conflict.
This proposal seems to be a private initiative of President Lukashenko, which was not coordinated with Russia. In particular, Russian Foreign Minister Sergei Lavrov said, “I have not heard about Lukashenko’s proposal to assist in the withdrawal of Ukrainian troops from this ‘mousetrap’. I think that any proposal that will help this deserves support, of course, if the Ukrainian authorities agree”.
In October 2014, in an interview with Euronews, President Lukashenko declared his readiness to send peacekeeping forces in Ukraine. The Ukrainian Foreign Ministry then rejected his proposal. Meanwhile, there are technical grounds for implementing such initiatives. Belarus has been cooperating with NATO’s Partnership for Peace Programme for a long time and has trained a special troop to participate in the UN peacekeeping operations. The Belarusian legislation also envisages the possibility for the Belarusian Armed Forces’ participation in combat and peacekeeping operations outside Belarus: within the CSTO and the UN, as well as other international organizations, including NATO. In addition, Belarusian specialists have already taken part in UN peacekeeping operations, for example, in Lebanon.
Meanwhile, Kyiv is not regarding Belarus as a neutral party, since she is the Kremlin’ closest ally, including on military cooperation. In addition, Belarus lacks mechanisms to implement the president’s peacekeeping initiative in Debaltsevo promptly.
Certainly, being in the focus of international attention after the organisation of the Normandy Four talks in Minsk, the Belarusian authorities seek to gain some financial and diplomatic benefits.
At the meeting with the EBRD President, the president requested to step up cooperation with Belarus: “After studying the situation in our country, the bank should remove all restrictions on cooperation with Belarus, especially with regard to state-owned enterprises”. Despite the fact that the EBRD pays attention to the state of political freedoms and human rights in the partner country, the EBRD President offered hope to the Belarusian leader that approaches to Belarus could be revised: “Efforts, undertaken by Belarus should be encouraged. The extent to which this role is welcomed by the shareholders of our bank cannot be overstated”.
In addition, at a meeting with Latvian Foreign Minister Edgars Rinkevics, President Lukashenko reiterated his interest in settling Belarus’ relations with the EU: “If Latvia helps us to get closer to the EU during her presidency (and not only), we shall be very grateful”.
After a meeting with Iranian Foreign Minister Mohammad Javad Zarif, Belarusian Foreign Minister Makei also underscored the increased role of Belarus in Eastern Europe after the Normandy Four Summit in Minsk.
The Belarusian authorities believe that Belarus’ peace initiatives will give her the opportunity to depoliticise the final agenda of the Belarusian-European relations. For example, Head of the Belarusian delegation to the OSCE Mr Senko excluded cooperation with the OSCE PA Working Group on Belarus by saying that there were no human rights issues in Belarus: “We do not see any sense in having this group. In particular, if it is headed by an extremist, talking to whom makes no sense. And we will not talk”.
The Belarusian leadership is attempting to keep Minsk in the focus of international community by sizing up the role of a mediator and a full participant in the negotiation process to resolve the conflict in Ukraine.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.