Lukashenko tires to be a mediator in the Russo-Ukrainian dispute
On April 29th, BelaPAN News Agency published an interview with Russian Ambassador to Belarus Alexander Surikov.
Russia is highly interested in Ukraine’s integration with the Eurasian Economic Union. President Lukashenko hopes to play a mediating role in this process and to improve his status in negotiations with the Kremlin.
In terms of regional policies, Ambassador Surikov’s the most important statement was his concern about the security of gas transit through the Ukrainian gas transportation system, as well as certain recognition of the hopelessness of the Moscow-Kiev situation.
In particular, the Ambassador said that “both, the trilateral relations (Europe-Ukraine-Russia), and bilateral (Russia-Ukraine) failed to solve the issue of renovation and putting in order the Ukrainian gas transportation system”. According to Surikov, it was one of the main reasons behind the construction of the Yamal-Europe-2 gas pipeline project.
Regardless of the genuine reasons for the Kremlin’s interest in the Yamal-Europe – 2 project, Surikov’s justification creates environment for the Belarusian leadership to intervene in Russo-Ukrainian negotiations and try to persuade President Yanukovych to participate in the Eurasian integration project.
If Lukashenko’s adventurous mission fails, he can still try to keep up appearances and present it as an attempt to partially restore the USSR’s lost integrity and to complement the author of the CES project, Vladimir Putin. In addition, the noble ‘integration’ mission will enable Lukashenko to gloss over (and ideally, to benefit from) the existing conflicts between him and President Yanukovych.
Potentially, Lukashenko’s mission might be successful. On April 15th, in a telephone conversation Presidents Lukashenko and Viktor Yanukovych discussed the possibility of the creation of a Belarusian-Ukrainian-Russian public movement and agreed to raise this issue at the upcoming bilateral meeting in May. On April 25th, in Kiev, close to Lukashenko Chairman of the Communist Party of Belarus Karpenko took part in the 20th Anniversary Celebrations of the Union of Communist Parties of the former Soviet countries.
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.