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The sanctions-hit regime is counting on aid from Russia and China. But experts have little optimism that Beijing will pitch in.
Belarusian exports to China amounted to $398 million in the first six months of 2021, compared with $1.86 billion worth of imports. Chinese trade with the European Union – $568 billion in exports last year – dwarfs these figures. China has always seen Belarus as a springboard to this huge market. It is unlikely that China is interested exclusively in its economic ties to Belarus. Rather, it would like to trade more with Europe.
Belarus’ [possible] accession to the World Trade Organization has been a key condition for a Belarusian-Chinese economic alliance. Belarus should have joined the WTO this past winter, but the U.S. Department of Commerce once again labeled Belarus a non-market economy.
“The thoughtful, calculated, and super-pragmatic Chinese are far from thrilled about the political crisis after 9 August 2020 [the date of the disputed presidential election in Belarus] and the West’s sanctions against the regime,” said Kamil Klysinski, a senior fellow at the Warsaw-based Center for Eastern Studies.
“Before 9 August, China had valued Belarus for order and a strong central government that had been able to maintain a dialogue with the West and stay friendly with Russia. However, Belarus has moved far from of its previous status, which puts future Chinese-Belarusian relations up in the air,” Klysinski said.
“From Beijing’s point of view, Belarus no longer lives up to its reputation as a stable, reliable, and safe ‘bridge’ between the East and the West, and hence, it can’t guarantee an uninterrupted supply of Chinese exports within the framework of the ‘One Belt One Road’ initiative,” he said.
Klysinski mentioned the Great Stone Industrial Park [part of China’s massive “One Belt, One Road” project, this much-touted industrial park on the outskirts of Minsk has failed to live up to expectations.] “Belarus also isn’t the best place for foreign investments or big logistics projects such as the Great Stone. That’s why China has not rushed to support [President Alyaksandr] Lukashenka financially or politically, which I think greatly upsets Minsk,” he added.
According to Klysinski, Belarus, now isolated by the EU and United States, cannot guarantee anything to China and thus Beijing no longer needs it and can be expected to show more interest in Ukraine.
At the same time, Lukashenka has threatened Germany with blocking its exports from traveling via Belarus to Russia and China.
“Given the deeply negative investment environment, China has no intention to help Belarus with a large stabilization loan. Even the investment credit line could be called into question now,” Klysinski added.
What About Chinese Loans?
Chinese banks opened that credit line for Belarus several years ago – almost $5 billion at a quite low interest rate, 2% to 5%. Enterprises may borrow up to $700 million through the China Development Bank regardless of the type of ownership. However, 50% of the loan must cover the participation of Chinese partners in projects, supplying services, human resources, or goods.
Another $3 billion is available if the Chinese partner participates in an industrial or infrastructure project (the partner’s shares should be no less than 60% and 35%, respectively). Yet another $1.4 billion may be borrowed against a guarantee from the Belarusian government.
However, the funds remain virtually untouched. Economic analysts say that the problem is systemic.
“Even before the political crisis when our banks had excessive liquidity, there were hardly any good investment projects,” said Kateryna Bornukova, academic director at BEROC, a leading economic think tank in Belarus.“The Chinese credit line presents even more challenges: what you need is not just a good project, but a good project that the Chinese partner could be interested in and that could involve Chinese subcontractors or vendors.
“Our history of cooperation has so far been mixed: there have been both successful projects and utter failures, like the Svietlahorsk [paper] mill project,” Bornukova said. “Private businesses don’t want to get involved because of the political risks and a lack of experience working with the Chinese; government-run companies have also been unenthusiastic after some examples of unsuccessful cooperation. China’s interest has also faded due to the political crisis.”
The same, she says, can be said about the maligned industrial park: “The Great Stone idea was about Belarus’s attractive geographical position and subsidies. But almost all the pluses have been canceled by the sanctions and political crisis.”
The fate of a shipment of Belarusian tractors is another indicator of the state of bilateral economic ties. Chinese media said the tractors did not make a good impression and in the end, China simply copied the know-how and pulled the plug on further shipments.
Brothers in Arms
Defense and security matters are another pillar of Belarusian-Chinese cooperation, with Belarusian security officials describing the relationship as an “iron brotherhood.”
This area indeed looks promising and interesting to China, but loans or money have not materialized.
Back in 2017, Belarus and China struck a deal to form a united front against “color revolutions” [the pro-democracy movements that had swept through some of the countries of the former Soviet Union]. China invited Belarusian police officers to study at its universities for the benefit of the Belarusian Interior Ministry. Children of high-ranking Interior Ministry officials participated in the free program.
Belarus also cooperates with China in the defense sphere, but, as financial reports suggest, this has had little effect on mutual trade.
In short, despite the pompous statements about “an all-weather partnership,” China has been losing interest in Belarus. Hopes for financial and political support may well remain only at the level of nice words.