That means Belarus, which today buys Russian oil duty-free and exports much of it, charging its own duties, will have to pay more. This year, according to the Belarusian Finance Ministry, the country stands to lose $300 million from the Russian “tax maneuver” given an oil price of about $70 per barrel. That’s already quite a lot for a country with an economic output of about $55 billion, and the losses will mount as the Russian export duties disappear.
Lukashenko has asked Russia to reimburse Belarus for the losses either by lowering the oil price or via a direct budgetary transfer. But in December, multiple Russian government officials, including Prime Minister Medvedev and Finance Minister Anton Siluanov, linked any compensation to a deeper integration with Russia under the 1999 union treaty.
Though Lukashenko has publicly warned Russia against trying to swallow up Belarus and Putin’s spokesman, Dmitry Peskov, has said a Russia-Belarus merger isn’t the subject of discussion, the denials only concern a full takeover, rather than a deeper integration scenario with Belarus and Russia both formally ceding part of their sovereignty to the union state. That scenario — a single currency, a unified judiciary and a harmonized tax system — appears to be on Russian officials’ minds. During two meetings with Lukashenko in late December, however, Putin failed to convince his junior partner to go down the unification path. Most Belarusians, too, believe Belarus should be independent, though a Russian ally.
Lukashenko’s alternative to bending to Putin’s pressure is seeking help in the West, but that, in a way, is a less attractive option for him: He suspects the U.S. and the European Union want to undermine his near-absolute power. As many times before in his career, the Belarusian leader is caught between a rock and a hard place. Whether he can wiggle out this time depends largely on whether Putin finds other ways to resolve his own political problems, both with succession and with the balance of gains and sacrifices in foreign policy. If he doesn’t, the pressure may become unbearable for the Belarusian dictator.
Leonid Bershidsky is Bloomberg Opinion’s Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru. The views expressed in opinion pieces do not necessarily reflect the editorial position of The Moscow Times.