Leanid Zaika: Sanctions against Russia to hit Belarus’ building industry and infrastructure

As early as the end of 2014 stagnation and inflation are expected in Russia. Will it be felt here in Belarus?

The European Bank of Reconstruction and Development has sounded its forecast for Russia’s nearest future. It follows from this forecast, that before the end of this year Russia is to face stagnation, as well as inflation growth and decline of the international business are expected. Charter97.org asked an economist Leanid Zaika, how the sanctions against Russia are going to influence Belarus.

- According to European economists, Russia’s future looks depressing, and the economy is going to fall apart in the nearest months.

- It’s a panic for some people. Lots of people may discuss sanctions, savour them or on the contrary, cry. In reality, the sanctions are aimed at development of the military and industrial complex in Russia. Russia has found a total failure in the sphere of aircraft industry, in a number of branches of electronics, in the sphere of high tech sub-branches, such as production of drilling equipment for and so on. I would say that a rather narrow view at the sanctions exists, as at the thing which is to cause damage. That’s the way it should happen. But from the point of view of an expert in the strategy of development, I would like to say that these sanctions were needed by Russia greatly. As for today, this country is addicted to its hydrocarbon drug, and the sanctions could become a motivation for development.

- But in order to develop, an innovative, modern approach of the leadership of the country and absence of corruption are required. But it is not about Russia and Belarus.

- If Belarusian government demonstrated a certain level of strategic thinking, which I could hardy confirm yet, our country could have advanced in the sphere of development of new technological industries dramatically. It could have been aircraft industry, military industry. Apparently, Russia is going to continue manufacturing rocket equipment on Belarusian “wheels”. Electronic engineering could develop to a large extent. But it is the situation from the perspective of the strategy of development.

- And what is going to happen to Belarusian economy in the context of sanctions against Russia in reality?

- For today such problems exist as a lack of investments and free capital. In addition, devaluation of the Russian ruble is taking place, and in the wake of it, the Belarusian ruble is going to feel this pressure. Our currency is not to devaluate at such a speed, and it means that our goods are going to become more expensive at the Russian market. Consequently, the competitive power of the Belarusian products in Russia will drop. Decrease of demand in a number of industries can happen, especially in the projects where use of the Western capital had been planned. These are construction projects, projects for development of infrastructure. Orders for Belarusian builders are going to decrease, and for those who had been involved in cooperative deals, in supplies of equipment and construction materials.

For instance, the situation with cement was funny. The Belarusian government dreamt about a wide cement market so much, that they took a loan from the Chinese, increased production, while prices for Belarusian cement are higher than for Russian one. That means we lose in markets in Petersburg, central Russia and so on. And now a decision has been made to take more loans and build beton roads. It’s an amusing example for text-books. First they take loans, modernize plants, and then it turns out that such a quantity of goods is not required, and they do not know what to do with them. And as a result, they find another use for surplus of goods, and they take new loans for that, as it happened with beton roads. These are study process mistakes of the Belarusian government. To my mind, sanctions against Russia are doing less damage to Belarus, than activities of the Belarusian government.

We remind that on September 12 another package of the EU sanctions against Russia entered into force. It had been prepared after the open invasion of Russian troops to Ukraine. The previous sanctions, though they influenced the Russian economy, had not made Putin stop supporting separatists in Donbas and scale down the aggression against Ukraine. The sanctions of September 12 are to hit the oil industry of Russia most (the three major Russian company Gazpromneft, Rosneft, Transneft are on the list), the military and industrial sector (Oboronprom, United Aircraft building company, Uralvagonozavod are blacklisted), the financial sector (access to financial markets is limited for VTB, VEB, Sberbank, Rosselbank, Gazprombank). 24 more persons have become non-grata persons in the EU, including the so-called “Premiere” of the DNR Zakharchenko, a number of persons from his inner circle, the leader of the Russian Liberal Democratic Party Vladimir Zhirinovsky, the leader of the United Russia faction in the State Duma Vladimir Vasilyev and others.