Lukashenka Started A Too Risky Game With Kremlin

The hope that “in-depth integration” can be talked round may not come true.

Last week, the media reported on the possible areas of the so-called in-depth economic integration between Belarus and Russia. Many colleagues spoke on this issue. A significant part of the comments focused on quite important, but still, in my opinion, secondary matters.

For example, they thought about how legitimate the author's interpretation of the article in Kommersant was about “confederation”, for what purpose this publication appeared in the information space, and how it is technically possible to implement the measures mentioned in it (for example, unification of the Tax and Civil Codes, if it is really considered).

Focusing on these points, I believe, is moving away from the more important ones. For example, I consider it extremely important to answer the following question: are the measures for the “in-depth economic integration” purely economic? It is impossible to answer unequivocally without reliable information about what lies on the negotiating table.

Once again, it is this circumstance that paves the way for insinuations. In the absence of information, until recently, there was hope that the subject of bargaining for compensating for the consequences of the Russian tax maneuver, and the reasonable price of gas are purely economic issues. But from the scant official information, it seems, we can conclude that at least the unification of the Tax and Civil Codes is indeed part of the package of the “in-depth economic integration”.

If this is true, then the new package of agreements is significantly more than a “pure economy”.

Economic integration affects other areas

I believe it is quite obvious that almost all spheres of society are closely intertwined with each other. For example, economic relations - with other areas of social relations: political, legal, scientific, cultural, sports, religious, etc. In this regard, it is often said that economics and economic culture remain an organic part of the culture of the whole society.

The national economy and economic relations in the society reflect the values, attitudes that are generated by the corresponding national culture. In turn, economic norms and rules also affect the development of national culture in its broad sense.

Therefore, of course, any steps towards economic integration affect other areas of public life. But when they try to talk about purely economic integration, that is, the goal is only to increase well-being, they try to deliberately limit the impact on the other areas of society.

Therefore, today in world practice, clear forms of what is commonly called economic integration are developed. As a rule, its forms and mechanisms focus only on issues of promoting trade, investment, competition between countries, freedom of movement of labor and capital.

The most common forms of integration are the customs union and the single market, and the most advanced are economic and monetary unions. All these forms of integration have a clearly measurable economic effect, limited to trade growth and positive impact on the economic growth.

In the case of Belarus and Russia, almost all of the traditional mechanisms of economic integration (with the exception of the monetary union, but there are important reasons) have already been agreed upon and implemented within the framework of the Eurasian Economic Union (although they do not work fully).

Belarus will not be able to freely adjust standards in the future

The steps announced in the framework of the “in-depth economic integration” between Belarus and Russia go beyond the framework of “pure economy”.

Firstly, the lack of an obvious economic effect, by analogy with the “standard” forms of integration, does not allow classifying them in this way.

Secondly, and more importantly, meaningfully they affect a much wider layer of relations in the society in addition to economic ones. For example, the norms of the Tax and Civil Codes affect almost the entire spectrum of social fields besides economics: culture, science, civil society, etc. Therefore, they will invariably leave their mark in these areas.

In history, you can find many examples when the norms which appeared purely economic at first glance left their mark in many areas of life of states and societies. The most striking in this sense is the example, which one of the most authoritative economists of our time Daron Asemoglu refers to in many of his works - the mit’a.

The mit’a was a form of forced labor used by the Spanish colonists in Latin America. A medieval “economic norm”. But, as Asemoglu shows in a number of his works, this “economic norm” has so strongly influenced the values, attitudes and behavior of people who lived in the areas where it acted, that even centuries later after its abolition, these areas remain the poorest.

Therefore, such standards are normally categorized as institutional. Institutions, institutional norms - this is what sets the rules of the game in the economy and in the society in general. Institutional differences are often the key to explaining the differences between countries in the levels of well-being and areas of development.

From this point of view, linking your institutional norms to the norms of another country also means linking it with respect to the path of development.

Even more worrying is the fact that in the case of Belarus and Russia, de facto unification of institutional norms will mean that Belarus will not be able to freely adjust these standards in the future. The loss of the right to build institutions according to one's understanding is at least a weakening of the sovereignty of the country.

Belarusian economy is systemically vulnerable

What is the reason for the willingness to discuss an unequal deal, in which the fee for maybe important, but short-term economic benefits (compensation for a tax maneuver, an acceptable price for gas) is giving up institutional independence?

The first part of the answer, I think, is obvious. The compensation for the tax maneuver and reasonable gas prices are indeed extremely important today for the short-term prospects of the national economy.

The second part of the answer is less obvious. Some suggest that the authorities really believe that the deal is “purely about the economy,” or underestimate the consequences of a partial loss of institutional independence.

More plausible to me is what is often said in the form of hints: Minsk believes that the compensation for a tax maneuver and an acceptable gas price will be received, and the solution of institutional issues will sink in a bureaucratic swamp. Such a diplomatic maneuver in response to the tax one. And maybe even this could be treated loyally, if not for three circumstances.

The first one. The mere readiness to discuss such an unequal deal can be construed as a precedent, indicating that at least components of the sovereignty of a country can be traded.

The second one. The excessively high significance of the compensation for tax maneuvers and gas prices reflect the state of systemic vulnerability of the national economy.

Yes, in the last two and a half years, the country's economic results have been relatively good. But economic growth prospects remain weak, while systemic threats to financial stability don’t go anywhere.

The systemic vulnerability of the economy is a bad background for “diplomatic maneuvers”. The chances of success of a “diplomatic maneuver” in such a situation are reduced, and the stakes are very high.

Moreover, I believe that the instrument of a “diplomatic maneuver” alone cannot in any way eliminate this very systemic vulnerability of the economy. At best, it will only give a new respite, and at worst, such step will aggravate it.

The third. The expectation in the spirit of “realpolitik” that bureaucratic millstones will be able to grind agreements of an institutional nature seems naive to me.

For example, it is naive to believe that the counterparties to the transaction are not aware of such a possible motivation. These contractors over the past years have repeatedly demonstrated their “realpolitik”. Therefore, it is hardly appropriate to think that they conclude a deal without immediate benefit for themselves (and even with costs, if we consider compensation for a tax maneuver), not expecting a return in the future and not taking into account possible risks.

It seems to me that their logic was well reflected by the founder of the concept of “realpolitik” Otto von Bismarck, whose words should probably be authoritative for adherents of this approach: “Russians always come for their money. And when they come - do not rely on the Jesuit agreements that you have signed, supposedly justifying you. They are not worth the paper on which they are written. Therefore, it’s worth playing with the Russians honestly or not to play at all.”

Dzmitry Kruk, naviny.by