Monday

19th Nov 2018

EU billions flow to Lukashenko despite sanctions

  • Pipeline: EU trade with Belarus is on the rise (Photo: gTarded)

Lucrative oil and petrochemical contracts between the EU and Belarus help keep the former Soviet republic's economy afloat.

Belarus declared a €2.5 billion trade surplus in 2011 after trade between the two sides shot up by 76 percent in the first nine months alone.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Despite the economic hardships endured by most of the population, the country has seen a significant increase in trade with the EU over the last year - Belarus effectively doubled exports to Europe compared to 2010.

Some of the extra profit may go towards paying off its €30 billion of external debt, though an unstable currency could still be a problem.

Poverty in Minsk is hidden away - the streets are well maintained and clean, but in the back alleys and courtyards, homeless people can be seen rummaging through bins in the early morning hours before disappearing from view once again. Nobody dares to beg openly.

As import-export profits fill the state's coffers, the deterioration of living standards continues.

In Minsk, the price of meat has soared: the careful display of chicken behind shop windows has become an exercise in voyeurism for many who can no longer afford it.

While the price of food recently increased by 127.4 percent, the official average wage dropped from $530 to $353 per month. The president of Minsk's Organisation of Trade Unions says the real figure is closer to $150 per month. "People who work in the factories are earning this kind of wage," he told EUobserver.

Almost everyone is forced to work on a one-year contract, which helps keeps workers obedient to the regime. Contracts by the employer can be terminated at any moment without reason or following a phonecall from the KGB.

A deputy director of ideology staffed at every state-owned company ensures the workers understand their duty toward President Alexander Lukashenko. "His main duty is to inform on people who differ from the state line," said the trade union leader.

Meanwhile, behind closes doors in large government offices, the tight circle of the country's elite - dubbed the "regime's bagmen" - boast of huge profits with their EU business partners. At this level, their ideologue and overseer is Lukashenko himself.

Regime bagmen

Oligarchs such as Vladimir Peftiev and Yuriy Chizh have extensive European business connections.

The railway oil terminal in Zhabinka near Brest in Poland officially belongs to the state-owned enterprise Belspetsvneshtechnika but is allegedly connected to Beltechexport, the weapons defence firm owned by Peftiev.

Aside from receiving, storing and shipping petroleum products at its Zhabinka terminal, Belspetsvneshtechnika is also one of the leading companies in the Commonwealth of Independent States specialising in the export and import of armaments, military equipment and other hi-tech products and science-intensive technologies.

Meanwhile, Chizh's Belneftegaz, NeftekhimTrading and Neonafta facilitate Belarus oil-based product trade in Europe. Neonafta is located in northern Belarus at Polotsk near a river that flows from Russia all the way to Latvia and finally the Baltic Sea. The company sells diesel via Lithuania’s port of Klaipeda, from where it is shipped to the Netherlands and UK.

Some of the oil-based products exported by Chizh are also said to go through the railway terminal in Zhabinka. In Latvia, Chizh owns the Mamas-D biodiesel factory, established in 1992.

Belneftegaz is based off the Pripyat river in Mozyr where the world's longest pipeline, the Druzhba, carries crude oil from Russia to be refined into petrol. The pipeline has a 2 million barrels per day (bpd) capacity, most of which goes to Europe, while around 0.5 million bpd stays in Belarus.

Belneftegaz also sells low-octane fuel to Ukraine and diesel to Poland, while NeftekhimTrading supplies paraxylene to the Netherlands.

Altogether, around 30,000 people in Belarus work for these companies, according to Fedynitch Gennadi, chairman of a Minsk-based trade union. He believes that EU sanctions against these companies would cripple Lukashenko. "We are 10 million in Belarus. We already live under sanctions - Lukashenko's sanctions," he told EUobserver in Minsk.

Peftiev and Chizh recently went on the EU's visa ban and asset freeze list together with 29 individual companies. But just one of the firms listed above - NeftekhimTrading - was put under the EU ban. Their holding companies - Beltekh Holding and LLC Triple - are also on the list. But this does not affect subsidiary firms, such as Chizh's Elite real estate company or others.

Belarus welcomes EU money

At a press conference in Minsk at the end of December, Lukashenko described healthy business relations with Europe as one of his crowning achievements in 2011, regardless of the EU sanctions on literally hundreds of his officials.

"Paradoxically, more economic support for the regime in 2011 has been coming not from the east, as most people believe, but from the west" said a recent study by the Moscow-based Committee on International Control, a human rights organisation specialising in Belarus.

The country ranked only 41 in 2010 as an EU trade partner, just below Iraq. But to Belarus, EU trade represented 30 percent of its total exports, most of which came in the form of fuels and mining products.

One senior EU official told EUobserver that Belarus is now seeking to open and expand its trade with Europe, focusing on transport, pharmaceuticals and nano-technology.

A source within the fragmented opposition - who wants to remain unnamed - told this website in Minsk that today half the country's trade is with the EU. "Oil products are directly connected to the Lukashenko family and [the income] is used for repression," he said.

Wealthy businessmen in Belarus pay into a presidential fund, which is used at Lukashenko's discretion. During election years, the fund balloons to almost $1 billion, though some believe it could be nearly eight times the amount.

Alaycsandr Makaev, deputy-chair of the Co-ordinating Council of Individual Entrepreneurs in Belarus, told this reporter in November that the fund is used to extort money and ensure loyalty from the business elite. "This fund payout is typical to all companies here," he said, adding that even Chizh spent a few days in jail in 2008 for "insubordination."

Black gold flows through Europe

Outside Russia, the Belarus National Statistics Committee says its number one trading partner is the Netherlands. Belarus does not produce oil but instead refines or sells off heavily subsidised Russian crude to other countries, including EU member states.

Belarus says it exported $4 billion to the Netherlands in 2011, more than twice the amount traded in the first nine months of 2010.

"The Netherlands is the second trade partner after Russia. One of the reasons for it is very efficient end professional Belarusian diplomats working in this country. Today, the ambassador there is Alena Gritsenko, former head of the [foreign ministry]," Raman Yakauleuski, a prominent Belarusian political observer, told EUobserver.

Yakauleuski says Gritsenko's predecessor in the Netherlands, Vladimir Gerasimovich, was also the former deputy minister of foreign affairs and a KGB colonel who once headed the external intelligence department.

EUobserver was unable to verify the statistics with the Dutch ministry of economic affairs. Based in The Hague, the ministry has a desk officer dedicated to Belarus but after three weeks of enquiries, it only provided a link to the Statistics Netherlands registry on bilateral trade data. The statistics do not disclose transit trade, which makes up the bulk of its commercial activities with Belarus.

The Statistics Netherlands registry shows the Dutch did not import, trade or transport any energy products from Belarus in 2010. But the numbers are misleading.

"The imports of oil reported in statline [database] are based on the country of origin where the oil comes out of the ground," a spokesman of the Netherlands Statistics Office told this website in an email. The registry shows The Netherlands imported 33 million tons of oil from Russia in 2010.

The Port of Rotterdam's business development manager was more forthcoming. He told EUobsever that Belarus' two major refineries sell products within the EU because its production exceeds domestic demand.

"Some tonnage is sold within Netherlands, diesel. From the Netherlands, it is shipped to mainly the far east," he said.

News in Brief

  1. Germany and France agree eurozone budget framework
  2. Austrian foreign minister: EU's Israel policy 'too strict'
  3. Soros and Kurz discuss Central European University move
  4. EU set to tighten rules on foreign strategic investment
  5. Macron repeats call for unified Europe in Bundestag speech
  6. US warns EU banks and firms against trading with Iran
  7. Merkel urged Romania not to move embassy to Jerusalem
  8. Protesters call for Czech leader to step down

Opinion

Macron's 'European army': why is everyone talking about it?

Few people commented on one key point in Macron's statement: he did not justify the idea of a European army by the need to intervene in Africa, which would have been France's traditional approach. Instead, he invoked the Russian threat,

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Panic is not answer to EU's security challenges
  2. Dutch flesh out proposal for EU human rights sanctions
  3. EU cheerleaders go to Russia-occupied Ukraine
  4. EU must recognise new force for Balkans destabilisation
  5. Brexit dominates EU affairs This WEEK
  6. How the EU commission got tunnel vision on self-driving cars
  7. No-confidence calls against May put Brexit deal in doubt
  8. Key points of the Brexit deal (if it ever comes into effect)

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Stakeholders' Highlights

  1. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  2. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  3. FIFAGreen Stadiums at the 2018 Fifa World Cup
  4. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  5. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  6. FIFARecycling at the FIFA World Cup in Russia
  7. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  8. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  9. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  10. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  11. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  12. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries

Join EUobserver

Support quality EU news

Join us