Russian Embassy Explains Slow Russia-Belarus Integration

UNCLAS MINSK 001498

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON PREL BO
SUBJECT: Russian Embassy Explains Slow Russia-Belarus Integration

Ref: Minsk 1425


1. Summary: While speaking to investment forum participants in
Mogilev on November 17 (reftel),Trade Counselor of the Russian
Embassy in Minsk Evgeniy Novozhilov explained why he believed
economic integration of Belarus and Russia, as envisaged in the
union state, has been slow. He blamed Belarus for not carrying out
free market reforms, for resistance in aligning its laws with
Russia's, for implementing those laws that have been aligned
differently than in Russia, and for being ruled by presidential
decree, rather than by law. He thinks these problems could be
solved when Belarus adopts the Russian ruble, but stated this event
is also delayed. End summary.


2. At an investment conference in Mogilev on November 17, Russian
Trade Counselor Evgeniy Novozhilov, who had been scheduled to talk
about the economic benefits of the Belarus-Russia union, instead
explained to the audience why economic union has been so slow.
First, Belarus and Russia have vastly different conceptions of how
to manage an economy. Novozhilov explained that Russia facilitates
the free market and has reformed accordingly. Belarus still
believes in heavy state intervention in the economy. As a result,
several fundamental differences have appeared between the two
economies. Novozhilov cited as an example that Belarus and Russia
treat privatization and taxation in very different ways.


3. Russia and Belarus are attempting in many cases to coordinate
and streamline their economic laws. However, these actions are not
systematic and are rather sporadic. Novozhilov maintained these
attempts to coordinate the laws are not taken with any view of the
bigger picture. Therefore, when one law is changed, it often
contradicts other laws. Furthermore, Novozhilov said Belarus often
refuses to reform its laws to correspond to Russia's.


4. Even when the laws are unified, government agencies in Minsk and
Moscow interpret the laws differently (stemming from their
differing views of the economy and the free market). The
Belarusian and Russian governments draft very different regulations
and instructions for even the unified laws, often contradicting
each other and making the laws work in opposite directions in the
two countries.


5. Novozhilov stressed that the Russian economy is ruled by laws,
while the Belarusian economy is ruled primarily by presidential
edicts and decrees. He argued that decrees are stronger than laws
and are almost impossible to conform with Russian economic laws.
Moreover, Russia's legal system tends to be more stable, as
Lukashenko frequently issues new decrees changing how the
Belarusian economy operates.


6. Novozhilov said he believes the introduction of the Russian
ruble as the single currency of the Russian-Belarus union would
help unify the two economies. He explained that introduction of
the Russian ruble in Belarus, however, has stalled over the
countries' different approaches to the establishment of a single
money emission center. Chiefly, Minsk would like the power to
issue rubles, while Moscow wants to be the sole source.


7. Comment: Novozhilov's comments were at variance with the
positive rhetoric on investment and integration routinely voiced by
Belarusian authorities. Emboffs were surprised to hear a Russian
diplomat, ostensibly asked to speak on the economic benefits of
union, so openly critical of Russia's union partner. His comments
likely reveal the true state of Belarusian-Russian integration
efforts. Despite the positive spin and ten years of supposed
unification, many barriers to economic, let alone political union,
remain.

KROL