Overview
Latest update: 19/06/2001

Political relations

Following the recognition of Belarus as an independent state in December 1991 by the European Communities, EU-Belarus relations initially experienced a steady progression. The signature of the Partnership and Cooperation Agreement (PCA) in 1995 signalled a commitment to political, economic and trade co-operation. Significant assistance was provided to Belarus within the framework of the Tacis Programme and also through various aid programmes and loans.

However progress in EU-Belarus relations was stalled in 1996 after serious setbacks to the development of democracy. In 1996 a move towards authoritarian rule was brought about by President Lukashenko, who, after organising a flawed referendum, reformed the 1994 constitution concentrating powers around the presidency. Democratic conditions have been undermined, by the replacement of the democratically elected parliament with a national assembly nominated by the president and through general deterioration of judicial and administrative competences, repression of the opposition and the media.

The EU was unable to recognise the new constitution, which replaced the 1994 constitution. The Council of Ministers decided upon a number of sanctions against Belarus in 1997: The PCA was not concluded, nor was its trade-related part (Interim Agreement); Belarusian membership of the Council of Europe was not supported; Bilateral relations at ministerial level were suspended; and EU technical assistance programmes were frozen (with the exception of humanitarian aid, regional programmes and programmes directly benefiting the democratisation process). 

Acknowledging the lack of progress in relation to bilateral relations and the internal situation following the position adopted in 1997, the EU adopted a step-by-step approach in 1999, whereby sanctions would be gradually lifted upon fulfilment of the four benchmarks set by the OSCE (substantial powers returned to the Parliament; opposition representation in electoral commissions; fair access to the state media for the opposition; electoral legislation conforming to international standards). 

Some moderately positive developments towards the implementation of recommendations made by the OSCE Advisory and Monitoring Group (dialogue between government institutions and the opposition; revision of electoral legislation) were observed in 2000. However, Belarus has so far failed to meet the requirements of the EU and the OSCE regarding access to the state media for the opposition and the conduct of free and fair elections. The procedure for the registration of candidates for the parliamentary elections of October-November 2000, through which many opposition candidates were barred from participation, leading some opposition parties to boycott the elections, gave rise to particular concern. 

Due to these considerations, the EU, like the OSCE, did not send an official monitoring mission and did not recognise the legitimacy of the election. The EU continues to assert the importance of the reestablishment of democratic conditions, human rights and legality in Belarus. The conduct of Presidential elections (likely to take place in September 2001) according to international democratic standards will be a necessary condition for the restoration of full Belarusian participation in European affairs. 

Economic situation

In Belarus, economic transition has barely begun. The state continues to own larger enterprises (the private sector accounts for around 20% of GDP) and to regulate economic activity heavily, including through elements of output planning. Until 2000, subsidies to state enterprises and price controls on industrial and consumer staples constituted a major feature of the so-called Belarusian model of ‘socially-oriented’ market economy. Inflationary currency emission had also been regularly used to finance real sector growth and to cover the payment of salaries and pensions. 

In the late 1990s, negotiations with the IMF and the World Bank were suspended due to the Belarusian authorities' failure to implement the required reforms (Belarus has received no IMF credits since 1995).

In 2000, Belarus managed to reduce its budget deficit to 2.4% (source: World Bank), tightened its monetary policy, reduced inflation and partially liberalised the foreign currency market. 

Between April and September 2001, the Belarusian government of PM Yermoshin is to implement a staff-monitored programme in cooperation with the IMF, involving price and wage liberalisation, a widening of privatisation, fiscal reform, the adoption of international accounting standards in the banking sector, etc.

The World Bank is currently considering a new Country Assistance Strategy for Belarus, focusing on areas such as targeted social assistance, AIDS/HIV and tuberculosis prevention, environmental protection, Chernobyl-related damage, small and medium business development. In June 2001, the World Bank approved a loan of $22.6 million to finance repairs in over 450 schools, hospitals, and homes for orphans, the elderly and the disabled throughout Belarus.

In view of the insufficient progress made by Belarus towards democratisation and the adoption of market economic reforms, the EBRD has restricted financing to the private sector, with an emphasis on SMEs.

On the other hand, Belarus has avoided the dramatic real sector decline that characterised most NIS economies after the collapse of the Soviet Union. Belarus has little foreign debt and has posted among the highest rates of growth in the region since 1996 (2.8% in 1996, 11.4% in 1997, 8.4% in 1998). As Belarus is highly dependent on the Russian economy, the crisis of August 1998 had a strong impact on the Belarusian economy, with growth slowing to 3.4% in 1999, and around 4% in 2000. However, economic indicators for Belarus need to be treated with caution. They appear rather unreliable, since the figures are often inconsistent and the patterns substantially diverge from neighbouring countries with strongly interlinked economies (Russia, Ukraine, etc.).

Belarus has attracted negligible foreign investment, most of which has come from Russia (especially for the construction of the Yamal-Europe gas pipeline).

Relations between Belarus and Russia

Russia is the most important partner for Belarus in the economic and political fields alike. In terms of trade, two thirds of Belarusian exports go to Russia. Due to the structure of Belarusian industry, which had been designed as the 'assembly shop of the Soviet Union', Belarus relies heavily on other CIS countries and Russia in particular both for export markets and for the supply of raw materials and components. 

The intoduction of free trade between Russia and Belarus in mid-1995 led to a spectacular growth in bilateral trade, which was only temporarily reversed in the wake of the financial crisis of 1998. Russia accounts for the largest share of Belarusian external trade (50% of exports, 63% of imports as of early 2000), while Belarus is Russia’s second-largest trading partner behind the EU (turnover of $9.3 billion).

Subsidised energy imports (especially of natural gas) and other forms of cheap credits have further strengthened Russia's position as the foreign partner of choice for Belarus. Links with Russia have allowed the Belarusian economy to survive, but had - until recently - failed to provide incentives to restructure and implement potentially unpopular market reforms. 

President Lukashenko has been keen to form a close union with Russia. To this end, far-reaching agreements have been signed. The framework for this union was notably set down in the Treaty 'On the formation of a Community of Russia and Belarus' (1996), the Treaty on the Russia-Belarus Union and the Union Charter (1997) and the 'Treaty of the Formation of a Union State' (1999). The integration treaties contain commitments to monetary union, equal rights (of residence, economic activity and access to social services), single citizenship, and a common foreign and defence policy. They have also established a range of institutions modelled on the EU. After protracted disputes and setbacks, the two countries' customs duties were unified as of March 2001, realising the treaty provision for a customs union. Finally, towards the end of 2000, Belarus made progress in monetary stabilisation in the context of ongoing negotiations with the Russian Central Bank on monetary union, which is scheduled for 2005.

EU assistance

The Tacis programme for Belarus for the period 1991–96 was funded at over €54 million . If multi-country, interstate and regional nuclear safety programmes are taken into account, Belarus benefited from a total of €76 million in Tacis funds over this period. Assistance in the framework of the national programme was given to a focal area of enterprise support and private sector development and three priority areas : food production and distribution, energy and transport.

Whereas the Tacis indicative programme for 1996-99 could not be negotiated and the planned allocation of €37 million was frozen due to the political reasons described above, certain developments have continued within the framework of Tacis assistance. In 1997, the Commission developed a special €5 million Programme for the Development of Civil Society in Belarus, targeted at the media, NGOs and youth. The proposal was adopted by the Council of Ministers in December 1997 and presented to the Belarus government in March 1998. The Belarusian government agreed upon a slightly amended version of the programme in June 1999, and formally endorsed the programme in November 1999. 

In 2000, €5 million in Tacis funds were allocated to the Small Projects Programme for Belarus, whose activities cover the development of civil society, the training of managers and educational exchanges (Tempus programme).

As with other New Independent States (NIS), Belarus continues to benefit from the Tacis Cross-Border Cooperation Programme, Interstate Programme and the Nuclear Safety Programme.

In addition to Tacis resources, Belarus has received €10 million in food aid from the €250 million programme for the former Soviet Union. Furthermore, a loan of €102 million was received for the purchase of food and medical products. ECHO provided €6.7 million to Belarus for humanitarian assistance essentially linked to the effects of the Chernobyl accident. In addition, macroeconomic assistance has been provided, in 1995 a loan of €55 million for ten years was agreed, the first tranche of this amounting to €30 million having been disbursed in December 1995. However, the remaining €25 million remains frozen due to the absence of progress in economic reform. Finally, Belarus received €24.97 million in bilateral aid from EU member-states over the period 1996-1999 as well as €112.40 million in EBRD loans.

Belarusian civil society organisations have received assistance from the EU's EIDHR programme (European Initiative for Democracy and Human Rights): just over €2 million in 1999; €0.4 million in 2000.

EU-Belarus trade

Bilateral trade with Belarus has shown a slight expansion over the years, though EU exports have declined following the considerable impact of the Russian crisis of 1998 on the Belarusian economy. Belarus has continued to have a negative balance of trade with the EU. Agricultural products, metals, textiles and machinery of various types represent the main Belarusian exports to the EU, while finished industrial goods make up the bulk of Belarusian imports.

Bilateral trade in € million

* Data for the first nine months only.

The EU has on three occasions introduced anti-dumping measures against Belarus. These have applied to potassium chloride since 1992, polyester staple fibre since 1996 and polyester filament tow since 1997. 

The EU supports WTO membership for Belarus, although important questions are posed in relation to its customs union with Russia, Kazakhstan, Kygyzstan and Tajikistan as well as its union with Russia. 

A textile agreement with Belarus has existed since 1993 and a new agreement came into effect in 2000. 

Future relations

The EU continues to recognise the importance of Belarus. Political stability in the region is a priority, the next enlargement of the EU will create a shared border with Belarus. Serious concerns remain over the political conditions in the country with incidents of repression of opposition movements. The endorsement of the Tacis civil society programme has been a positive step, fulfilling a benchmark set by the EU. The EU is closely monitoring political developments in Belarus - most notably with a view to assessing the legitimacy of the presidential election, which is expected to take place in September 2001. The EU continues to encourage dialogue between the  Belarusian government and the opposition in order to advance towards democratisation. The EU is ready to resume normal relations with (and full assistance to) Belarus providing the EU/OSCE criteria for free and fair elections are met.

Basic Data

June 2001