Since July 2013, Belarus and China have started building a comprehensive strategic partnership, by signing multiple key agreements, which would lead to an anticipated 150 mutually beneficial investment projects until 2020.
China has already provided $5.5 billion in loans for 20 projects. For Belarus, China brings the needed financial resources to help modernize and develop its economy and increase its exports, while also potentially helping it to reduce Russia’s economic and political influence. At the same time, China’s investments in its partner’s first nuclear power plant and in renewable energy sources could help Belarus increase its energy independence from Russia.
China’s policy of non-interference in domestic politics’ perfectly suits the interests of Belarus’ long-term president, deemed ‘Europe’s last dictator,’ who has held power since 1994 and has led a repressive regime criticized for its human rights abuses. China’s support is particularly important, because Belarus has been marginalized internationally since early 2011, when the European Union (EU) and the United States (US) imposed new financial and travel sanctions against the Belarusian government. The sanctions came as a response to Lukashenko’s violent crackdown on the opposition following a highly contested presidential election in December 2010. The sanctions scared many potential investors from considering the country as a viable partner.
For China, the partnership with Belarus will ensure a new market for Chinese-produced goods, while, through the agreed construction of an industrial park near Minsk, also bringing it closer to the markets of the EU, Russia and CIS countries. China’s strengthened relationship with Belarus could also strain its relationship with Russia, which considers its former Soviet neighbor to fall within its sphere of influence.
Prior to the 2010 elections, Lukashenko was already declaring that China was best Belarus’ best friend, because it did not have political strings attached, as the EU and US had. While the EU has frozen the ratification of an EU-Belarus Partnership and Cooperation Agreement since 1997 and refused to establish an action plan under the European Neighborhood Policy, in 2009, China ensured Belarus’ partner status in the Shanghai Cooperation Organization.
At the same time, bilateral trade between Belarus and China has been constantly expanding. In 2012, it reached $1.58 billion, increasing by 21.4 since 2011, with the Asian giant exporting $920 million in 2012 and importing goods worth $660 million from its partner. Chinese businesses has been focusing on diversifying their markets for their products, by increasing their exports outside the US, EU and Japan, due to sluggish western economies and the fast growth or growth potential of developing countries, such as Belarus, that China is striving to capitalize on.
The two partner countries have also agreed to build a $5 billion Industrial Park near Belarus’ capital Minsk, which will be able to house 155,000 people and is expected to employ around 120,000 people as well as attract companies around the world. It is planned for high-technology, especially electronics, biomedicine and engineering, and export-oriented production, manufacturing in particular.
The project could be beneficial for both countries. It will enable China’s tax-free expansion into the neighboring markets of Russia and Kazakhstan, which are part of a customs union with Belarus, and access to other CIS countries and EU members. The Asian giant will also benefits from contracts allowing it to increase its exports to Belarus.
China has sought to create a manufacturing base closer to the EU market for a long time. It even started a similar project in Bulgaria, which was stalled in 2010 due to the change in political leadership in both countries. It proceeded to discuss the possibility of developing economic zones with Eastern and Central European countries during a meeting held in Poland in 2012.
For Belarus, the industrial park project could enhance the country’s financial stability. At the same time, if used correctly, China’s investments could allow Belarus to modernize its economy and significantly expand its exports to China and other countries around the world.
Through Chinese investments, Belarus could also increase its energy independence from Russia. At the moment, Belarus imports 90 percent of its gas from its powerful neighbor, but aims to gain 25-30 percent energy independence through the construction of its first nuclear power plant.
Between 2013 and 2018, Belarus will receive a soft loan of $323.8 million from the Export-Import Bank of China in order to construct nuclear power plant infrastructure and connect it with the power network. Belarus’ nuclear power plant has as prime contractor Russia’s Atomstroyexport, a subsidiary of the Russian Energy State Corporation Rosatom, with Russian and Belarus subcontractors. Nevertheless, the plant will be Belarus’ property.
At the same time, Belarus and China signed other energy deals in October 2013, as they agreed to create a solar panel manufacturing plant and photovoltaic station in Mogilev, indicating China’s lesser interest in renewable energy.
The newly established economic and energy relationship with Belarus might test China’s relationship with Russia, which considers Belarus in its sphere of influence, due to its status as a former member of the Soviet Union. During the past few years, China has gradually started expanding its influence on countries traditionally controlled by Russia, such as the Central Asian countries, mostly to expand its energy sources, markets, and increase regional security.
Russia has yet to react to China’s expansion within the former Soviet Union area. In fact, China and Russia have started an all-round strategic partnership in March 2013, by signing over 30 agreements on cooperation in the areas of energy, trade, technology and military exchange. The two countries signed important energy agreements, which will witness Russia pumping at the peak of its trade with China over $31 million tons a year, compared to its current $15 million tons. This will be part of Russia’s effort to diversify its energy market away from Europe. While the Sino-Russian relation has not yet been affected by China’s increasing engagement with countries such as Belarus, if angered, Russia might retaliate by cutting China’s energy supplies.
Belarus and other former Soviet Union countries might use their new partnerships with China to lessen Russia’s influence. Belarus did just that in 2013, when it announced its intention to increase potash exports to China, the world’s largest consumer of the crop nutrient. This was an effort to counter the collapse of a sales alliance with Russia’s potash giant Uralkali, which threatened to push down prices and generate an economic problem for Belarus that depends on its potash exports. At the end of December 2013, perhaps in the response to Belarus’ stated interest in the Chinese market, Uralkali restarted its joint venture with Belarus, while admitting that the Russian side acted thoughtlessly and did not calculated all the consequences when ending the partnership. By playing the China card, it was ultimately Belarus that had to win from this situation. This scenario might play itself out not just in Belarus, but other former Soviet Union members, which could increasingly displease Russia.
At the same time, Belarus’ partnership with China, also entailing strong political support, could determine it to further diminish its efforts to engage with the EU and US. Given the EU and US’ emphasis on respecting human rights and China’s lack of interference in internal affairs, this will likely mean continued human rights breeches for the citizens of Belarus.
Originally published: digitaljournal.com