Putin, Lukashenko agree to deepen economic ties amid sanctions

Russia and Belarus on Thursday agreed to tighter coordination in economic policy, but stopped short of a common currency.

Russian President Vladimir Putin (right) and his Belarusian counterpart Alexander Lukashenko shake hands during a news conference following their talks at the Kremlin in Moscow, Russia on September 9, 2021 [Shamil Zhumatov/Reuters]

President Vladimir Putin and his Belarusian ally agreed to closer economic ties and new loans from Moscow, as the Kremlin moved to capitalize on Alexander Lukashenko’s international isolation.

“First the economic foundation must be laid before moving further on the political track,” Putin told reporters after talks in the Kremlin Thursday.

The two neighbors, linked in a so-called Union State, agreed to tighter coordination in economic policy but stopped short of a common currency. Russia will continue deeply discounted supplies of natural gas to Belarus through the end of next year as the two move to gradually integrate energy markets. Putin also said Russia will provide another $630 million in loans for Belarus through the end of next year.

Started three years ago, the integration talks had stalled amid reluctance by Belarus to implement existing agreements on a single currency and other joint mechanisms on the Kremlin’s terms.

But Lukashenko has sought increased financial support from Moscow amid sanctions from the U.S. and the European Union in response to his brutal crackdown on opposition protesters since disputed presidential elections in August last year. This is Lukashenko’s sixth visit to Russia for talks with Putin since then. The agreements reached Thursday are to be finalized by officials by the end of the year.

The two leaders also discussed closer defense and security cooperation, but they didn’t provide details.

Russia is stepping up its military presence in Belarus by deploying Su-30SM fighter jets for joint patrols of airspace along its borders. Anti-aircraft missile forces also began joint missions Thursday along Belarus’s western border, which neighbors the North Atlantic Treaty Organization, according to the Defense Ministry in Minsk.

The leaders touted the Zapad-2021 joint war games that kicked off Thursday. The maneuvers will take place in both Russia and Belarus and involve as many as 200,000 troops, as well as hundreds of planes, armored vehicles and ships, Russia’s RIA Novosti reported.

Regional Tensions

While Belarus has so far resisted requests to host a Russian base on its territory, the drills come amid heightened tensions in the region. Poland declared a state of emergency last week after accusing Belarus of using asylum seekers as a weapon following increased traffic across their border of migrants from Iraq and Afghanistan. Fellow NATO allies Latvia and Lithuania are locked in a similar stand-off with Belarus over migrant flows into the EU states.

Putin has embraced Lukashenko and offered Russian help to counter the West’s attempts to increase pressure on the Belarusian leader, a former collective farm boss who’s been in power since 1994. Lukashenko secured $1.5 billion in loans and a deal on oil and gas supplies from Russia.

Thursday, Putin said Russia will continue to supply gas at $128.50 per thousand cubic meters through the end of 2022, far below the current price in Europe of about $650.

“We argued for a long time,” Putin said. “Our Belarusian partners are difficult negotiators.” He didn’t provide details on how integration would proceed with Belarus’ highly centralized and state-controlled economy.

“Not all knots in our relations have been untied,” Lukashenko said, adding that further political integration is within grasp if “our people want it.”

–With assistance from Henry Meyer.

Source: Bloomberg