Belarus: country overview
23 August 2012by Ina Dimireva -- last modified 30 January 2017
The EU cooperates with Belarus in the framework of the European Neighbourhood Policy. Policies pursued by President Lukashenka's regime prevent the EU from offering Belarus full participation in the Eastern Partnership. All programmes funded by the EU are to the benefit of Belarusian people at large and include significant support to civil society. The European Neighbourhood Instrument is the EU financial instrument dedicated to the Neighbourhood for the period 2014-2020. It replaces the European Neighbourhood and Partnership Instrument (ENPI) of 2007-2013. Other funding sources are the thematic programmes, focused on human rights and civil society. EU assistance to Belarus takes mainly the form of country Action Programmes funded every year under the ENI. Belarus benefits also from regional and multi-country Action Programmes funded under the ENI.
Advertisement
Member of Schengen area: No
Political system: Republic
Capital city: Minsk
Total area: 207 600 km²
Population: 9.7 million
Currency: Belarusian rouble
Belarus and the EU
The strategic framework, key results and indicative financial allocations for the EU's bilateral cooperation with Belarus in 2014-2017 is set out in the Multi-annual indicative programme. The three priority sectors are: Social inclusion; Environment; Local and regional economic development.
Complementary support for civil society and for the modernisation of public institutions can be provided within and outside the priority sectors. Engagement with civil society is a prominent feature of EU cooperation in Belarus across all sectors.
In 2014-2017, ENI bilateral assistance to Belarus may range between a minimum of €71 million and a maximum of €89 million. These figures are indicative: final allocations will depend on the country's needs and commitment to reforms.
Ongoing bilateral programmes (under the ENPI) focus on reforms in energy, environment, food safety, regional and local development, education and people-to-people contacts.
In 2007-2013, the EU committed €94 million for bilateral assistance to Belarus under the ENPI. This included €22.5 million of direct support for engaging with civil society, media and local authorities and for targeted scholarship programmes.
Economy overview
As part of the former Soviet Union, Belarus had a relatively well-developed, though aging industrial base; it retained this industrial base - which is now outdated, energy inefficient, and dependent on subsidized Russian energy and preferential access to Russian markets - following the breakup of the USSR. The country also has a broad agricultural base which is largely inefficient and dependent on government subsidies. After an initial burst of capitalist reform from 1991-94, including privatization of smaller state enterprises and some service sector businesses, creation of institutions of private property, and development of entrepreneurship, Belarus' economic development greatly slowed. About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. A few banks, which had been privatized after independence, were renationalized. State banks account for 75% of the banking sector.
Economic output, which had declined for several years following the collapse of the Soviet Union, revived in the mid-2000s due to the boom in oil prices. Belarus has only small reserves of crude oil, though it imports most of its crude oil and natural gas from Russia at prices substantially below the world market. Belarus exported refined oil products at market prices produced from Russian crude oil purchased at a steep discount. In late 2006, Russia began a process of rolling back its subsidies on oil and gas to Belarus. Tensions over Russian energy reached a peak in 2010, when Russia stopped the export of all subsidized oil to Belarus save for domestic needs. In December 2010, Russia and Belarus reached a deal to restart the export of discounted oil to Belarus. In 2015, Belarus continued to import Russian crude oil at a discounted price. However, the plunge in global oil prices heavily reduced revenues.
Little new foreign investment has occurred in recent years. In 2011, a financial crisis began, triggered by government directed salary hikes unsupported by commensurate productivity increases. The crisis was compounded by an increased cost in Russian energy inputs and an overvalued Belarusian ruble, and eventually led to a near three-fold devaluation of the Belarusian ruble in 2011. In November 2011, Belarus agreed to sell to Russia its remaining shares in Beltransgaz, the Belarusian natural gas pipeline operator, in exchange for reduced prices for Russian natural gas. Receiving part of a $3 billion loan from the Russian-dominated Eurasian Economic Community (EurAsEC) Bail-out Fund, a $1 billion loan from the Russian state-owned bank Sberbank, and the $2.5 billion sale of Beltransgaz to Russian state-owned Gazprom helped stabilize the situation in 2012; nevertheless, the Belarusian currency lost more than 60% of its value, as the rate of inflation reached new highs in 2011 and 2012, before calming in 2013. In December 2013, Russia announced a new loan for Belarus of up to $2 billion for 2014. Notwithstanding foreign assistance, the Belarusian economy continued to struggle under the weight of high external debt servicing payments and trade deficit. In mid-December 2014, structural economic shortcomings were aggravated by the devaluation of the Russian ruble and triggered a near 40% devaluation of the Belarusian rouble. Belarus entered 2015 with stagnant economic growth and reduced hard currency reserves, with under one month of import cover.
Source: Europa, The World Factbook
