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Belarusian Review

Economy

Minsk Wants Compensation from Moscow for Abandoning National Currency

October 7, 2003. - Last week in Moscow, Belarusian President Alyaksandr Lukashenka met with his Russian counterpart Vladimir Putin, and Belarusian acting Prime Minister Syarhey Sidorski talked with Russian Prime Minister Mikhail Kasyanov to overcome a stalemate in the Russian-Belarusian plans to introduce the Russian ruble in Belarus as the sole currency as of 1 January 2003 . Reports on the Lukashenka-Putin meeting on 30 September were scarce and without any details, while the Sidorski-Kasyanov talks on 1 October were widely covered and commented on in the Russian press. The general conclusion of Russian commentators was that these talks ended in a "scandal" and put a big question mark over the future of the Russia-Belarus currency union.

Sidorski reportedly told Kasyanov that Minsk will not sign any agreement on the currency merger if Moscow fails to compensate Belarus for the "costs" of the adoption of the Russian ruble. Sidorski estimated this compensation at $2.1 billion: $1 billion for the unification of Belarus' tax legislation with that of Russia (lowering Belarusian taxes), $500 million-$540 million for the losses connected with the fact that Russian exporters to Belarus pay value-added tax (VAT) into the Russian budget, $190 million for increasing the capital of Belarusian banks, $180 million for unemployment allowances in connection with an anticipated increase in unemployment in Belarus following the currency merger, and $200 million in a zero-interest credit from the Russian government. Kasyanov reportedly agreed only to the compensation for the losses connected with the collection of VAT, but put the sum at $100 million-$120 million annually and said Russia will pay this compensation only starting from 2003."The Council of Ministers [of the Russia-Belarus Union] has not agreed the text of an accord on the introduction of the Russian ruble as the sole currency in Belarus as of 1 January 2005," Kasyanov told journalists after his talks with Sidorski. "If the accord on a single currency is not signed by the end of this year and not ratified within three months, we may forget about the date of its introduction " 1 January 2005," he said.
"The accord needs to be signed only in a package with agreements on the compensation to the Belarusian side," Kommersant quoted Sidorski as saying. This remark was met with an angry rebuke by Kasyanov: "I don't know what compensation we should pay for the introduction of our currency! The introduction of the Russian ruble in Belarus is an advantage to the Belarusian economy. We are not going to pay extra for this!"
And on 3 October Belarusian National Bank Chairman Pyotr Prakapovich said how much Belarus will need for replacing Belarusian rubles with Russian ones in 2005. According to Prakapovich, Moscow will have to transfer from 120 billion-160 billion Russian rubles ($3.9 billion-$5.3 billion). Prakapovich added that the amount is equivalent to 20 percent of Belarus' estimated GDP in 2005. "If we make the decision to adopt the Russian ruble in Belarus...the Russian ruble should ensure Belarus' economic development," he said
Prakapovich pointed out that Russia should print the money required by Belarus rather than budget additional expenditures. "It is surprising that it takes the Russian side so long to resolve the compensation and other issues, because it costs Russia nothing," he said, stressing that he will not sign an agreement on the currency union until Russia pledges to supply enough money. There has so far been no official Russian comments on Prakapovich's demand.

Source: RFE/RL Poland, Belarus, and Ukraine Report, October 7, 2003

This article appeared in
Belarusian Review, Vol. 15, No 4
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Copyright 2003 Belarusian Review
All rights reserved.

Jan Maksymiuk

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