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June 17 – June 23, 2024
Belarus-Russia relations

Economic Wars: Export vs. Import

The situation has not changed
Economic Wars: Export vs. Import
photo: elements.envato.com

The notion that “exports are unequivocally good, and imports are bad” might seem sensible at first glance, without considering the practical outcomes. Belarusian and Russian regulators often perceive purely economic phenomena in terms of military tactics, showing little concern for the consequences. In particular, Minsk and Moscow have fallen for the Western policy of restrictions.

Lukashenka suddenly became concerned about trade imbalances, notably the growing negative trade balance. In the first four months of this year, exports grew by 3.4%, totaling USD 13.15 billion, while imports increased by 4.5%, reaching USD 14.42 billion. Foreign goods deliveries to Belarus during this period exceeded exports by USD 1.2715 billion. A month earlier, the gap was USD 934 million.

Prime Minister Golovchenko optimistically assured Lukashenka that “there is no catastrophe here.” A slight increase in global oil prices affected the import cost rise, while “prices for traditional Belarusian goods decreased on international markets.” However, the Prime Minister speculated that everything would normalize, especially if the time-tested strategy of reducing imports and pursuing import substitution, implemented jointly with Russia, is followed.

On the TV channel “Belarus 1,” Golovchenko stated that the republic does not have a negative balance in trade with Russia. In previous years, this indicator sometimes reached USD 9 billion. The Prime Minister set a government task: Belarus’s share in Russia’s imports should be no less than 10%.

Moscow, meanwhile, is trying to understand the potential consequences of the new US sanctions package. The Kremlin places increasing hopes on China (and even North Korea), and increasingly aligns with Belarusian leadership in “economic” thinking. In both Minsk and Moscow, the analytical pair “export/import” is perceived not as operational categories, but as two armies in actual conflict.

Foreign trade specialists prefer another analogy. For instance, consider export as the right leg and import as the left. It’s better to walk on two legs than to hop on one. Famous economists rely on this relationship in constructions like “Lerner’s Symmetry Theorem,” which demonstrates that restrictions on imports ultimately become restrictions on exports. A balanced foreign trade policy is better than any fight against imports and better than import substitution. Continuing the analogy, the latter can be likened to walking on one leg with a crutch—better than hopping on one leg, but worse than walking normally.

Moreover, a constant positive balance would simply mean labor without compensation. Most economic agents (including the government) would presumably prefer compensation without labor, i.e., imports without exports.

Ironically, the Lukashenka government has been actively working in recent years in a direction set by Western sanctions policy. These individuals aim to reduce imports, which is one of the objectives of the restrictions. The less Belarus (Russia) purchases imported products, the higher their prices. The higher the import prices, the higher the consumer product prices of any production. Higher prices mean higher inflation, lower living standards, and ultimately, reduced economic potential of the country. Ideally, from the perspective of sanctions developers, the last should lead to a situation of “labor without compensation.”

Sanctions are, above all, a punishment. In precisely the same way, Belarusian authorities use free or low-paid labor of inmates in colonies. Representatives of the Belarusian ruling class like to repeat the thesis that sanctions “do not work.” But they believe in something directly opposite.

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.
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