“No country in the world receives the level of support from Russia as that which is afforded to Belarus,” according to Sergey Kondratiev of Moscow’s Institute for Energy and Finance Foundation. Just this summer Russia has loaned Belarus $500 million, which was the repeat dollar amount for another Belarus loan given six months ago. These are not typical country-to-country interactions: despite the fact that Belarus has yet to repay its debts and growing interest, Russia continues to inject financial support for the Belarus economy. Not a recent alliance, the International Monetary Fund (IMF) says that Russia has given $106 billion to Belarus over a ten-year period from 2005 to 2015. However, this costly cash flow seems to be in vain, for the Belarus economy is not boosted by it and it adds unnecessary financial pressure to Russia’s state budget. Instead of the loans optimizing efficiency in money use, Russian Council for Interethnic Relations member Bogdan Bespalko points out that “on the contrary, we are seeing steady stagnation.” 

Russia subsidizes Belarus in a variety of ways–not all legal. No border checks have been instated between Russia and Belarus and coupled with preferential market access, cross-border smuggling has flourished. Belarus re-labels certain EU goods to evade EU sanctions when smuggled into Russia and also issues falsified customs documents. But curiously, Russia does not benefit financially from these illicit trades. In fact, Russia lost $2.6 billion from illegal tobacco imports from 2011 to 2020 and lost $4.2 billion from the smuggling of EU-sanctioned goods from 2014 to 2020. Kondratiev explains, “Only Belarus earns money doing this. Belarusian cigarettes are a case in point: Batches containing up to 1 million packs are smuggled into Russia without any excise duty being paid. A popular way to hide cigarettes is within shipments of mineral fertilizers.” Belarus furthers its financial gain by seizing Russian company properties in Belarus. An example of such conduct, common for Belarus, is the 2020 Belgazprombank case. “After a provisional administration was established, deposits and financial assets were siphoned off, seriously hurting Russian shareholders.” Kondratiev makes it clear that Russia is, interestingly, aware of the seizure of goods sent by Russians transiting through Belarus.

In less legally ambiguous methods, Russia allows Belarus’s energy sector to receive cheap Russian gas and waives tariffs for oil heading to Belarusian refineries. Moscow’s Institute for Energy and Finance Foundation estimates that this special treatment adds up to $35 billion in subsidized oil and $19 billion for gas. “Over the past 20 years, gas prices in Belarus only rose twice to European levels; each time Belarus halted payments [to Russia], demanding a discount,” said Kondratiev. Russia is generous in extending payment deadlines and is willing to repeatedly revise terms and conditions of loans to Belarus. When Russia lent Belarus $10 billion for a nuclear power plant in 2011, Russia gave Belarus an unusually long grace period for repayal and the offer to pay the loan back on a discounted rate. Kondratiev notes the unconventionality of the loan, as “Belarus would not have received such favorable conditions on the open market.” For loans Russia gives that are not specified for certain projects, Bespalko thinks Belarus uses the money to pay off old debts, since “a large portion of the latest $500 million loan was taken to repay money owed to Russian corporations.” The entirety of several Belarus business sectors like food and engineering industries are propped up by Russia. The special treatment is not just noticeable globally, but even within the Eurasian Economic Union. The Eurasian Economic Union is an international economic union between countries in Eastern Europe, Western Asia, and Central Asia, such as Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. Belarus’ terms and conditions with Russia always looks like a sweeter deal compared to Russia’s other allies, especially when the Belarus’ economy is able to generate $11 billion between 2011 and 2020 because of Russia’s low-interest loans, according to Moscow’s Institute for Energy and Finance Foundation.