The amount of Belarusian foreign trade of goods and services was 122 percent of GDP, or 111 percent without services. With such a strong dependence on external markets, it would be logical to expect liberalization, more active talks on WTO entry, more of foreign investment and efforts to reduce costs for the movement of raw materials, components and technologies. Instead, the country gets more protectionism and stronger bias toward the export of mineral products and fertilizers.
As a result of changes in VAT payment conditions in trade with Russia, Belarus was hurt severely last year: bilateral trade fell by 10.7 percent. Belarusian producers were losing traditional markets one by one. At the same time, they increased the amount of refined oil and the export of petroleum products. But that was Russian rather than Belarusian export to the EU.
It has been the second year already that oil and petroleum products save Belarusian exports by letting them grow. While the value of the export of goods rose by 16 percent, the export of mineral products increased by 49.6 percent. It is a very high indicator but it is considerably lower than in 2004 - 67.6 percent. The export of other commodities looks much worse against that background. Compared with 2004, the export of machines and equipment fell by 3.9 percent, textiles - by 8 percent, metals - by 0.9 percent and wood - by 1.3 percent.
The share of mineral products in the country's export structure rose from 27.5 percent in 2004 to 35.4 percent in 2005. The relevant indicator for Russia is about 36 percent. To make the picture complete, it should be added that the value of exported chemical products increased by 20.8 percent and fertilizers - by 29.5 percent. Those figures show that last year again saw favorable conditions for Belarusian raw products in external markets. The growth in the value of exports is a result of a 17.4-percent increase in the average prices for exported commodities. The physical amount of exports fell by 1.2 percent.
The growth in the physical volume of the export of two main items - mineral products and fertilizers - can be a wet blanket for the optimism of proponents of the current policy. The export of petroleum products increased by just four percent to 13.5 million tons and potash fertilizers - by 0.8 percent. At the same time, the average prices of exported potash fertilizers rose by 33.5 percent and petroleum products - by 41.5 percent.
For comparison, prices for potash fertilizers increased by 25.9 percent in 2004 year-on-year, while prices for petroleum products grew by 37 percent. The impressive increases in those prices for the second year in a row allow the country to achieve its public budget and foreign trade targets. Both Belarusian and foreign experts agree that prices for petroleum products, potash fertilizers and chemical products are going to grow much slower in 2006 and can start falling already in 2007. This means the Belarusian government cannot build its strategy of sustainable development on the export of those products.
Changes in other indicators give more evidence into the hands of pessimists in their opinions about the prospects for Belarusian foreign trade. In particular, the export of chemical fibers fell by 9.3 percent in physical terms and rose by 7.7 percent in terms of prices. There was a decrease in the export of wood and wooden products, flax fiber (minus 20.6 percent) and tires (minus 14.3 percent).
If we exclude mineral products and fertilizers from Belarusian export in 2005, the export of commodities rose by just one percent in comparison with 2004. What we actually see is its stagnation. If we in addition take metals and chemicals products out of the structure of export, we will see that Belarusian export shrank by 2.4 percent in 2005.
That is a revealing figure that can tell a lot. First of all, Belarusian trade, as well as the economy in general, became even more dependent on the performance of two dozens of large enterprises in 2005. A threatening number of companies are losing their external markets and becoming outsiders on them. Moreover, the performance of a small group of enterprises directly depends on the political will of Russia. Thus, Belarus' economic dependence on the Kremlin became even stronger in 2005, although the authorities always emphasize that the country's economic sovereignty is getting stronger.
Secondly, the capacity of old technologies and productions is nearly exhausted now. It is still possible to keep the current level of production but it is impossible to grow by 10-15 percent per year and produce new products without foreign investors. It looks like the Belarusian government does not have a clear strategy of export development. New technological products are undistinguishable in the structure of export. The country still relies on petroleum, metal and potash dollars and does not care about expanding the export capacity of small and medium enterprises, especially in regional centers and provincial towns. By not allowing foreign investors to come to Belarus, the government is depriving the country of the most powerful motor of renewal, which worked well in Central and Eastern Europe.
The country badly needs new export products, fresh ideas and modern foreign trade. If the authorities do not think now, new prices for Russian gas and Russia's revision of its system of oil supply to Belarus in 2007 will make them think much harder.

Changes in the export of selected Belarusian products
in 2002-2005 (in millions of US dollars)

Source: Belarus' Ministry of Statistics, 2003-2006