If the quality of Belarusian-Russian relations were to be judged solely by the dull figures of Belarusian trade balance, one would have the impression that the two countries are at war in trade. In particular, Belarus has lost 49.7 percent of trade with the Russian capital, the most dynamically developing and richest market in Russia.
Belarusian-Russian trade shrank by 10.7 percent in value terms in 2005. Physical export to Russia fell by 10.9 percent, import from Russia - by 12.9 percent. There was a decline of all the ten major commodity exports.
There was an explosive growth of the export of petroleum products in 2004, but the following year it decreased as fast as it increased in the previous 12 months. The amount of supply to Russia fell by 74 percent. Such instability is a consequence of legislative inefficiencies and lack of stable rules for that segment of the market.
Textiles are the second commodity group that experienced a serious decline. Belarusian light industry sold to Russia products worth of 18.7 percent less than in 2004. Then go chemical products and ferrous metals.
Despite the upcoming tenth anniversary of union relations between Belarus and Russia, the two countries are still far away from their announced ambition of stability and predictability. Trade is still highly dependent on political decisions of the authorities, and the authorities do not really welcome the regime of free trade between countries.
Among other Belarusian commodities that are losing demand in Russia are footwear (a decrease of 30.3 percent in its export in 2005), components for vehicles (27.5 percent) and TV sets (24.5 percent). Belarus, in turn, substantially decreased import from Russia: components for tractors (by 160 percent), storage batteries (by 11 times), insulated cables and wires (by two times), plastic (by 42 percent), paper and cardboard (by 30 percent), and ferrous metals (by 21.9 percent).
Last year was a successful one for Belarusian meat exporters. The export of fresh and frozen beef, pork and sausages increased both in value and in size. At the same time, the export of poultry decreased in 2005. Milk producers also performed well last year. The export of milk products rose by 30-35 percent in value terms. The Russians were buying more of Belarusian cheese, sugar and even canned fish.
The year was not good for producers of chocolate (a decrease of 36.2 percent in value terms) and confectionery (28.6 percent). The position of Belarusian producers of bras and underwear also worsened in the Russian market.
A careful analysis of Belarusian-Russian trade balance over the past few years cannot find commodities, except for gas and oil, which would show stable growth. It looks like trade develops in spite of numerous agreements and protocols regularly signed by the two countries, rather than thanks to them. The year of 2005 sharply intensified the process of structural changes in trade relations between Belarus and Russia. In particular, the share of mineral products in Belarusian import from Russia rose from 40.6 percent in 2004 to 54.9 percent in 2005, while the share of machines and equipment fell from 12.5 to 7.7 percent, basic metals - from 16.4 to 13 percent, foodstuffs - from 3.8 to 3.3 percent, and textiles - from 2.6 to 1.5 percent.
Belarus fences itself off from Russia in nearly all commodity groups but nevertheless demands that Russia keeps its domestic gas prices for Belarus and maintains the existing (and extremely profitable for Belarus) mechanisms of oil processing. This can hardly be called a partnership. Since oil flows and prices for Russian energy still remain mostly non-transparent, one can assume that last year's structural revolution in bilateral trade is not the last one.
The most unpleasant moment for Belarus would come when Russia develops sufficient productions of goods that are now imported from the neighboring country's largest producers, such as tractors, trucks, refrigerators, TV sets and chemical products). Under WTO rules and bilateral agreements with Belarus, Russia would then demand equal access to the Belarusian market. Taking into account smaller taxes, lower prices for energy and more up-to-date technologies, Russia would become the most serious competitor for Belarusian companies.
Low prices for Russian energy that Belarus had for years have made Belarusian producers too relaxed. The government's protectionist measures added even more to that relaxation. State companies directors are focused on fulfilling government-set production targets, rather than on capitalizing their productions and lowering costs. Their approach is very easy in the conditions of soft monetary and fiscal policies, much easier than upgrading fixed assets and finding ways to enter markets of rich countries.
What causes most concerns now is the expectation that the crisis of trade with Russia would lead to a general crisis of foreign trade and recession of the whole economy in Belarus.

Trade in commodities between Belarus and Russia in 2002-2005 (in US$ million)

Source: Belarus' Ministry of Statistics and Analysis, 2003-2006