Russian experts have persistently advised their government against providing unconditional support for the regime in Minsk. The Belarusian leadership, however, has managed to secure lucrative oil, arms and other deals with the help of lobbyists and partners in Moscow.
Belarus can earn $3.9 billion this year from a difference between the price at which it buys oil from Russia and world market prices. Russian companies yield additional revenues of $370 million because they do not pay an export duty on oil deliveries to Belarus. Considering Russia's low internal prices, oil supplies to Belarus generate Russian exporters additional revenues of $1.5 billion. However, if oil exports to Belarus were not exempted from customs duties, the Russian budget would get additional revenues of $3.5 billion.
What are Russia's real interests - allowing the rich oil barons to get richer and supporting their political godfathers, or strengthening the budget system and raising pensions and wages? local experts ask. Oil is not the main subsidy for the Belarusians who buy it at a higher than Russian domestic consumers.
Natural gas is the second item that the Belarusian regime obtains at a low price, exploiting Russia's naive hope for the restoration of the Soviet empire. Gazprom sold gas to Belarus at $47 for 1,000 cubic meters in 2005, giving Minsk for free between $1.7 and $2 billion, considering that the 2005 market price was $150 per unit.
Belarus' GDP totaled $29.5 billion last year. Experts estimate that Russian subsidies accounted for 18.6 percent of the country's GDP in 2005. No other nation in the world receives so much foreign aid. There are other forms of support. Belarusian enterprises maintain strong positions in Russia through centralized orders from government agencies, which would be impossible without kickbacks and bribes.
Since Russia's cheap fuel and energy supplies help manufacturers in the neighboring country to cut costs of their final products, Belarusian goods such as tractors, agricultural equipment, refrigerators and chemicals are more competitive than good manufactured in Russia.
Direct financial support is prohibited by WTO rules and contravenes economic equality principles adopted by the two countries. Interestingly, Russian bureaucrats discriminate against domestic manufacturers by flooding the local market with commodities imported from Belarus in return for fuel and energy subsidies.
Russia accounts for the lion's share of Belarus' consumer exports - over 98 percent of the total exports of meat and meat products, 97.7 percent of the exports of dairy products, 100 percent of sugar exports, 61.8 percent of the exports of pharmaceuticals, 73.5 percent of the exports of wallpaper, 88 percent of the exports of footwear, 81 percent of the exports of refrigerators, 63 percent of the exports of metal-turning tools, 65 percent of the exports of TV sets, 39 percent of the exports of tractors, 76 percent of the exports of truck tractors and 70 percent of the exports of furniture.
Experts estimate that Russia loses about $1 billion, an amount equivalent to three to four percent of Belarus' GDP, on sales of subsidized Belarusian commodities. The ratio of minerals on Belarus' imports from Russia increased from 40.6 percent in 2004 to 54.9 percent in 2005, while the share of other goods shrank considerably - that of equipment from 12.5 to 7.7 percent, of non-precious metals and metal products from 16.4 percent to 13 percent, of food products from 3.8 to 3.3 percent and of textiles from 2.6 to 1.5 percent.
On the one hand, Belarus closes its market for Russian goods, while on the other it demands a low price for gas and lucrative oil processing contracts. What does Russia get in return for its generous support of the Belarusian regime? Almost nothing. It is not a surprise that Gazprom announced plans to raise its gas price to $200 for Belarus if it refused to sell a controlling stake in its gas pipeline system, while the Russian government demanded its share of oil profits.
Minsk hit back with threats to raise an oil transit fee by 50 percent. It may soon demand that Russia pay a higher rent for its military facilities in Belarus. After the seizure of a big Belarusian sugar shipment in Russia, Minsk seized a convoy of cigarettes en route from Moscow to Kalinigrad. It seemed to be the start of a trade war. Later, the Belarusian regime may blame Russia for price hikes and the collapse of the Union State. So, Russia is likely to pay a high price for supporting the Belarusian regime.

Table 1 Belarusian-Russian trade in goods between 2002 and 2005
(in millions of US dollars)

Source: the Ministry of Statistics of the Republic of Belarus, 2003-2006

Table 2 Belarus' trade with top 10 Russian provinces, (mln. USD)

Source: the Ministry of Statistics of the Republic of Belarus, 2004-2006