BOFIT Viikkokatsaus / BOFIT Weekly Review 2021/37

On September 9, the prime ministers of Russia and Belarus signed an agreement, blessed by presidents Vladimir Putin and Alexander Lukashenka, that would deepen economic relations during 2021–2023. The plan consists of 28 “roadmaps” that address, among other things, harmonisation of tax administration, monetary policy, payment systems and labour laws. The Union State of Russia and Belarus was established already in 1999, but actual integration to date has been quite modest. Drafting of the now-approved roadmaps for harmonisation of legislation began in 2018.

In most cases, harmonisation is likely to mean that Belarus should adjust its laws to make them compatible with Russian practices. These changes might open new opportunities for Russian firms in their western neighbour’s market. One challenge from Belarus’ standpoint is its special economic system in which the state and state-owned firms play an oversized role. Adoption of Russian practices may imply that some branches in Belarus will have to shift to a more market-based system.

Belarus needs to embrace a common energy market to assure continued access to inexpensive natural gas supplies in the years ahead. Now the countries agreed to proceed with energy market harmonisation in only 2023. This may give Russia an option to postpone gas pricing harmonisation if implementation of other roadmaps does not proceed.

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