1/8/19
President Vladimir Putin has more than five years left in office, but he must already contemplate his next move. The transition among Russia’s leaders is seldom smooth, so Putin is looking at ways to ensure his continued influence by forging a closer union with neighboring Belarus. A change in the Russian oil taxation regime has provided the opportunity for exploring this scenario. The Russian constitution allows a president to serve only two consecutive terms. In 2008, rather than change the law and be ridiculed as the equal of Central Asian dictators, Putin ceded the presidency to a close ally, Dmitry Medvedev. But he hated playing second fiddle and disliked Medvedev’s openness to more cooperation with the U.S.; besides, trusting anyone with such a handover could be a bigger risk today, in a country increasingly run by the security apparatus. Simply going into retirement in 2024 is an even scarier option: Putin could never be certain of any personal security guarantees his successor might provide. Russia itself has been lukewarm about a closer union with economically weak Belarus, run by Lukashenko’s thoroughly Soviet team. In particular, extending the Russian monetary system to Belarus, as Lukashenko has at times suggested, could weaken the ruble and undermine Russia’s macroeconomic stability.
Now, however, unification is politically attractive to Putin, and not just because he could take over a much strengthened Supreme State Council in 2024, retaining a large measure of his power for life without changing the constitution. This is a good moment for Putin to put pressure on Lukashenko without looking overly aggressive. Russia doesn’t have to threaten to cut off gas supplies, raise energy prices or insist on a greater military presence. Belarus stands to lose billions of dollars from a perfectly reasonable tax reform going on in Russia today. All oil, whether exported or sold domestically, will eventually be taxed the same. That means Belarus, which today buys Russian oil duty-free and exports much of it, charging its own duties, will have to pay more. This year, according to the Belarusian Finance Ministry, the country stands to lose $300 million from the Russian “tax maneuver” given an oil price of about $70 per barrel. Though Lukashenko has publicly warned Russia against trying to swallow up Belarus and Putin’s spokesman, Dmitry Peskov, has said a Russia-Belarus merger isn’t the subject of discussion, the denials only concern a full takeover, rather than a deeper integration scenario with Belarus and Russia both formally ceding part of their sovereignty to the union state. Lukashenko’s alternative to bending to Putin’s pressure is seeking help in the West, but that, in a way, is a less attractive option for him: He suspects the U.S. and the European Union want to undermine his near-absolute power. As many times before in his career, the Belarusian leader is caught between a rock and a hard place. Whether he can wiggle out this time depends largely on whether Putin finds other ways to resolve his own political problems, both with succession and with the balance of gains and sacrifices in foreign policy. If he doesn’t, the pressure may become unbearable for the Belarusian dictator.