Council of Ministers for Foreign Affairs of the countries of the EU made the decision to lift sanctions against Belarus this week. This includes lifting sanctions against President Aleksandr Lukashenko. And although experts believe this decision carries a more political goal (to reduce the ties between Belarus and Russia) than an economic one, this event is most certainly an ambiguous one.
Ministers have mostly commented on the political side of this decision – compliance of Belarus with international standards of democracy and human rights, the desire to enhance ties with EU and enter WTO and participation in the resolution of the Russian-Ukrainian conflict.
In reality, however, restrictions on funds owned in the EU and entry ban for 170 citizens of Belarus were halted by the European Union in October 2015 – after the release of several notable political prisoners. The decision in regards to a complete cancellation of sanctions will come into force in March. The only restrictions to remain in force will be that on arms trade and sanctions against four specific people who are believed to be responsible for the disappearances of several representatives of the opposition in Belarus.
Politics are politics, but Belarus is also Latvia’s closest neighbour. In spite of sanctions, Latvia maintains active economic ties with this country. This includes cargo transport (mineral fertilizers, oil products) and trade of goods. According to information from the Central Statistical Bureau of Latvia, the country’s exports to Belarus reached EUR 150.9 million in 2015; imports reached EUR 299.5 million.
But a different aspect of economic relations is developing much more actively at the moment. The Federal Customs Service of Russia had reported at the end of January that the majority of administrative violations take place in regards to attempts to carry sanctioned goods from Belarus to Russia.
Customs services launched a total of 256 administrative cases in regards to attempts to re-export embargoed goods from this country, which, as it turns out, benefits the most from the Russian embargo. Poland and Lithuania are on the second place (112 cases), Ukraine is on the third (39 cases), Kazakhstan is on the fourth (28 cases), Latvia is on the fifth (26 cases), Finland is on the sixth (22 cases) and Estonia is on the seventh place (18 cases).
Russian authorities started reporting attempts to carry sanctioned goods, primarily vegetables and fruits, over the border through Belarus in August 2014 – only several days after the adoption of the embargo against western countries. Official Minsk denies all accusations, saying that even if sanctioned agriculture products are used, they are subjected to processing. Unofficially, experts mention a well-developed influx of European products with tags of Republic of Belarus.
Continuing the topic of creative cross-border cooperation, it is worth mentioning that the Latvian Saeima has conceptually approved the draft On Latgale Special Economic Area, developed by the Environmental Protection and Regional Development Ministry. The draft suggests adding 17 regions and Daugavpils to the special economic area. According to the ministry, creating a special economic area in Latgale will be an adequate solution to help improve the economic situation in the region.
It is currently unknown which municipalities and territories will be provided with special economic area status – the Cabinet of Ministers will decide. It is expected that the law will come into force in 2017.
Vice-Mayor of Daugavpils Peteris Dzalbe believes potential investors are already interested in the city. However, he said there are multiple factors that prevent business development. One factor is the lack of special economic area status. According to Dzalbe, the moment when Latvia adopts the special economic area law will be a breakthrough for economy in Daugavpils. Investors say having the status of a special economic area is an important additional stimulus for opening a business in the city.
There are currently four special economic areas in Latvia. Three of them are located at Liepaja, Ventspils and Riga freeports. These three special economic zones focus on transit services. The fourth is located in Rezekne. Development of a special economic area in Rezekne is delayed because owners of the territory to be made into a special economic area are private persons and businesses. They increase rent prices hoping to make more money. This only serves to scare away investors.