Policy Documentation Center

Manenok, Tatyana

Tarasov, Vladimir

 
 
 
 
The Belarus Public Policy Fund 
(project of the Pontis Foundation and the Belarusian Institute for 
Strategic Studies) 
 
presents 
 
 
Stocks and Rights: 
Protection of the rights of minority shareholders in Belarus 
 
 
Analysis and recommendations1
 
 
 
 
by:  
Tatyana Manenok, Belorusy I Rynok weekly 
and 
Vladimir Tarasov, Belorusy I Rynok weekly 
 
 
 
 
 
 
 
 
Minsk, April 2009 
 
 
 
 
 
 
 
 
 
                                                 
1 This policy paper has been prepared with the assistance of the Pontis Foundation and supported by the Belarus 
Public Policy Fund. The aim of the fund is to provide direct support for Belarusian experts working on issues of 
strategic importance and thus to stimulate public policy debate in Belarus. The opinions presented in the paper are of 
the author exclusively, neither necessarily of the Pontis Foundation nor of those of the Belarusian Institute for 
Strategic Studies. 
1 
 
1. Introduction  
 
The Belarusian stock market has been in a virtual frozen state for the past 10 years. This 
year’s abolition of the moratorium on the sale of shares acquired by individuals during the 
privatisation process raised certain hopes. Despite this, the level of protection of the rights of 
minority shareholders remains significantly weaker than that of other countries, particularly in 
Europe and the US. With the imminent start of the privatization process in sight, there exists a 
real danger that minority shareholders’ rights will be violated. Without a change in current 
legislation, the situation may arise whereby shareholders may demand rights, leaving the 
judicial process unable to cope. In turn, this may result in the further freezing of share 
market. 
 
This paper calls for an abandonment of the attitude of the past and the introduction of 
minority shareholder’s rights protection, comparable with that of the US and the EU. 
Specifically, we recommend the following as steps to ensure minority shareholders’ rights are 
respected. 
 
1. Ensuring a fair price for share purchase from minority shareholders and defining the notion 
of a fair price in law.  
 
2. Expanding the right to a court hearing in the case of a shareholder’s discontent with the 
purchase price; introducing the possibility to file claims at the expense of the company; and 
the recognition that further training of judges is required.   
 
3. Creating a system of pre-court investigation for the claims of minority shareholders, parallel 
to the system of arbitral bodies.  
 
4. Introducing the possibility to file a claim of unfair treatment by a minority shareholder.  
 
5. Defining the procedure for transforming a joint-stock company with small gains into a 
private company and for buying out shares from shareholders of such joint-stock companies.  
 
6. Increasing access to information about the activities of a joint-stock company to 
shareholders and potential investors.  
 
7. Toughening and reinforcing liability for the use of insider information and committing other 
trading breaches concerning the securities and stock market.   
 
 
2. Analysis  
 
2.1. Redemption rights in Belarus 
 
Legislation abroad provides for a series of mechanisms for the protection of shareholder’s 
rights which clearly stipulate their rights. These include taking part in shareholders’ meetings, 
managing the company and receiving information. However the bulk of such rights bears not 
much significance for Belarusian citizens, who became shareholders during the course of the 
mass privatisation drive, as they cannot exercise these rights due to various reasons; be it the 
lack of  economic and legal knowledge or the lack of time and will to become part of corporate 
management.  
 
For such passive shareholders, there is in fact only one significant measure of protection, 
which is the possibility to refuse to sell their shares at undervalued rates. It is exactly this 
right which is in dispute.  
 
Internationally, this right (known as a redemption right) is usually seen as a means of 
protection for minority shareholders to guard themselves against the actions of majority 
shareholders. 
2 
 
The minority shareholder is not entitled to a mandatory purchase of their shares without good 
reason. In some countries the mandatory redemption right is granted to minority shareholders 
when one individual receives a controlling share. This is the case in the EU and in the Russian 
Federation. 
 
Belarusian legislation regulating redemption rights is significantly weaker then international 
standards, despite the existence of the 1992 law №2020-ХII which grants the redemption 
right in cases such as the re-organisation of a joint-stock company; the adoption either of a 
new statute or of changes and additions to the existing statute restricting shareholders’ rights; 
and in a major undertaking of a joint-stock company.  
 
The mechanism of price setting also seems to cause concern.  The price at which a joint-stock 
company can buy its shares at the request of its shareholders is defined in line with legislation 
and approved at a general meeting of shareholders where a decision which may include the 
demand for the redemption right of the shareholder is made.  
 
Unlike in law abroad, the problem facing Belarus is that existing legislation does not provide 
for setting a fixed price, which leaves the shareholder unprotected against the company. The 
requirement to endorse the price of selling the shares at a shareholders’ meeting is strange 
too, as it appears that the determination of the price at which they can be bought by the 
public company can be made at any meeting. 
 
Belarusian legislation does not envisage strict requirements for the procedure for notifying the 
shareholder of their right to demand redemption of shares; for the time frame during which 
the joint-stock company must make such a notification; for the procedure and deadline for 
requesting the buyout of shares; or the procedure for and period during which the company 
must either satisfy the demand for buyout of shares or inform the shareholder of rejection of 
their demand.  
 
All these rules should be defined in the joint-stock company’s statute. Companies can 
seemingly act as they wish, without taking into consideration the rights of minority 
shareholders.  
 
2.2. The right to judicial protection  
 
Of no less importance is another mechanism for protecting the rights of minority shareholders, 
namely the right to initiate claims against the company.   
 
In the UK, a shareholder has the right to file a claim in the court against a company in the 
case that it is mistreating all or some of its shareholders. The courts may impose certain 
changes in the company’s activities, initiate a civil suit on behalf of the company (against its 
management) or ensure the purchase of shares belonging to the discontented shareholder. 
The shareholder is also entitled to file a derivative claim on behalf of the company.  
 
The situation regarding judicial protection in Belarus is poor. Belarusian law stipulates that the 
shareholder entitled to a buyout of their shares has the right to appeal for a refusal of buyout 
by the company within six months following receipt of the rejection. This clearly does not 
protect shareholders at all, as it implies that the shareholder forfeits their right to file a suit 
after six months. 
 
The 1992 Law No 1512-XII On Securities and Stock Exchange has a chapter devoted to the 
protection of shareholder’s rights. However, the law does not elaborate on either the 
shareholder’s right to a court hearing at the expense of the joint-stock company or on any 
other special rights of minority shareholders. It only stipulates that offers to purchase shares 
addressed to all shareholders, shall be regulated by the rules set by the central body. Such an 
offer must be made at the same price for all shareholders, although requirements for setting 
the price rate are not mentioned.  
 
3 
2.3. Protection from unfair treatment 
 
UK law entitles a shareholder to file a claim for unfair treatment. No Belarusian court will 
accept such a claim, yet there is a great need to introduce this, especially as shareholders are 
at increased risk of unfair treatment by company leadership in Belarus.  
 
The right of the shareholder to leave a company in the case of unfair treatment should be 
enshrined in law. It may be sensible to create special funds of direct investment, which can 
buy out shares of such joint - stock companies from minority shareholders under specific 
circumstances, for example for a lack of dividends or their undervalued price.   
 
2.4. Fair value  
 
A key element in the protection of shareholders’ rights judicially or by other means is the 
notion of fair value. In principal it is a calculated value of shares which would exist in the ideal 
market, when both the buyer and the seller expose complete information about the shares in 
question.  
 
The real market value nearly always differs from the fair value, which is an important 
distinction. However, the value of shares is considered to be approaching with time the ideal 
one. Significantly, there is no single method of calculating the fair value.  
 
One method is by comparing their value with the value of shares of other enterprises. Since 
there are no market prices in Belarus yet, it is not possible to determine the necessary ratio of 
value to profit. But knowledge of the ratio in other countries can help determine the share 
value in Belarus.  
 
Other methods which exclude the possibility of profit manipulation include those which use the 
data on net gains. Significant differences in the accounting systems of Belarus and other 
countries make it difficult to say to what extent the book value of an enterprise corresponds to 
its assets.  
 
A fair value can ultimately be defined as the mean average of those derived through a number 
of different methods taken alongside other indices. 
 
2.5. Transparency of information 
 
Information transparency plays an important role in protecting the rights of minority 
shareholders.  
 
In recent years, the US saw a series of corporate scandals in connection with management 
abusing their position (most famously Enron).   
 
As a result of the 2002 Sarbanes-Oaxley Act, US shareholders have access to a large volume 
of information about the activities of companies, for example through annual reports, 
shareholders’ registers and proxy statements.  
 
Belarus has nothing of the sort. A Belarusian shareholder is only entitled to receive an annual 
report, but can access the websites of the Belarusian Foreign Stock Exchange and the 
Securities Department of the Finance Ministry which contain more information. These public 
websites publish a range of financial indicators of joint-stock companies, such as gains, profit 
and debts.  
 
2.6. Fight against fraudsters 
 
Shareholders’ rights can be violated not only over the course of a company’s operation but 
also while concluding shady deals on the market through suspect insider trading.   
 
4 
Nearly all deals must be executed at the Belarusian Stock Exchange through the intermediary 
of professional stock dealers, which is meant to ensure protection of the rights of minority 
shareholders. A professional broker must familiarise the parties of the deal with all necessary 
information and attach a corresponding note to the contract, which is signed by all parties.  
 
The experience of the early years of privatisation in Belarus has shown that when a great 
number of people receive shares without an understanding of the process, management or 
external investors buy them out en masse at undervalued prices.  
 
In order to stop potential fraudsters, the stock exchange has adopted a monitoring directive, 
alongside legislation which incorporates a series of bans on insider trading. 
 
The existing system seems adequate, but two important elements are absent. Firstly, 
punishment for different breaches of the law is not prescribed and secondly, there is no special 
body which can hear complaints from minority shareholders. Such bodies exist in other 
countries, such as the Panel on Takeovers and Mergers in the UK.  
 
 
3. Conclusion 
 
The analysis conducted leads to a conclusion that if active operations with shares begin now in 
Belarus, then the rights of minority shareholders will be violated en masse. Belarusian 
legislation lacks the norms necessary for their protection. Shareholders will demand 
protection. As a result, bodies regulating stock operation will find themselves overloaded with 
cases for which they are currently unprepared. This in turn, may cause a further freezing of 
the share market.  
 
Belarusian legislation must now be amended in order to increase the degree of protection for 
minority shareholders at least to the level which exists in other countries. For this purpose, an 
expert regulation group should be established, which would be tasked with drafting necessary 
amendments.  
 
A possible objection to reform could be that increasing the protection of shareholders will 
create obstacles for the primary accumulation of capital in Belarus, as it would prohibit 
company management from buying up shares at undervalued prices.  
 
Changing company law bears special significance for attracting investment from minority 
shareholders. There exists the perception of investment in Belarus as being some kind of 
unfair lottery or gambling. But it is of crucial importance to change public opinion in this 
regard in order to develop a market economy in Belarus.   
 
5 


English

Stocks and rights. Protection of the rights of minority shareholders in Belarus

Poghosyan, Tevan

The Armenian ENP and Conflict Resolution in Nagorno Karabakh

Butorova, Zora

She and He still not equal 
Source: The Slovak Spectator, April 6 – 12, 2009 (www.spectator.sk) 
 
Interview of Michaela Stanková (Spectator staff) with Zora Bútorová  
 
Although gender equality, or rather inequality, is definitely not topic number on the agenda of Slovak 
politicians, the social reality – especially the fact that there were three women running in the first round 
of the presidential election and one of them received enough votes to advance and become a serious 
challenger to the incumbent president – shows that gender issues are beginning to find their place in 
public discussion. 
A team of researchers of the Institute for Public Affairs (IVO) have spent three years working on a 
project named Plus for Women 45+ funded by the European Union’s EQUAL Initiative. They recently 
published a book named She and He in Slovakia. Gender and Age in the Period of Transition, 
featuring topics that reflect on the gender order of Slovak society and show the image of the ideal 
woman and the ideal man in Slovakia. In many respects it is a continuation of the previous study, She 
and He in Slovakia. Gender Issues in Public Opinion from 1996. 
The Slovak Spectator spoke to Zora Bútorová, the head of the research team and the editor of the 
publication, about gender inequalities, gender and age-based discrimination and Slovakia’s degree of 
readiness for a female president. 
 
The Slovak Spectator (TSS): In what ways do gender inequalities show up in 
Slovak society – are they more substantial in family life or in the business 
environment? 
Zora Bútorová (ZB): Gender inequalities in both spheres are interconnected. 
Everything starts in the private sphere. In a typical Slovak family, the man is seen as 
the principal breadwinner and the woman plays the role of the homemaker, which 
means that most of the work related to household chores and looking after family 
members remains on the shoulders of the woman. Although this traditional model has 
been frequently criticized, it has survived changes of several political regimes 
including the fall of communism. Today, employed women spend 16 more hours on 
unpaid domestic work while men spend 4 more hours on paid work per week. 
Altogether, the average employed woman in Slovakia works 12 hours more than the 
average man. And obviously, such a double burden limits her advancement in the 
public sphere – both at work and in politics. 
Our book brings forth many facts about women’s unequal status in the labour market. 
Let me illustrate a few facts by giving you answers to several questions. Are women 
more concentrated in low-wage sectors, industries and professions? Yes, they are. Is 
there a substantial pay gap between Slovak women and men? Yes, it is even one of 
the greatest within the EU. Are women under-represented in managerial and 
decision-making posts? Yes, they are. Do they have good prospects for promotion? 
No, they don’t.  
Today, these gender disparities are discussed more than ever before in Slovakia. 
However, concrete public policy measures that would promote gender equality in the 
labour market and enable women to better combine work and family life are still 
lacking.  
 
TSS: In your research you have paid special attention to the category of 
women over 45. Why?  
ZB: They have a very disadvantaged position in the labour market. What sets them 
apart from younger women, as well as from men, is the higher incidence of long-term 
unemployment, their lower educational attainment and lower interest in improving 
their qualifications, and their greater exposure to discrimination in the workplace. 
Most of them, especially in regions with few job opportunities, realize their 
vulnerability and are ready to make financial concessions to keep their jobs. Even 
women with higher educations have a more fragile sense of employment security. To 
be a woman in her mature years is not a big advantage, especially in the corporate 
sector which tends to be a hotbed of ageist prejudices.  
We argue in our book that such stereotypical attitudes towards workers over 45 are 
not only unacceptable but also counterproductive. Slovak society is ageing and our 
employers face challenges similar to other European countries: to promote the 
working ability of ageing workers and to meet their specific needs. Only this approach 
can enable employers to fully benefit from the potential of older employees– from 
their experience, their reliability and loyalty to an organization.  
Obviously, embracing the concept of active ageing will be neither quick nor easy. It 
calls for a partnership and involvement of many stakeholders, including the 
government, corporations, workers and their organizations, research and educational 
institutions, the media, and last, but not least, ageing women and men themselves.  
 
TSS: What is Slovakia’s position among the EU countries regarding women’s 
representation in politics? 
ZB: Compared to other countries, women in Slovakia were granted the right to vote 
relatively early, in 1919. Despite this, their participation in political decision-making is 
still rather low. 
 Under socialism, formal quotas were in place regarding the appointment of deputies 
to parliamentary seats. As a result, women obtained over 20 percent of the seats. 
However, their representation was merely formal as it took place in an undemocratic 
framework under the power monopoly of the communist party. After the Velvet 
Revolution, the quota system was abolished and the share of women elected to the 
Slovak parliament in the first free elections in 1990 dropped to 12 percent.  
Currently, women have 20 percent of the mandates in Slovakia and the EU average 
was 24 percent in 2008. The share of female MPs is much higher in countries such 
as Germany (33 percent), Spain (35 percent), Finland (41 percent) and Sweden (46 
percent). The gender composition of the Slovak parliament is similar to that of 
France, UK, or Italy but is more balanced that in the Czech Republic, Greece or 
Slovenia.  
The representation of Slovak women in top executive posts in government is much 
lower than in parliament. Since 1989, the ratio of female cabinet members has never 
exceeded 15 percent. Although the current dominant coalition party Smer-SD claims 
to be a social-democratic party, its leaders disregarded the principle of gender 
equality when forming the government.  
With just one woman in the government, meaning 6 percent of the cabinet members, 
Slovakia lags well behind the EU average of 26 percent and its position is the second 
worst in the EU. Romania is on the bottom of the ladder with no woman in the 
cabinet. The top positions belong again to countries such as Finland (60 percent), 
Spain (50 percent) and Sweden (45 percent).  
The Slovak public is ready for a change: most people in Slovakia disapprove of the 
low political representation of women and believe that women’s say in politics should 
be equal to that of men.  
 
TSS: The conclusions of your research say that increasing gender equality in 
Slovakia is a difficult challenge. Why is that so?  
ZB: A typical feature of contemporary Slovakia is the gap between formally approved 
laws and strategic documents supporting gender equality and their implementation in 
practice. Until now, the good intentions have remained mostly “on paper”. The 
principal challenge is how to encourage the country’s political leaders and its public 
administration to take an active interest in eliminating gender inequalities.  
Obviously, this lack of political will also reflects the insufficient pressure for change 
among women themselves. On one hand, women are critical of their status and 
opportunities in the labour market and in politics and are also more dissatisfied with 
the division of labour within the family. On the other hand, they tend to prefer a 
strategy of passive adaptation. Even those facing real discrimination in their 
workplaces do not have a clear idea how to defend their rights. The cases in which 
women decided to file a gender discrimination lawsuit are very rare.  
In the last decade people in Slovakia have become much more aware of gender 
inequalities. However, the changes in the awareness of women and men have had a 
different pace. As our analysis shows, younger and more educated women are much 
more critical of gender inequalities than older women, while younger and more 
educated men resemble the generation of their fathers and see fewer reasons to 
change the status quo. In other words, the differences between the views of young 
women and young men are wider than within the older generation. This tension could 
spark a positive reversal, provided that women are sufficiently assertive in expressing 
their values and advocating their demands. And the numbers of such women are 
slowly, but surely, increasing. 
At the same time, women cannot walk this path toward equal partnership alone: it 
also requires participation of men – men who would not only admit the existence of 
gender inequalities, but who would also acknowledge the need for change and 
implement this change in everyday life. 
 
The Slovak Spectator (TSS): Gender equality and the position of women in the 
society was an issue also in the presidential election campaign, as the 
challenger to the incumbent president in the run-off is a woman. Do you think 
that Slovak society is ready for a female president?  
 
ZB: The unique feature of the 2009 presidential election was the presence of three 
women out of seven candidates running for the office. In 1999, there was one woman 
candidate who did not make it to the run-off and in the following 2004 elections, no 
candidate was a woman. The strongest among these three women candidates, Iveta 
Radičová, has been supported by three parties of the parliamentary opposition and 
by a smaller non-parliamentary opposition party. Although it is not easy to predict the 
outcome of the presidential election, one thing is clear: the very fact that Radičová 
was nominated by the overwhelmingly male leaderships of these parties, as well as 
her good results in the first round, give a positive signal about the readiness of 
Slovak society for a female president.  
 
Surveys indicate that more women were among Radičová’s voters in the first round 
of the election. At the same time, the structure of her electorate also featured a 
higher proportion of men and women with higher educations, of white-collar workers 
and professionals, of urban dwellers, and of ethnic Hungarians. Regardless of the 
final result, Radičová will have a strong impact on the public. She has strengthened 
her public visibility and credibility. As an outstanding professional and as a successful 
politician she could become a role model for young Slovak women and men who – as 
our study shows – rarely find any female role models among Slovak politicians. 
 
 


She and He still not equal

Curtis, Matt

Guterman, Lydia

Overdose Prevention and Response
A guide for people who use drugs and harm reduction staff in Eastern Europe and Central Asia

Dabrowski, Marek

CASE Network Studies and Analyses
No. 384 The global financial crisis: lessons for European Integration

Jakobashvili, Temuri

Can join Georgia NATO without solving the conflicts in Abkhazia and South Ossetia?

Kostyugova, Valeria

Pankovski, Anatoly

BISS BLITZ
BB #08/2009EN, 29 March 2009
Russian Geopolitical Efforts, Crisis and Transit: Is 
Belarus Lucky Again?
Valeria Kostyugova and Anatoly Pankovski
Questions for discussion:
1. It has been a couple of months now that the Russian foreign 
political efforts have been focused exclusively on maintaining 
political and geopolitical control over the “near abroad” (the Post-
Soviet states). As part of this campaign Russia has been trying 
hard to thwart the plans of the West to extend its influence in 
some key regions, namely, in Eastern Europe, Central Asia and the 
Caucasus. Russia seems to be using the financial carrot as an 
instrument of foreign policy much more frequently now that the 
global crisis has showed its real face, whereas in times of cheap 
money and high oil prices Russia did not mind the stick. How can 
we define the goals and methods of the Russian foreign political 
efforts in its immediate surroundings amid the crisis? Why does 
Russia impose budgetary and financial limitations on its satellites 
during the economic boom and why does it remove them when 
things get dire, not the other way round?
2. What is there in this strategy for Belarus? Does Russia pursue 
some definite political objectives, like the recognition of Abkhazia 
and South Ossetia? How can this policy of the eastern neighbor 
impact the liberalization campaign in Belarus and its dialogue with 
the European Union?
3. Finally, how should Belarus interpret the new energy deal 
between Ukraine and the European Union and how should it 
respond to the reaction of the Kremlin administration?
The global financial and economic crisis has called for serious adjustments to the Russian 
foreign policy in general and to its CIS-related efforts in particular. Now that federal 
budget revenues and corporate receipts have plummeted, the importance of transit 
countries that surround Russia is increasing day after day, because the transit 
infrastructure of its neighbors has remained the only way for Russia to communicate with 
the outer world for many years now. Under the circumstances, Russia tends to get back 
to tried and tested methods.
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The new policy of the Russian Federation towards its neighbors that separate it 
from the rest of the world is based on an upgraded version of the Yeltsin-style 
regional strategy. The period of the “pragmatic turn”, that is, the implementation of 
the “Putin doctrine” is over. The differences between the former and the latter, 
insignificant as they seem, are fundamental. Both strategies use the economic, or rather 
political economic levers (finance, energy supplies, trade preferences contingent upon 
political contracts, or tacit conventions) as key instruments to exercise control over 
potential allies – this is a matter of continuity. But there has been a dramatic shift of 
emphasis, and the same is true for application points – and this is a break from the past.
The Russian foreign political concept, adopted in 2008, prior to the crisis, needed regular 
updates, as it had been based on the positive pre-crisis trends extrapolated to the future 
(especially as far as the situation on the global energy market is concerned). Secondly, 
there was a natural gap between the regulatory framework of foreign political initiatives 
and their practical implementation. For instance, the ideological cliché “energy 
superpower” that used to be cherished by the Russian political elite (personified by 
Gazprom’s own general V. Putin) was never mentioned in the official foreign political 
concept.
The basic principles of the Russian foreign policies towards the CIS member states under 
Putin were as follows: (1) the upward price trends were pushing the federal budget and 
super profits of suppliers of raw materials to new highs; (2) Russia managed to 
accumulate reserves that could be used as investments in new solutions and 
infrastructure; (3) additional possibilities meant additional foreign political ambitions: the 
giant infrastructure projects to deliver energy to Europe and Asia bypassing transit 
countries and haggling that included blocking of supplies via alternative transit routes 
encouraged the illusion of an “energy superpower” whose worthy partners are Europe or 
the whole world rather than the CIS neighbors.
Fundamental changes in the vision are only natural.
The succeeding phase of the “rape of Europa” is completed in the following way: the 
global economic crisis, which may end in a political crisis in Russia (since the pyramid of 
energy managers almost coincides with the administrative pyramid), followed by a series 
of “small victorious wars” that are won through the use of conventional weapons and 
energy weapons (Georgia and Ukraine), and finally, a complete fiasco of the major 
foreign political endeavor, when even the CIS and Collective Security Treaty Organization 
(CSTO) partners decline to legitimize the results of the Russian-Caucasian campaign.
It appears that Russia has found itself in isolation or semi-isolation, backsliding 
to the borders the Russian statehood used to have before Peter the Great 
(actually, those borders are not available to Russia, either; see below). Another 
sharp disappointment is that the upward price trend was over in no time at all. The years 
of the economic boom were marked by hikes in consumption and production of consumer 
goods. But when it comes to traditional and new communications (motorways, railroads, 
pipelines, sea and river ports, air transport service, telephony, etc.) and high 
technologies (including new types of weapons), the progress was comparatively slow. We 
cannot deny serious achievements, especially new pipeline projects and new arms, but 
many large-scale projects have yet to be launched. The second high-speed Moscow-
Nizhni Novgorod connection is expected in 2009, and so is the beginning of the BTS-2 
pipeline construction. The Eastern Siberia-Pacific Ocean (VSTO) oil pipeline will be 
launched in 2010, and the same year is the deadline for the North European Gas Pipeline 
(SEG). The Russian army will be rearmed and reequipped between 2010 and 2015. 
Vostochnyi space launch complex is projected to be completed and ready for operation in 
2015. But the list of large infrastructure projects that Russia may have to postpone and 
revise is much longer than the one above. Should all these projects be completed in 
time, Russia could drastically reduce its dependence on its transit neighbors and secure 
its defense self-sufficiency, that is, without its CSTO partners.
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3
The two trends we mentioned earlier – isolation and briefness of oil price 
increases – stand behind the dramatic break with the upward “pragmatism” 
inherent in the Putin era. Like we said, Russia finds itself thrown back to the 
borders that it no longer has.
Russia’s state borders with the CIS, including those with Ukraine and Georgia, lack 
border infrastructure or border and customs control. The busiest transport routes have 
traveling customs stations assigned to them in order to monitor commodity traffic, but 
the borders are nominal and easily permeable. Nearly all Russian borders are 
conventional, as they are not fixed in interstate agreements with the neighbors – there 
was no delimitation of border territories, to say nothing of the official demarcation of 
state borders. Furthermore, even these conventional borders are still challenged by 
neighboring countries, like the maritime borders with Ukraine or the Caspian Sea 
borders.
Had Russia been able to arrange a Global Bypass of the Transit Buffer, the next phase 
would probably have been a demarcation of its borders, and all tariff disputes would be 
settled very fast and easily. But Russia slides back to the Yeltsin times approaching the 
countries that act as its borders: brothers, could I pass with my goods? BTS-2 does not 
seem effective enough to blackmail Belarus and Ukraine, and it is harder and harder to 
give Kazakhstan heavy hints that Baikonur Cosmodrome would be shut down in just five 
years.
Under the circumstances, Russia’s tactics and strategies may be dual: it can use force 
and weapons (Georgia and Ukraine) or give the tested method of buying allies another 
try. As a result, Russia will start … no, not swallowing the post-Soviet space, like many 
analysts believe, but forcedly use or develop the defense system (like the united air 
defense plan with Belarus) or infrastructure facilities of adjacent countries, extend soft 
loans, etc. Political loyalty is secondary here – apart from loans and subsidies to loyal 
Belarus, Armenia and Kyrgyzstan, and a U.S. $7.5 billion contribution to the Eurasian 
Economic Community (EurAsEC) bail-out fund, which amounts to U.S. $10 billion, Russia 
came to an agreement with Ukraine’s Prime Minister Yulia Timoshenko and was ready to 
lend U.S. $5 billion to disloyal Ukraine. Despite its bitter grudge against Ukraine for its 
agreement with Brussels on modernization of the Ukrainian gas transport system, Russia 
is not ready to deny Ukraine a loan or rule out the possibility of taking part in the 
overhaul of Ukrainian pipes in partnership with Brussels and Kiev.
For Belarus, the global crisis does not necessarily mean a phase-out of various 
preferences that Russia used to offer when there was nothing to worry about, 
but on the contrary, the global meltdown prevents Russia from phasing down 
its policy of preferences as an instrument to haggle over a wide range of issues.
The reason is simple: there are few blackmail options for Russia now that the Bypass 
capabilities are limited.
Belarus thus acquires additional opportunities aside from Russian loans and 
concessional gas prices. The Belarusian approach to modernization, both in the 
manufacturing sector and infrastructure, looks a lot like Russian strategies: because of 
the excess centralization of economic policies, Belarus, like its eastern neighbor, had 
scheduled most of its state-financed programs of modernization and upgrade to be 
completed after 2010. It is clear, though, that amid the crisis all resources must be 
channeled into support for the financial system, manufacturers and outlets, while 
modernization programs will have to be postponed yet again.
However, Russia’s interest in the upgrade and refitting of the Belarusian infrastructure 
will be growing stronger, especially as far as defense facilities, transport, customs-and-
border infrastructure and gas and oil pipelines are concerned. Once they signed a 
common air defense system deal with their Russian counterparts, the Belarusian 
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4
authorities expect substantial assistance of its ally in the rearmament and reequipment 
of Belarusian armed forces with modern weapons.
Belarus will also have a better chance of having Russian investors modernize its 
Druzhba oil main, which has been half-empty lately: the northern spur stands 
idle because of the launch of the alternative BTS-1, while the BTS-2 project 
threatens the southern string of Druzhba. Anyway, it is much harder for Russia to 
find internal resources to finance BTS-2, while external borrowings are getting costlier, 
so it looks like Belarus needs just a couple of short steps towards Russia (minor 
concessions include plans for both Druzhba oil transporters to go public as early as 2009) 
to lure Russian oil majors back into the shared use of the Belarusian pipes.
The construction of the second string of Yamal-Europe also seems likelier.
Moreover, the recent agreement between Ukraine and Brussels regarding the 
modernization of the Ukrainian gas transport system may encourage Belarus to advance 
its Yamal-Europe-2 project. The emotional reaction of Vladimir Putin’s government to the 
Ukraine-EU deal brings Belarusian and Polish lobbyists fresh hopes that they will 
eventually pull it off.


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