bne -

It was supposed to be a cordial meeting of partners, but the third Belarus EU Business Council investment summit in the middle of October ended with a sharp exchange of barbs as Minsk becomes increasingly frustrated with Brussels' total lack of action to further their "partnership."

Charge d'affaires of the European Commission to Belarus Jean-Eric Holzapfel gave an upbeat 20-minute speech and talked about programmes and the "Eastern Partnership" agreement that unites the two countries. However, shortly before the end, Holzapfel flipped to a slide that listed the problems: the European Investment Bank has no mandate to work in Belarus; the General System of Preferences for trade was suspended earlier this year; the EU-Belarus Partner and Cooperation agreement was passed in 1995 but never ratified. "And the EU is prepared to offer Minsk deep and extensive concessions in a trade partnership - as soon as Minsk joins the [World Trade Organisation]," concluded Holzapfel with a deadpan delivery.

The Belarusian government is starting to lose patience with what is clearly its biggest and most obvious partner in the region. Two years ago, Minsk began the process of trying to open up to the rest of the world with its first-ever investment summit in London in the midst of the economic crisis. As relations with Russia deteriorated and the last two years were marked by a series of trade spats and name-calling, Belarusian President Alexsander Lukashenkao has been working the international circuit to find new partners. In the last few months alone, Venezuela's Hugo Chavez was in town and signed off on a deal to supply 200 years worth of oil with a value of $19.4bn to break the country's dependence on Russian supplies. Ukrainian President Viktor Yanukovych quickly followed through a week later with a deal to reverse the flow in the Odessa-Brody oil pipeline to send the Chavez oil from tankers in the Black Sea to Minsk. Most significantly, Lukashenko was also in Beijing in October where he did a string of deals worth $16bn of which the first $1bn is already being spent.

And where is Europe in all this? Nowhere. "Actually there is nothing in place and no cooperation to speak of between Minsk and Brussels. Without the investment mandate, for example, all the technical support programmes can't even start to work, as no money can be allocated until there is a mandate," one European diplomat told bne on the sidelines of the summit.

Investment on hold

The EU's go-slow approach is even holding back would-be European investors who are willing to take a punt on Belarus. The European company Greenfield was trying to build a large ethanol plant that runs on grain and stalks that could have made Minsk a big player in Europe's alternative energy market. Moreover, as it was to be located near Chernobyl one of the side effects would have been to cut the time it takes to remove the residual radioactive waste from the 1986 nuclear disaster from two generations to a couple of decades. It should have been a no-brainer project for environmentally conscious Europeans. Except that without the investment mandate, raising the necessary investment proved to be impossible and the project is now dead.

These tensions bubbled over during the conference. Right after Holzapfel sat down, the next speaker was Belarus' deputy foreign minister, Andrei Yeudachenka. "Belarus has used the crisis to accelerate the reforms, but there are still many bottlenecks that we need to fight against. We have already simplified the customs system and introduced a one-stop-window for company registration, but the main problem remains the overly complicated tax system and the bureaucracy," Yeudachenka said.

The audience was nodding off when Yeudachenka suddenly switched from Russian to English and looked directly at Holzapfel. "We have been talking to many countries like Egypt and even Vietnam, but we get no reaction to talks with the EU - our main and most obvious partner," said Yudachenko. "You talk about formulating a serious trade partnership, but that partnership is not real."

Having spent two decade lecturing the countries of the east about the need for liberal reform and at the same time worrying about Russia throwing its weight about in the region, it is time for the EU to get off its pedestal and engage countries like Belarus by doing business with them. If it doesn't, Minsk will simply ignore Europe - and that process is already well under way.

Yeudachenka came to the lectern directly from a video conference with his Russian and Kazakh counterparts where the three men had been thrashing out regulations to govern the new Customs Union between their countries, which already accounts for more than half of Belarus' trade.