Belgium

One of the most important events in Russia's interrelationships with Belgium was President Boris Yeltsin's visit in December 1993. During the visit, the two countries signed an intergovernmental document, the Treaty on Concord and Cooperation, which Belgium ratified in June 1997 and Russia in December 1997. Pursuant to the provisions of this Treaty (which went into force on 22 January 1998), King of Belgium Albert II, Queen Paula, and heir to the throne, Prince Philippe, paid a return visit to Russia on 19-21 February 1998.

Belgium's membership in the European Union is having an increasingly perceptible influence on the nature of Russian-Belgian relations, as a broad range of issues is being delegated to the supranational structures of the EU. Some of the changes in Russian-Belgian relations are associated with the new internal realities in Belgium. As a result of the long process of federalisation in the country (since 1970), federation subjects (communities and regions) received a great deal of autonomy, including in foreign relations. This has led to a noticeable increase in the regional element of bilateral relations.

Efforts are madeto expand and improve the contractual and legal base of bilateral relations. In addition to the Treaty on Concord and Cooperation, an Agreement on Cooperation in Air Traffic was signed in Brussels during President Yeltsin's visit. In June 1995, during the second session of the Joint Russia-Benelux Commission, a double taxation agreement was signed (ratified by the Russian side in December 1996, and still waiting to be ratified by the Belgians). Work is continuing on the Agreement on Cooperation among Law-Enforcement Agencies (at the end of January 1998, interdepartmental consultations of experts were held in Moscow, the next round was scheduled for January 1999 in Brussels).

The next summit "powwow" was held during the Russian Government Chairman's visit to Belgium (17-19 July 1997). This visit made it possible to mark new reference points in the development of Russian-Belgian relations, and confirmed the presence of significant potential for establishing bilateral cooperation. On 7-9 September 1997, Belgian Foreign Minister Erik Derycke made an official visit to Moscow, and in February 1998, Russian Government Deputy Chairman Ramazan Abdulatipov held several meetings in Brussels, including with Belgian Prime Minister Jean-Luc Dehaene and Foreign Minister Eric Derycke, in order to exchange experience on the federalisation of the state structure of the two countries.

In October 1997, Belgian Defence Minister Jean-Pol Poncelet made an official visit to Moscow. The Russian military delegations that went to Belgium on NATO business also met with the Belgian military leadership. A unit of Russian peace-makers from the UN contingent in East Slavonia took part in a military parade in Brussels on 21 July 1997 on the occasion of Belgium's national holiday.

According to the Russian State Customs Committee, the trade turnover between Russian and Belgium in 1997 amounted to US billion (in 1995, 1996 and 1998 it was more than US billion at a constant positive balance for Russia). More than 60% (in value terms) of Russian exports to Belgium consist of uncut and cut diamonds, closely followed by oil and petroleum products (in the first half of 1997, almost three-fold more of these commodities were exported than during the whole of 1996). Whereas Russia is still managing to hold its position on the Belgian market for these commodities, as well as for nonferrous metals and chemicals, Russian timber, ferrous metals, cars, household appliances, optical goods, machine-tools (due to technical obsolescence) and textiles (due to the EU export quotas) are leaving the local market. The main Russian imports from Belgium are foodstuffs (40%), carpets and textiles (17%) and mechanical engineering equipment, primarily spare parts (10%), for which most-favoured-nation treatment is mutually granted. Russia is no longer considered a country with a state-controlled commercial system, which means that relations are expected to develop dynamically as transformations in the Russian economy progress, and even envisage the possibility of negotiations on creating a free trade zone. The Belgians planned to ratify the Russian-Belgian convention on avoiding double taxation and preventing evasion of income and property tax of 16 June 1995 in 1998 (Russia ratified it in December 1996) and raise the question of signing an Agreement on the Encouragement and Mutual Protection of Investment as soon as possible (in November 1997, they submitted their draft of the agreement, which is currently being reviewed by the Russian Ministry of the Economy). Documents are being drawn up at the inter-branch and inter-departmental level. Over the past two years, agreements have been signed on veterinary medicine and technology for the production, storage and sale of fruits and vegetables, as well as a cooperation programme on public health. The possibility of entering an agreement on cooperation in the fight against legalisation of criminal income is also being reviewed.

As for trade policy, the Belgian government has an essentially favourable attitude towards developing trade with Russia, and there are no special Belgian restrictions on imports from this country. However, several Russian commodities fall under EU restrictions (quotas on metals and textiles, anti-dumping procedures with respect to fertilisers and metal compounds, and the switch-over in EU countries to low-sulfur diesel fuel). An unfavourable situation for Russian exports to Belgium persists on the world raw material market (diamonds, oil, nonferrous metals). On the other hand, the Belgians were extremely concerned about the Russian government's decision to introduce quotas on carpets exported from the EU countries (their anxiety was also expressed during King Albert II's visit to Russia), which they maintained could have a direct effect on 13,000 employees of the Belgian carpet industry (in actual fact, up to 90% of carpet goods from Belgium are imported into Russia illegally by "unofficial" exporters and are not affected by the restrictions).

Russia is ranking 13th among exporters to Belgium (0.8% of Belgian imports) and 15th among the importers of Belgian products (0.8% of Belgian export). Trade turnover between the two countries continued to rise steadily and in 1997, according to Belgian estimates, it exceeded US billion (according to Belgian data, these figures constituted US billion in 1995, and US billion in 1996). It is worth noting the great difference between Russian and Belgian statistics regarding bilateral trade. The data of the Russian State Statistics Committee, not including so-called "unofficial" trade, present a significantly lower level of Russian import from Belgium. For example, in 1994-96, Russian statistics showed US, US and US million, respectively. As a result, in 1996, Russia had a false positive balance of more than US million, while according to Belgian statistics, this balance was in the negative (by US million). Judging from the data of the Russian State Customs Committee, a similar situation arose when collating the totals for 1997.

The mutual trade pattern continues to reflect the current state of the Russian economy. Most of Russian exports to Belgium still consist of raw materials (the main export commodities are diamonds, energy carriers, nonferrous and ferrous metals, chemicals and lumber; the share of machinery and equipment is a little more than 1%) and, consequently, it remains dependent on the fluctuations on the world market. For example, the decrease in Belgian deliveries of uncut diamonds to India, Thailand, and Hong Kong, and of diamonds to Japan, caused by the financial crisis in South-East Asia had an unfavourable effect on Russian export of these commodities to Belgium, which decreased in 1997 by US million. The prices for nonferrous metals remained extremely low, as a result of which revenues from their sale (copper, nickel, aluminum, and tin) in 1997 basically remained at the level of the previous year (US million). Deliveries of ferrous metals (US million) and lumber (US million) also remained the same. The export of chemicals (US million) decreased somewhat, including fertilisers (US million). On the other hand, despite the constant drop in prices for energy sources throughout 1997, deliveries of crude oil increased more than 8-fold (670,000 tons at US million as against 81,000 tons at US million in 1996), and petroleum products 2.3-fold (1,780,000 tons at US million compared with 763,000 tons at US million the previous year). There was an increase in the export of textiles (US million). Foodstuffs amounting to US million were exported, whereby sunflower seeds accounted for US million (Russia is the main supplier of this product to Belgium), and the rest comprised canned fish and crab, caviar, and alcohol. Mechanical engineering and industrial products were sold for US million, including 350 cars, and metal-processing lathes, as well as spare parts for vehicles and other technology previously delivered, for US,000.

Russia's main imports from Belgium are still foodstuffs, textiles, chemicals and plastics, mechanical engineering goods (including cars), and pharmaceutical products. The price situation and tax policy of the Russian government, as well as the favourable changes in the political and economic situation in Russia, had an effect on the changes in 1997 in the purchase of certain items. Despite a noticeable increase in foodstuff purchases (US million), including meat, fish, fruit and vegetables, baked goods, and animal fats, the import of alcoholic beverages drastically dropped. Textile purchases decreased (US million), including carpets and rugs. The import of Belgian chemicals increased (US million), including pharmaceutical products (US million), plastics (US million), and machinery and equipment (US million). In so doing, the import of mechanical engineering products reached an unprecedented high level for the past decade. In addition to passenger cars (US million) and installations for beer-brewing plants (US million), the percentage of equipment delivered in the form of Belgian investment in Russian joint-stock companies is also high.

Further development of trade and economic relations between Russia and Belgium is being curbed to some extent by the non-settled Russia's debt to Belgian companies. Belgium has not granted Russia any loans at the inter-governmental level. The total amount of debt of Russian organisations amounts to approximately US million, including US million in banking, financial and commercial loans, and US million in uninsured commercial debt to Belgian companies for deliveries of various commodities in 1990-91. The debt on guaranteed bank and commercial loans was consolidated by an agreement signed with the Paris Club in 1996 and with the London Club in October 1997. Moreover, the Russian Trade Ministry and Vnesheconombank (Foreign Economic Bank) are negotiating the uninsured commercial debt with authorised Belgian creditors from the Ducroire National Insurance Company with respect to verification of relevant accounts.

The measures taken to improve the climate of trust led to the Ducroire Agency, after an almost five-year interim, renewing political and commercial risk insurance for short-term (up to one year) export loans and direct investment in the Russian economy under warranty from the Russian Government or a first-class Russian bank. One of Belgium's largest banks, Generale Bank, took the first step in this direction in August 1996 by granting the Rossiyskiy Kredit Bank a loan of 300 million Belgium Francs (approximately US million) under a warranty from Ducroire for financing Belgian exports to Russia of machine-building equipment. In September 1996, a similar credit line was opened for Unexim Bank.

The progress achieved in resolving the debt problems has still not given the Belgians reason to completely open up the crediting and insurance of export deliveries and investments in Russia. They have confined themselves to the "selective" insurance of small short-term and medium-term loans under warranty from the Russian Government or "first-class" banks. In 1997, more than 20 Russian banks received short-term loans, including for the import of machinery and equipment from Belgium. The total amount of loans the Ducroire Agency will insure has been increased from 4.6 billion to 15 billion Belgium Francs (US million).

Belgium occupies 12th place among foreign investors in Russia, whereby Belgian investments are mainly portfolio investments in the shares in privatised or joint ventures. Although the volume of its investments cannot be considered impressive, taking into account the potential possibilities of the Belgians (the total amount of Belgian investments by the middle of 1998 was estimated at US million), Belgian business circles have been showing more interest lately in the Russian investment market. Their largest investment transaction for 1997 was the purchase by the Glaverbel Company of a stake (with prospective participation of up to 75%) in the Borsk Glass Factory (Nizhny Novgorod Region). Tractebel, the largest industrial group in Belgium, signed a protocol of intentions with the EES of Russia (Unified Power Grid) on Belgium's financial participation in the construction of power plants in Russia and access of the Russian power system to the EU market, as well as assistance in work with electricity consumers.

The activity of Russian-Belgian companies continues to expand in Russia and Belgium. According to data presented during a session of the Joint Commission, Belgium capital is involved in 236 Russian enterprises. Such major Belgian companies as Alcatel-Bell (which founded a joint venture on setting up telephone lines in several Russian regions), Combellga (mobile telephone lines), Besix (construction), Janssen Pharmaceuticals and Multipharma (the manufacture and sale of pharmaceutical products), and others are operating actively on the Russian market. More than 40 companies (including the largest Belgian banks, Generale Bank and Kredietbank) have branches and representative agencies in Russia (in 1997 the Solvay Chemical Concern opened its representative office in Moscow).

New companies with Russian capital are also appearing in Belgium. There are now two dozen such companies, whereby some of them occupy a visible place on the Belgian market. The most important in Russian-Belgian economic relations are Rusalmaz, Smolensk Diamonds, Krystall International (trade in diamond), Urals and Nafta-B (trade in petroleum products).

An important potential direction of economic cooperation with respect to the specific conditions in Russia and Belgium as federative states is regional-level relations. The geographical orientation of this cooperation is increasing. The French-speaking part of Belgium (Wallonia and the Brussels region) is significantly oriented towards Moscow and the Moscow Region, while recently there is also the prospect of its cooperation with the Republic of Udmutria; Flanders is placing its stakes on developing direct ties with the North-West part of Russia.

In 1996, an Agreement on Friendship and Cooperation and a Cooperation Programme were signed between Moscow and the Brussels region. As a result of two visits to Belgium in 1997 by representatives of the Moscow Region Administration, an agreement was reached to sign a Moscow Region Protocol on cooperation with Wallonia. Specifically, the sides are reviewing the possibility of the Belgians building five waste-recycling plants on the outskirts of Moscow. Contacts have been established between the Moscow region and the Brussels region. Interest has been expressed in cooperating in the agricultural sphere and in training managerial personnel for small and medium businesses. The visit of two Udmurtian delegations to Belgium resulted in an agreement being reached on cooperation and know-how exchange between this Russian autonomous republic and Wallonia and Brussels in the development and production of new construction materials, biotechnologies, high-tech environmental protection systems, metallurgy, and the manufacture of equipment for the paper industry.

Flanders, in turn, is reviewing the possibility of entering into an agreement on cooperation with St. Petersburg. The Flemish are seriously analysing the expediency of promoting Russian exports under a programme entitled "Flanders – Gateway to the Benelux Market", and are showing an interest in the St. Petersburg Investment Programme for 1998-2001, particularly in such fields as the conversion of defence enterprises, ship repair, the construction of factories for manufacturing diabetic foods, the production of gas-heating systems for residential buildings, hydraulic engineering, municipal development and environmental projects. They are planning to extend cooperation experience with St. Petersburg and the Leningrad Region to the Kaliningrad and Murmansk regions, the Republic of Karelia, and the Nizhny Novgorod region.

The condition of and prospects for economic trade, financial, currency and investment cooperation between the two countries, relations with international economic organisations, and mutual relations at the regional and industry level were analysed at the third session of the inter-governmental Joint Commission on Economic Cooperation between Russia and the Benelux countries held on 8 July 1997 in Brussels, right before Victor Chernomyrdin's visit. The Russian delegation at the session was headed by newly appointed chairman of the Russian part of the commission, Public Health Minister Tatiana Dmitrieva. At the session, the Russian side drew the Belgians' attention to the need for a qualitative change in the pattern of mutual trade and an increase in Russian exports of machinery, equipment and other ready-made items. The Russians also asked for Belgium's assistance in removing the restrictions and anti-dumping procedures enforced by the EU. The Belgian side expressed its desire for rapid settlement of Russia's debt, and highlighted problems which Belgian suppliers face at Russian customs stations.

Joint projects include Belgium's participation in the development of Russian express railway network, modernisation of the Borsk, Klin and Solnechnogorsk glass factories, joint production of antibiotics, medications, and medical preparations, conducting scientific research and fieldwork for specialists in this sphere, the construction of enterprises for manufacturing homeopathic preparations in Moscow and St. Petersburg, deliveries to Russia of X-ray and other medical equipment, mutual deliveries of equipment and technical means for industrial and agricultural facilities on leasing terms, and the participation of Belgian companies in the privatisation of Russian enterprises.

The Belgians were presented with a draft cooperation programme for the agro-industrial complex. The parties agreed to step up the activity of sectoral working groups (to this end, a meeting of the working group for machinery and equipment was held in Brussels in December 1997, and a meeting of the commission on cooperation in public health and medical science was held in Moscow in January 1998). A decision was made to promote the establishment of ties between sectoral and regional economic associations, as well as between the regions of both countries.

It is obvious that with its vast industrial, financial, commercial and investment potential, Belgium still has a lot to offer as Russia's important trade and economic partner. First, the interest of Belgian business circles in the Russian market will continue to grow as more favourable legal and other conditions are created. Second, there is still a possibility of massive supplies of Russian electricity and raw materials to Belgium (and to the EU via Belgium), which will predominate in Russian exports for a long time to come. However, it is also obvious that the prospects for further increase in simple trade turnover are limited. Its quantitative level appears to be approaching its natural limit (even now the increase in trade turnover depends largely on the market situation). With respect to imports, this is explained by the relative saturation of the domestic market with consumer goods purchased in Belgium (although the demand for imported mechanical engineering products will increase as the Russian economy recovers). The export of basic Russian goods, which have a stable, production-oriented demand in Belgium (fuel and energy, lumber, fertilisers, diamonds) has also reached its limit. In addition, the trade infrastructure and commodity flows are passing increasingly into the hands of foreign shippers. Russia is essentially not represented on the Belgian engineering, telecommunications and financial service markets.

Gazprom and the Belgian Distrigas company are holding negotiations on cooperation in building a gas pipeline in Belgium which would connect current and planned gas transportation systems on the continent with the Interconnector gas pipeline. They are also discussing the prospects for natural gas deliveries from Russia in the amount of approximately 600 million cubic metres a year with a possible increase up to 1.5 billion cubic metres in 2000-2005.

Joint ventures set up in Russia with Belgian companies include 74 industrial enterprises, 81 trade and public catering outlets, 14 transportation and communication companies, 7 enterprises in construction and 9 in material and technical supplies and sales. The total trade turnover of these ventures for 1997 is estimated at US million (of which exports account for US million and imports for US million).

FLANDERS

The working visit of head of the Flemish government L. Van den Brande to St. Petersburg. Within the framework of his trip to several East European countries (Lithuania, Poland, Russia, Hungary and Slovenia), head of the Flemish Government L. Van den Brande visited St. Petersburg on 30-31 August 1998. He spoke with city and regional governors Vladimir Yakovlev and Viktor Gustov.

During a visit to the State Hermitage, L. Van den Brande announced the decision of the Flemish government to grant US,000 towards restoration of the Rubens Hall in the Hermitage (renovation of the ceiling, walls and floor) and instalment of modern lighting, within the framework of the UNESCO Hermitage Programme.

While touring the St. Peter and Paul Fortress, head of the Flemish government presented St. Petersburg with a bell cast at the Royal Foundry Petit & Fritsen B.V. intended for the Flemish carillon in the St. Peter and Paul Cathedral. This is the first of 51 bells, all of which will be cast using funds raised on the initiative of the Flemish side (director of the Royal Carillon Academy in Mechelen, Jo Haasen). L. Van den Brande also opened an exhibition of modern Flemish art (head coordinator on the Flemish side was art critic Van de Perre, who organised an exhibition on the life and creative work of Fyodor Dostoyevsky in the town hall in Dendermonde in January-March 1998, in association with his St. Petersburg colleagues).

During his visit to the Law Fund Centre, discussion focussed on the implementation of the MOT A-45415 project, Development of Module Learning Programmes in St. Petersburg, in which the Flemish Employment and Professional Training Service (VDAB) is taking an active part. The project is aimed at training personnel in St. Petersburg and the Leningrad Region in accordance with the contemporary standards of professional training, re-training and qualification raising of adults in harmony with the demands of the labour market. Its sphere of activity encompasses the administrative and commercial sector, the services and public catering (a total of 12 fields of specialisation). The project has been functioning with Flemish support since January 1995. In so doing, the Flemish government allotted US,000 for its implementation in 1995-1996 and another US,000 in 1998-1999.

L. Van den Brande presented a detailed report on the implementation of the joint Russian-Belgian Methodius project, initiated by the Eastern European Institute of Leuven Catholic University (Prof. K. Malflit). This project, which has been underway with the financial support of the Flemish government since 1992, was originally focussed on interaction among Russian and Flemish lawyers primarily in the area of private (commercial) law, but later its conception was expanded to include the study of special methods for conducting reforms in various spheres of the law. One of the results of this approach was the signing of agreements on cooperation between the Bars of St. Petersburg, the Leningrad Region, Brussels, Antwerp and Gent, and between the Leuven Catholic University and St. Petersburg State University. The agreement with the latter made it possible to organise in St. Petersburg a Master's course of lectures on management and legal reform with the assistance of Belgian professors, as well as provide Russian law students with the opportunity to work in Belgium.

From September 1995 to June 1997, the Methodius project was financed out of TACIS-Democracy Programme funds and by the Flemish government. It was called Legal Assistance to Professional Groups of Lawyers in St. Petersburg and included such arrangements as seminars in St. Petersburg for certain law professions (public prosecutors, lawyers, judges, public notaries) and fieldwork for representatives of these professions in Belgium to acquire practical experience: a conference, The Independence of Practising Lawyers in Russia (St. Petersburg, November 1995), and a round table (Leuven, June 1996). In July 1998, the TACIS-Democracy Programme and the Flemish government resumed their financing of the Methodius project.

On the eve of his trip to the Eastern European countries, the Flemish premier approved two new projects aimed at expanding cooperation with St. Petersburg: the financing of joint projects, legal experts' examination and transfer of know-how on the market economy, as well as training of personnel engaged in the care of physically and mentally retarded adolescents.

L. Van den Brande also visited ZAO Alcatel closed company where he met with representatives of its Russian-Belgian personnel.

The discussion of prospects for further Russian-Flemish inter-regional cooperation during his meetings with the city and regional administration, highlighted the following issues.

1. Growing interaction between the ports of Antwerp, Gent and Zeebrugge and St. Petersburg's Greater Port and assistance from the Antwerp port in modernising the port in St. Petersburg, prospects for expanding freight flows through Russian ports in the Finnish Gulf. A project entitled Baltic Bridge was presented to the Flemish side, in which L. Van den Brande showed great interest. In his words, everything in the Flemish-St. Petersburg dialogue involving the word "maritime” is extremely promising. He also emphasised that Flemish ports interested in providing regular and reliable freight deliveries by sea to St. Petersburg can and want to expand their participation in projects involving development of St. Petersburg's Greater Port. "Particularly since there is no need to start from scratch," the premier pointed out.
2. The St. Petersburg side proposed reviewing a possibility of conducting joint projects in such areas as demilitarisation of munitions, construction of waste-recycling plants, and conservation of waterways and the atmosphere.
3. In view of willingness shown by the Flemish to take practical steps to encourage export to Flankers of Russian coal, timber and wood-working industry products via St. Petersburg sea terminals, the Flemish side was asked to consider rendering technical assistance in training managers for St. Petersburg exporting enterprises and in marketing analysis with respect to St. Petersburg technological products in the Benelux countries.
4. The Russian Gems company, engaged in precious stone cutting and jewelry manufacture, is willing to discuss opportunities for cooperating with Flemish lapidary and jewelry enterprises. Another interesting proposal dealt with a possibility to arrange an Antwerp--St. Petersburg--Sakha-Yakutia triangle.
5. The presence in Flanders of several major transnational companies using state-of-the-art technology offers good prospects for attracting direct investments. Alcatel's experience shows that progress is already being made in this direction, but St. Petersburg wants more projects of this kind. To this end, favourable conditions are being created in the city and joint efforts made by lawyers from both countries (cf. the Methodius project already mentioned) to bring local rules and regulations in line with EU requirements. The Flemish were given a catalogue of the city's investment projects and a set of investment laws translated into English.
6. During the discussion, mutual interest was shown in cooperating in the sphere of restoration and conservation of historical and architectural monuments (within the context of St. Petersburg's preparations for its 300th anniversary and the extensive Flemish experience in restoring buildings and architectural ensembles in Brugge).
7. Active bilateral contacts between the Antwerp province and the Leningrad Region were noted (exchange of visits by regional and provincial governors, the signing of a framework agreement, etc.). L. Van den Brande expressed his willingness to accept 12 to 15 heads of municipal districts for fieldwork in Flanders (specific proposals will be formulated in the regional governor's letter). A catalogue of available production facilities and documents prepared by the Leningrad Region government for the St. Petersburg Economic Forum (June 1998) were given to the premier.

The Flemish side noted the unique geopolitical position of the region (it borders on Finland, i.e. on the EU) and proposed looking more closely at the possibility of developing a European region here. In their opinion, the Leningrad Region could become an active member of the Association of European Regions currently chaired by L. Van den Brande.

8. Immense interest was shown in the possibility of implementing the so-called Bridge Art project (the inner surfaces of drawbridges are decorated with paintings), a project proposed by Mayor of Antwerp Leona Detiege. Similar projects have already been carried out by St. Petersburg artists. The St. Petersburg version may be interesting, but the conditions for implementing it need to be worked on.
9. The head of the Flemish government supported the proposal of the St. Petersburg governor on the expediency of beginning to jointly draw up a framework agreement on cooperation which should at the same time be absolutely specific and which may include many of the issues mentioned above as separate items. An "almost ready" agreement between the Moscow Region and the Walloon area of Belgium could be also used as a basis. Its signing is scheduled for the time of Vladimir Yakovlev's visit to Flanders.
10. By that time (approximately February-March 1999), L. Van den Brande would be ready to organise a special seminar on investment for representatives of Russian and Flemish business and financial circles, at which the St. Petersburg governor would speak.

L. Van den Brande and his cabinet noted the constructive nature of the meetings and discussions with the St. Petersburg and Leningrad Region leaders, which is indicative of a qualitatively higher level reached in Russian-Belgian relations as a whole.