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Belarus: the president's dilemma

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A dramatic devaluation of the national currency has combined with international isolation to plunge the usually reliable Belarus deep in a sea of instability. The crisis is unlikely to seriously threaten President Lukashenka's position, says David Marples. But the country may yet have to pay a high price for his clinging on.

David Marples
1 June 2011

On May 31, Belarus requested a new $3.5-$8 billion loan from the International Monetary Fund. This startling request reflects the country’s financial predicament and cash shortage and comes after a series of events that have elevated this normally stable part of Europe to global headlines. They concern not only President Alyaksandr Lukashenka’s economic problems, but also his relations with Russia and the West, and his maltreatment of political prisoners, including five presidential candidates, arrested in the aftermath of the December 19 elections.

The government has handed down a series of harsh sentences to several of the arrested presidential candidates. Andrei Sannikau, the former deputy foreign minister, was given five years in a medium security penal colony early in May, and later in the month Dzmitry Uss and Mikalay Statkevich received sentences of 5.5 and 6 years respectively. Two other candidates, Vital Rymasheuski and Uladzimir Nyaklayeu received suspended sentences. The sentences received opprobrium from international leaders, and US president Barack Obama, during a visit to Poland, issued the sharpest condemnation of the Lukashenka regime since his coming to office three years ago.

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Many — including Russian presidential aide Arkady Dvorkovich — have linked  Belarus’ current problems to the violent crackdown that followed December’s presidential elections. Andrei Sannikau (pictured), the most prominent of the opposition leaders, remains imprisoned. Photo: gazetaby.com

Under these circumstances, with the EU expanding its travel ban on Belarusian leaders and the US focusing on economic sanctions, Lukashenka has found himself pushed closer to Russia. Moreover, this realignment of forces—relations with Russia have been tense for several years—comes at a time when his country is experiencing a series of economic shocks not present hitherto in Belarus, and which most analysts attribute to public over-expenditure during the election campaign—especially wage increases—and the payment of higher prices for Russian oil and gas.

The result has been the dramatic depletion of currency reserves, the devaluation of the Belarusian ruble from BR 3000 to the US dollar to BR 4,930, mass panic buying of consumer and crucial food products in anticipation of the devaluation resulting in food shortages of goods such as sunflower oil and sugar in stores, and growing popular dissatisfaction with the Belarusian government and—as the president acknowledged in his report to the government last weekend—with Lukashenka himself.

Lukashenka typically responded to the situation initially by blaming outside forces for Belarus’ problems. He has commented, for example, that European powers such as Germany and Poland wish to overthrow him and have conducted spying operations against his government. He also accused them of interfering in the presidential on behalf of opposition candidates. He also laid blame on his Prime Minister, Mikhail Myasnikovich—in office for a mere five months—and on his National Bank chairman Pyotr Prakapovich, both of whom have been threatened with dismissal.

"Lukashenka offered his people an oasis of financial and political stability with guaranteed wages and pensions: what he termed the “social contract.” That oasis has been transformed into the most arid part of the desert"

Above all, however, he laid blame on those who carried out panic buying. He offered a long chronology of his “achievements” in office, particularly in areas such as public amenities and housing. In short he portrays himself as a leader under siege from all sides who has but one aim: to defend the integrity of his country from outside and internal forces. In doing so he equates Belarus tightly with his own leadership and personality. To oppose Lukashenka is to oppose Belarus. However, his position is weaker than at any time during his 17-year presidency.

There are various scenarios in terms of an escape route. The first has been the securing of foreign loans to ease immediate financial problems. Russia, now the senior partner of Belarus, has been the main donor in the past, and once again Lukashenka has requested a further $1 billion as well as $2 billion from the Emergency Fund of the Eurasian Economic Community, which is largely Russian controlled. Belarus is a full-fledged member of the Common Economic Space along with Russia and Kazakhstan. Thus his request might be construed as analogous to that of Greece or Spain within the European Union, requesting short-term loans as a panacea for emergencies resulting from an international financial crisis.

Unfortunately for Lukashenka, Russia doesn’t see it that way. Through its finance minister Aleksey Kudrin, Russia has made it clear that further loans will not be forthcoming unless Belarus takes serious steps to privatize its major and most lucrative companies. These are mostly in the sectors of oil reprocessing, trucks and tractors, and potash production. In response, Lukashenka has either declined to privatize national companies or else claimed that the price being offered is too low.

However, several analysts have noted that the president often makes announcements geared to public consumption while allowing his government to do the opposite. Evidence suggests that some companies are well into the process of being sold off, and specifically to Russian enterprises. Further, state-owned conglomerates, such as Gazprom, are making significant inroads into the Belarusian economy, and reportedly the Russian gas company may soon control 100% of Belarus’ BELTRANSGAZ, which controls about 25% of the supply of Russian gas to central Europe.

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President Lukashenka has reverted to a simple
message: to oppose Lukashenka is to oppose
Belarus. Photo: www.kremlin.ru

Under former Prime Minister Syarhey Sidorski, who was unceremoniously dumped from office after the contentious December presidential election, Belarus embarked on a program of privatization that included the relaxation of some controls for foreign businesses and the sale of bonds issued in US dollars. That policy essentially is still in place, but with the difference that rather than a competitive market environment, privatization signifies the takeover of Belarus’ most valuable companies by Russian ones.

Is there a way out? Certainly the president doesn’t have many options. The Europeans are justifiably frustrated with his leadership. Though the EU and United States have been much criticized for their policies toward Belarus—including in a book by Radford University analyst Grigory Ioffe and a scathing article by Edward Lucas in The Economist—as adopting incorrect policies toward Belarus, the real issue is that Lukashenka, personally, has failed to meet the Europeans halfway, against the wishes of some of his government. Through the Eastern Partnership and extensive contacts below the level of the presidency, the EU gas tried to draw Belarus into its economic sphere while asking the president to make at least token moves toward democratization. Before December 19, 2010, there was some evidence it was working. Over the past five months not even the most accommodating of European statespersons could fail to be convinced that Lukashenka had moved toward a regime of harsh repressions, at all levels of society.

One can conclude that belatedly, the president’s “Belarusian path” to national and economic security has failed. It is not entirely his fault. He could not have been expected to anticipate a world financial crisis, for example. But he could have dealt with some of the dilemmas much earlier: the currency situation was evident several months ago; his failure to diversify and reform the economy looms large; and his overreaction to the popular demonstration on Independence Square after the election was inexplicable and catastrophic.

Lukashenka, it is postulated by some analysts, is a reflection of Belarusian society in the post-Soviet age. But in the midst of chaotic upheavals in neighboring countries like Ukraine, Georgia, and Moldova, and local conflicts of smaller or greater degree in Russia, what he offered his people was an oasis of financial and political stability with guaranteed wages and pensions: what he termed the “social contract.” In short, they could live life as in the past without resorting to such evils as shock therapy or military alliances with either NATO or the CIS.

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Lukashenka is likely to give into the demands of Russian finance minsiter Aleksey Kudrin and open up some of the most profitable Belarusian companies to private ownership. Beltransgaz is likely to be one of the first and most lucrative deals, with the Russian Gazprom the destination. Photo: www.btg.by

That oasis has been transformed into the most arid part of the desert, from which Belarus lacks the resources to extricate itself. Lukashenka’s position might make sense if the Communist Party controlled Russia, but Moscow’s rulers are committed capitalists. All he can do henceforth, unless he concedes completely to Russia’s economic barons, is postpone the inevitable through more loans and short-term crisis measures, and specifically from the IMF, one organization that has not infrequently emphasized financial stringency and economic pragmatism rather than a free or democratic society.

His pride likely negates the alternative possibility of releasing the imprisoned activists and presidential candidates, introducing more tolerant policies, and renewing Belarus’ role as a small central European state committed neither to the east nor the west. Unfortunately it is precisely the latter position that is embraced by most of the electorate. 

The departure of Lukashenka from the political scene in the near future is unlikely. What is more probable is the gradual but relentless intrusion of Russian business and political clout into the Belarusian environment, leaving the president/dictator—that term is finally appropriate—to resort increasingly to impotent and facile pronouncements on the hostile forces facing him. Sadly the longer he remains in office, the weaker Belarus’ international position becomes.

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