Belarus’ economy in tatters: what role for the EU?

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Whilst Belarus is largely dependent on the Kremlin for its energy supplies, it is equally a key transit country, via which EU member states receive gas and oil from Russia. The personalities of Moscow and Minsk’ leaders as well as transit-disputes have however been blamed for an acute deterioration in Moscow-Minsk relations since 2006 which, inter alia have encouraged Belarus to oscillate towards and away from the EU periodically.

Since 1994 Belarus has been ruled by fourth term President Alexander Lukashenka, who swiftly established and consolidated an authoritarian regime. Advances towards strengthening the institution of the President as well as the creation of a loyal security apparatus account for the incumbent’s success in ensuring a strong grip on power.  These structures were put into use for the December 2010 presidential elections in order to quash protests questioning the 79.67% pro-Lukashenka electoral result.  

The aforementioned election violations and brutal crackdowns prompted the condemnation of the EU and the US and incited them to reintroduce the previously suspended sanctions of 2008-2009 as well as tightening the former restrictive measures towards Lukashenka’s regime. In addition, the EU imposed visa bans and an asset freeze on the President and his top aides. Since then the list of the EU sanctions has gradually been extended while the US has targeted several major Belarusian companies through sanctions as a result of unabated civilian repression by Lukashenka’s government.

‘It’s the economy, stupid’

More than a decade of isolations and targeted sanctions imposed by the West and a strained relationship with Russia since Putin’s presidency have weakened the Belarusian economy but posed no real existential threat to Lukashenka’s reign. ‘Europe’s last dictator’ was successful in sustaining high standards of living for the majority of Belarusians until the recent global financial crisis started taking its toll. The economic hardship which ensued incited a part of the meek albeit disgruntled population to take action. Belarusians may not strive for the same “instability” as that “ravaging” democratic Ukraine, but Lukashenka’s authoritarian model harbouring a so-called “island of tranquillity and spiritual harmony” loses its legitimacy in the face of sky-high unemployment and crippling inflation.  Moreover, average salaries of Belarusians have seen a dramatic cut in recent months, forcing the country to relinquish its much coveted title of most affluent state in the CIS.  Internally, the middle class as well as small and middle size business owners are increasingly dissatisfied with state socialism which hampers the development of private industry.

Added to the prospect of economic collapse, Lukashenka’s rule is further being challenged by internet savvy ‘revolutionaries’ using networking sights such as vkontake to mobilize protesters. The innovative element in this equation is that the previously passive working class is getting increasingly involved, thus partly shedding their apathetic stance to Belarus’ domestic affairs.  The latter combined with the youth have been organizing spontaneous meetings in public squares, unexpectedly applauding or walking through parks in unison.  It is thus that the July 3 Independence Day celebrations were graced with the intervention of marching protestors, clapping their hands and setting of their mobile alarms in sync. Similar protests have been repeated in the weeks that followed, resulting in displays of violence towards more than 1000 protesters by the Belarusian security forces. 

Lukashenka was quick to build on these preliminary measures. Instead of reflecting on the demonstrators’ concerns, Lukashenka blamed the unrest on saboteurs financed by the West, berating them for being “enemies of the people”. In reaction to the demonstrators’ increased creativity and assertiveness, the president passed a law which proscribed any planned action or inaction in public. The incumbent further stipulated that all internet café users must provide I.D when accessing such services, a measure which undoubtedly served to facilitate the tracking of potential dissidents. To date, demonstration organizers using vkontake have already been subjected to harassment by the state security apparatus. Reinforcing his commitment to stamping out popular participation, Lukashenka highlighted social unrest and the power of internet, as his major concerns at a recent CSTO summit meeting, advocating a CSTO response to anti-government protests. The Belarusian leader further endorsed the creation of a legal framework for the drafting a list of personae non gratae (read EU& US officials) on the territories of CSTO countries.

 Lukashenka’s past behaviour makes the following deduction reasonable: the incumbent is erratic and is unlikely to step down voluntarily. While the protesters must be lauded for their courage, it is dubious whether the movement alone is enough to topple the dictator. To date, the protests have been rather chaotic and have relied on transmission through word of mouth as only a segment of the Belarusian population has direct access to the internet. Moreover, the protests do not reflect the full amplitude of dissatisfaction in the country as many disgruntled workers do not dare to demonstrate lest they lose their state-controlled jobs.

Another major stumbling block to change is the absence of an organized opposition with a credible leader in Belarus as all opponents have either been forced into exile or imprisoned. Given the absence of a real alternative, a large percentage of the population -while not as apathetic as before- is biding time until the economic conditions become unbearable. Lukashenka’s future largely depends on an economy which already finds itself in tatters.  The worst scenario now would be for the President to not get sufficient loans to save the Belarusian economy from collapse. 

The big brother Russia

Relations with Russia have been marred by the impossibility for the Kremlin to reason with the Belarusian President. Lukashenka has frequently infuriated the Russian leadership which has rendered him highly unpopular in Moscow. Whilst Russia does not want to bear responsibility for deposing of Lukashenka directly, its economic policies can eventually provoke to the ouster of the president. Belarus’ isolation renders it highly dependent on its “bigger brother”, especially as all EU and the US trade preferences have been abolished. Moreover, it must be noted that Belarus is solely the EU’s 41^st trading partner and EU businesses only have negligent investments in the country. In contrast, 1/3 of Belarusian trade is with the EU- compared to ½ with Russia- which highlights the country’s asymmetrical dependence on the EU’s market.

Whilst Russia has been observing the domestic volatility in Belarus to date, it is cautious about supporting the ouster of the incumbent as this could bring a pro-western leader to the head of the country. Instead, the Kremlin seeks a pro-Russian figure which, as opposed to Lukashenka, would be a reliable partner for Russia and expedite the liberalization and privatization of the Belarusian economy.  This would thus allow Russia to continue buying out Belarus (as is the case with Beltransgaz) and equally ensure the undisrupted transit of energy exports to the EU. To date, both Putin and Medvedev have been pragmatic towards Belarus and as the current Belarusian state socialism hinders Russian business interests, it will try its best to force Belarus to open up. Russia is indeed the only actor with enough leverage to push for economic reform, privatization and minimum standards. Given that Belarus has already asked for Russian government and the EurAsEC loans, the Kremlin will use its consequent clout to apply conditionality for its stabilization loan.

Frosty winds from the West

Whilst the government in Minsk is forced to privatize a number of its most lucrative businesses EU and US sanctions on these are likely to make them less attractive to investors thus hampering Belarusian attempts to utilize all its resources to the fullest. The West is moreover equally likely to continue blocking any attempt of the Belarusian authorities to obtain a loan from the International Monetary Fund (IMF) until it receives satisfying concessions from Belarusian authorities. Without the IMF loan- or an equivalent amount of funding from another source- Belarus is likely to be brought to its knees.

Past experience with Belarus shows that the President puts aside its isolationist shield in times of extreme economic volatility and thus Belarusian advances towards the West are to be expected in the short-term.  Bulgarian Foreign Minister Nikolay Mladenovwas the last Western figure to mediate with the Belarusian authorities, which resulted in Lukashenka’s pledge to release political prisoners and begin talks with the opposition. Following the ‘Gymnich’ meeting at the beginning of September in Sopot, Poland, the EU High Representative and Vice President Catherine Ashton reaffirmed that the EU’s support to Belarus is conditioned upon the release and rehabilitationof ‘all the political prisoners.’ Belarus has periodically continued to release prisoners since that meeting but no other major changes have been noted. This is not surprising aslast time Belarus was pushed into a corner, it simply feigned liberalization in order to relish EU engagement, just to go back to its repressive ways again.  Indeed, Lukashenka is likely to continue releasing political prisoners in order to have a chip at its disposal in negotiations with the West, when Russia starts getting too close for comfort. Given that its previous ally Ukraine has started to shun it after Lukashenka’s recent Chernobyl blunder, the Belarusian dictator does not have many cards left to play.

Where do we go from here?

Given the lack of EU leverage, Russia’s strong presence and an unreliable Belarusian dictator, there is little that the EU can do to advance its agenda in Belarus. However, the near economic collapse that slowly spills over to Belarusian politics and seriously shakes Lukashenka’s power grip provides the EU with a window of opportunity. The EU is well positioned to offer economic incentives that Belarus badly needs while tying them to the objectives in line with EU goals.

The IMF loan potentially supplemented with EU aid could serve as are major bargaining chip. The holding of genuine talks with the opposition, ensuring real political freedom and the calling of early free elections must constitute the preconditions for the economic carrot. Simple concessions by the regime to lure the EU- such as the release of political prisoners - should be regarded with suspicion and as a general ploy to gain economic advantages from the EU.

Again, whilst it is advantageous to isolate Lukashenka, there should still be efforts, notably by the EU delegation, to interact with the Belarusian bureaucracy, which might be persuaded to turn its back on Lukashenka if the situation in the country does not stabilize. It should be informed of aid packages the EU would be willing to provide it with and tied to the West through increased contact. As part of the Eastern Partnership and newly reviewed ENP the right steps towards handling Belarus have been made with regard to Belarusian civil society. It should continue increasing people-to-people contact (ideally through visa facilitation inter alia.) to win over the Belarusian population as this would enable them to gradually develop a European identity.

It thus seems that change is inevitable as Belarus is in desperate need of conditionality-laden loans, be that from Russia or the West, which will subsequently lead to the economic liberalization of the country. However, in light of the absence of a structured opposition, weak civil society and no credible alternative to Lukashenka, the Belarusian revolution is still very much in the making and begs for the EU’s ever proactive engagement. Independent of the dramatic transformations occurring in the Southern neighbourhood which require the EU’s outmost attention, Belarus remains the Union’s direct neighbour and potentially finds itself at a novel juncture in its post-independence history in which the EU has a supporting role to play.