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Belarus in Focus 2011

15 Nov

Katarzyna Kwiatkowska, Polityka (Poland)


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Black Days in Belaya Rus

Political jokes like these are enjoying growing popularity, though nobody really feels like laughing. Belarus, a country without worries, until quite recently, has just entered a period of huge economic turbulence. The well-known ‘stability, Lukashenko-style’ is collapsing in front of the more and more bewildered citizens. And this is only the prelude to a colossal transformation which is to reshape the last dictatorship of Europe.

Batska is tumbling

‘It was supposed to be great,’ disappointed Belarusians sigh. Not so long ago, even ardent opponents of Lukashenko could not negate the fact that he seemed to possess a political instinct. His skilful manoeuvring around Moscow and Brussels was guaranteeing the citizens rather average, albeit stable, living conditions. The main sponsor of the country’s economy was Russia, supplying its neighbour with oil and gas at a reduced price, which Belarusian petrochemical companies were converting into petrol, sold then to the Western consumers at a considerable profit. The value of Moscow ten-year financial backing in a form of cut-rate raw materials amounts to 49 billion USD (in comparison, Belarusian budget for 2011 – 15 billion USD). At the same time, goods produced in Belarus - tractors, combine harvesters, fridges, furniture, and also milk and meat – have had their market in Russia.

Since 2008, this fertile source has been drying. Belarus fell short of Kremlin’s expectations due to not recognizing independence of Abkhazia and South Ossetia, two regions that  separated  from Georgia as a result of its August war with Russia. For months, Minsk was making empty promises to Moscow. Meanwhile, Lukashenko was busy with flirting with Europe.  The International Monetary Fund has granted Belarus a credit of 3.5 billion USD, being given since 2008. The funds were to be spent on modernizing the outdated economy system; however, the authorities ate them up. They used the last tranche of the loan, given in the middle of 2010, for pay rises (average wages increased from 370 USD to 500 USD), prepared for a period of presidential elections n December. In November, the foreign ministers of Poland and Germany promised another loan of 3 billion EUR, but with conditions: Lukashenko was to stick to democratic rules. Belarusian president assured of his care for international respect. ‘These elections will be much better, because you want them to be such,’ he promised.

In time, it occurred how ironic these words had been. After 19th December, hundreds of people who came to post-election rallies in Minsk were arrested. The trials of ‘mass protests’ organizers’ have been proceeding for the last half a year. The rival candidates of Lukashenko – Andrei Sannikau, Mikalai Statkievich and Dmitry Uss – have received the heaviest sentence (5 to 6 years of imprisonment).

Belarusian authorities’ brutal reactions without political justification (the divided opposition was of no threat to the regime) triggered a wave of criticism against Lukashenko from the West. Any attempt to Europeanize Batska was out of the question. 

The command-and-quota model of economy adapted in Belarus is a costly one and requires regular money injections, a situation Russia effectively exploits. The Kremlin was delaying its promised loans, thus pushing the neighbouring country further into destabilization. Lukashenko, after getting in Europe’s bad books, had no one to turn to for help with paying the interests on the existing loans.

In the meantime, the world demand for Belarusian products declined, which the local economy, dependent upon export, suffered accordingly. Despite the trade deficit reaching a record level in 2010, there was no change in original production programmes.  The energy-intensive industry for years has been producing beyond measure. Storehouses have been full of unnecessary goods. The factory parking lots could not house the tractors, and there were enough watches, produced under the Luch label, for all Minsk adult citizens, who, anyway, prefer Chinese products. In defiance of logic, the authorities were misspending billions of roubles. The effects occurred quickly. At the beginning of this year, the level of monetary reserves fell significantly.

They paid for the loans

In 2011, Belarusians’ world collapsed. The crisis was unavoidable – Lukashenko had been working hard for this effect, ignoring all alarm signals. The economists were warning:  the election pork barrel would damage the budget and citizens would pay dearly for increased wages.

A deep currency crisis has erupted. In March, the value of a Belarusian rouble started to fall and citizens headed towards exchange offices, guarded by militia, for foreign currency did not suffice for everybody. Similar events occurred in Poland in the early ’90. While zloty was weakening day by day, dollars seemed to be the only safe investment. Belarusian, just as Poles two decades ago, are trying to convert their rouble savings into hard currency.

When bureaux de change ran out of dollars and euros, people began to spend money depreciating in value on household equipment, both white and brown goods. They emptied the shop shelves of sugar, oil, kasha and salt – products one can stock up. Endless queues of cars formed in front of petrol stations.

This nervous reaction generated further destabilizing process on the market. Citizens did not believe Lukashenko, who was assuring that there was no need to panic.

Although the real exchange rate dropped twice as much as the official one, authorities were postponing devaluation for fear of social effects: decline of citizens’ real income and rise in inflation.  Thus, after the central bank had reduced the rouble value by 56% in relation to foreign currency, no apparent improvement took place – the dollar rate in the black market is still lower than the official one. An average salary fell to ca. 300 USD.

In practice, everything went up: petrol by 20%, food by 100%. ‘I’ve paid 23,000 roubles, that is almost 5 dollars, for a chicken breast,’ complains a citizen of Gomel. Only vodka remains cheap.

As a rule, devaluation brings in profits to a country, because it helps stabilizing the currency and eliminating trade deficit. Nevertheless, experts claim unanimously that without fundamental economic reforms, diminishing the value of a rouble resembles curing cancer with painkillers.

Russian rules

Economists estimate that in order to stabilize the country Belarus needs 6.5 to 10 billion USD of aid, which, however, no one is rushing in with.

On 19th May, during his visit in Minks, Prime Minister Vladimir Putin left Lukashenko with no choice. Russia will approve a loan of 3 billion USD from the Eurasian Economic Community’s stabilization fund, but on its own conditions. Russian minister of finance Alexei Kudrin said that in exchange Belarus must adopt a three-year plan of privatization. In Minsk, speculations are rife which pearls within the country’s industrial sector will fall into the hands of Russian businessmen.

Kudrin’s announcement induced nervous reactions in Belarus’ capital. Sovetskaya Belorussiya- Belarus Segodnya, a regime daily, compared actions of the minister to those of the hero from the “Pirates if the Caribbean,” who valued highly methods such as using sabres and boarding attacks. Lukashenko is aware that privatization process and, related to it, restructurization of companies, is going to lead to profound political consequences. Perhaps not high, but stable, wages and low (ca. 1%) unemployment were the pillars of the Belarusian welfare state.

In April, 600,000 persons (almost 13% of the workforce) have become ‘temporarily unemployed.’ In retaliation, independent trade unions have announced nationwide protests. Even the ever faithful to the government Federation of Trade Unions of Belarus demands taking all necessary steps immediately, restoring workplaces and adequate incomes. But how?

Unprofitable state farms are a ball and chain of the country’s economy. The authorities have conceded that the whole debt of collective farms amounts to 13 billion USD. Yet official cost are artificially pushed up (experts are joking that the price of a square meter of a barn equals this of an apartment in Minsk). Heads of the departments are buying luxurious staff cars and half of the crops are shredded due to the lack of storage space. Almost one fourth of the country’s workforce are employees in state farms – an army of people who, unable to take up employment anywhere else, live at state’s expense.

Time acceleration

‘Black Monday, ’– this is how Belarusians call 11th April 2011, when an explosion in Minsk underground belied the conviction that terrorism threat does not concern Belarus. Although authorities caught juvenile perpetrators admirably fast, the citizens are asking, expressing anxiety: “What if the government wanted this way to distract our attention from the economic crisis?” – the public confidence in state institutions has declined.

The day when the value of Belarusian rouble drastically fell was named ‘Black Tuesday.’ Citizens start to count how much they have lost so far this year. They want to know who is responsible for this situation and what happens next. Meanwhile, the regime television provides cursory information on the crisis: on the day when rouble devaluation has started, news services supplied coverage of Lukashenko’s visit in Kazakhstan, sporting successes, fires in Russia, tornado in the US. Somewhere there, in this information deluge, was a short mention of the decision made by the central bank.

The regime, wanting to hold power over the turn of events, is currently tightening the screws. Opposition has been decimated, its leader are in prisons, have emigrated or compromised themselves through self-criticism. Lukashenko proudly announced that all is as usual, yet changes one can see with the naked eyes. In a relatively short time, the pillars supporting an informal social contract for Lukashenko’s iron fist policy – economic stability and sense of security – went down.

‘The regime is seeking how to end this stalemate,’ said political expert Paweł Usau. ‘However, an attempt to rescue the old economic system leads to a total collapse.’ According to Belarusian analytics, the government has two ways out. Hence, both result in changes.

The first one means reforms under the guidance of the Kremlin. Agreeing on Russia’s loan conditions is ensued by giving up the centralized economy. Major political shifts follow. ‘Moscow will make all decisions and Lukashenko without controlled economy is like a wolf without its teeth,’ claims Usau. ‘No matter whether he stays or goes, either way real power belongs to Russia. Then, don’t count on democratization. Perhaps media would gain more freedom, at least those printed and small and medium enterprises would enjoy more institutional facilitations, today hindered by high taxes.’

Another scenario: preserving status quo at all cost. Maintaining the existing model will lead to a total financial collapse. Gradually impoverished Belarusian might then lose patience and take the law into their hands. At present, there is no political circle able to use society’s discontent in a constructive way. However, appearing of such force, since the situation is deteriorating, is only a question of time. Still, this is less probable, for revolution does not suit Russia, which prefers changes happening under its control.

At least one thing is certain – Belarus, a country where time has been flowing slower than anywhere in Europe, is right now passing away and becoming history.

Polityka



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