Post-election Period in Belarus: Economy Determines Politics

The recent presidential election in Belarus was associated with an unusual uncertainty, which was uncharacteristically beyond the political sphere and entirely within the economic sector. Belarus will not be shocked to learn the outcomes of the election. The country is expecting changes in its economic policy after the election. So what are economic and political discussions all about?

The recent presidential election in Belarus was associated with an unusual uncertainty, which was uncharacteristically beyond the political sphere and entirely within the economic sector. Belarus will not be shocked to learn the outcomes of the election. The country is expecting changes in its economic policy after the election.

So what are economic and political discussions all about?

Economy

Belarusian liberals believe that the current economic structure fails to ensure sustainable growth in prosperity, development and protection from internal and external shocks. This is something not to argue about. The Belarusian economy is suffering not only from the entire range of challenges to Russia, but also has its own set of problems to reckon with.

The hypothetical solution to the problems that is offered not only by members of the Belarusian Popular Front, but also by the relatively moderate opposition is as “simple” as it gets: a guaranteed reduction in living standards for at least a decade for the sake of hypothetical growth, which at best will be enjoyed by the next generation.

The mechanics that will enable the country to achieve this result are well-known to anyone who lived through the 1990s:

• Overwhelming privatization , bankruptcy of uncompetitive enterprises, i.e. virtually all large and medium-sized enterprises, except for the oil refineries and Belaruskali, according to liberal experts;
• Discontinuation of targeted social support for released workforce, as unemployment rate will reach at least 30% of the labor market, and there will be no money to support non-workers [1] ;
• Liberalization of prices, trade, foreign exchange relations, promotion of the financial market. Hikes in prices of goods by at least 250–300%;
• Budget cutting, increase in the taxable base amid higher tax rates and control of the budget deficit;
• Reform of the land, forestry, and infrastructure markets — elimination of all of the elements of availability of public resources;
• The above reforms are expected to be combined with the most favored treatment of foreign investors. They will enjoy property rights protection and a package of measures to streamline public administration methods to comply with their objectives and interests.

The logic of Belarusian reformers notably looks like the approach by Russian liberals back in 1992; however, it evolved at a different time, in different conditions, and amid the obvious achievements by Russia, Kazakhstan, Azerbaijan, and, most importantly, Belarus itself. “At the start of the 1990s, pseudo-liberals called for the state to leave the economy. This resulted in a situation, when a group of people emerged and appropriated, as a result of anti-popular privatization, the mineral wealth of the country, its economic potential, and sought to take power in Russia. As a result, the Russian economy suffered more losses in the 1990s than it did during WWII.” The recipes concocted by Belarusian liberals will have the same economic results, if the state follows their advice.

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For instance, Yaroslav Romanchuk, a Belarusian economist and head of Mises Research Center argues that the current employment structure cannot be preserved if the state aims to address productivity and efficiency challenges. In 2013, organizations without a state shareholding accounted for 49.5% of GDP, the same as the public sector. Further, in 2013, the private sector accounted for 58.4% of Belarus’s export supplies and provided jobs for 49.4% of the country’s workforce [2].

The openness of the Belarusian economy exacerbates structural problems amid the global crisis. Russia accounts for 48.8% of Belarus’s foreign trade. This would be just fine if the Russian economy were growing at the rate recorded back in 2012; however, under the circumstances two-way trade between Russia and Belarus cannot keep growing, but the structure of the Eurasian Economic Union should not be blamed — it is the overall crisis and sanctions that should.

The mere reference to Belarus’s trade with Russia and Russia’s support does not provide any figures regarding the volume of this support. It is not about support, but essentially about the model for the engagement between the two countries, where the level of socioeconomic development of one country depends on the development and capacity of the other country. This idea is shared not only by experts and economists, but also senior executives in Belarus. Belarusian economists believe that 1% contraction in Russia’s GDP results in 0.8% narrowing of Belarus’s GDP, but this is just the initial reaction. Given the time lag that spans about three quarters, and given the lack of any adjustment mechanisms at the current stage, the situation will be different, and 0.8% reduction in GDP in Russia will bring about a contraction in Belarus’s GDP by 1–1.2%. This tendency has been noted at the level of the economy minister: “half of GDP depends on Russia, either directly or indirectly.”

Politics

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The crisis in the Belarusian economy encourages not only experts, but also some representatives of the state authorities to look for external resources without sufficient critical attention to the existing geopolitical and geoeconomic status of the country. The concept of an “equidistant” Belarus belongs to their arsenal.

The notion of the “integration of integrations” also needs to be clarified. This idea of the “integration of integrations” is remarkable from the perspective of Belarus and, admittedly, both Russia and Kazakhstan. There is no arguing about this. The problem is different — the plan is unfeasible. Minsk’s attempts to become a buffer area between the Eurasian and European integration projects can hardly be implemented now. There is no real “integration of integrations” now, there is a conflict of integrations instead. Some may object that the Russian president spoke about the “integration of integrations” in his recent speech, but let’s have a closer look at his United Nations General Assembly speech: “Russia advocates harmonizing regional economic projects. I am referring to the so-called ”integration of integrations“ based on the universal and transparent rules of international trade. As an example, I would like to cite our plans to interconnect the Eurasian Economic Union with China's initiative for creating a Silk Road economic belt. We continue to see great promise in harmonizing the integration vehicles between the Eurasian Economic Union and the European Union”. In other words, the integration of the Eurasian Economic Union and the European Union is a matter of future. But how distant is that future? It can be assumed that if the project depended entirely on Minsk or Moscow, the matter would be tackled within a few months. However, it depends on Brussels, meaning it is a matter of several years, under the best-case scenario.

This is why the idea of turning Minsk into a negotiating venue for the East and the West proposed by some Belarusian experts can be regarded as a possible agenda.

The European Union has assumed a position that envisages encouragement of official Minsk for its special stance on the “Ukrainian issue,” however, it is more likely that the financial reward for Belarus’s role in the management of the peace process in Ukraine will come from Russia, not from Brussels. As a Russian–Finnish expert puts it: “So far, the EU’s commendation of Minsk has had very few tangible results.” [3] The idea that “Belarus became the only country on the continent, where the parties (including the self-proclaimed DPR and LPR) were able to meet on a regular basis; Minsk became synonymous with ‘peaceful process.’ To say the least, this produced a positive impact on Belarus’s reputation and gave an impetus to the warming of Belarus’s relationship with the West” does not hold water. The continent is huge, but Minsk is geographically suitable for Moscow and Kyiv, and treating this as a special geopolitical function is wishful thinking.

In this context, the idea voiced by Belarusian experts that “Belarus should convert its relevance for the West and Russia in the Ukrainian issue into a technology breakthrough” looks very odd and utopian.

However, the “conversion” is currently far from being properly implemented. According to the OSCE Office for Democratic Institutions and Human Rights (ODIHR) the presidential election of 11 October 2015 made it clear that Belarus still has a long way to go before it complies with the OSCE’s standards for democratic elections.

The newly reelected Belarusian president made a fair comment about the election: “This election will become an improvement only if the West wants it. If the West is willing, then there is nothing that can stop it.” Fair enough, but the “willingness” is something that the West is missing. Ahead of the election, Foreign Minister of Lithuania Linas Linkevičius said that he would welcome the lifting of sanctions from the Belarusian president by the European Union. This is as long as the resoluteness of European politicians goes. No one promises to change anything for the country itself.

Under the circumstances, some members of the Belarusian expert community [4] increasingly believe that if Russia responded to Ukraine’s turning towards the West, then it would be ready to destabilize the situation in Belarus as well if Minsk chose to turn its back on Moscow. However, a closer look at their comments makes it clear that these concerns are mostly voiced by Belarusians and Russians who live abroad. Notably, many experts reside beyond the Union State with a clear understanding that we cannot be defeated as long as we stay united, but they have a slight chance if we are separated.

Belarus’s experience, intellectual and manufacturing resources are required in pragmatic, not utopian projects, which would be in line with the spirit of that nation of peaceful workers. Objectively, Belarus is unable to become the assemblage point for the entire Eurasian space, but it remains its integral part, a central drive belt.

The Minsk dialogue platform is an important, yet contextual format. The Ukrainian crisis will sooner or later be resolved, and Belarus should not overuse the “Minsk dialogue” format. The power of Belarusian society and the state is in its reliance on brotherly relations with Russia, work in the Eurasian Union, the SCO, and engagement in joint projects with Moscow and Beijing.

The bottom line: the Belarusian economic model as it is now can only survive if Russia continues offering its support. A possible solution to the competitiveness challenge is a transfer from the paternalist quasi-resource-based economic model to the postindustrial, investment-based pattern. However, this path always envisions tough unpopular reforms and shock therapy in the most cynical version of the 21st century. Unlike Belarusian liberal experts, I will not dare impose such a model on Belarusian society and authorities, my friends and relatives. Given the historical and cultural background of the country, in the medium term, the demand for reform can be satisfied based on a scenario alternative to the catastrophic one that Belarus’s southern neighbor had opted for.

In today’s changing world the relationship between Russia and Belarus as a link between two especially close and related nations remains a constant. This is a relationship between two peoples that share the same understanding of major historical events and vision of the future.

1. Hereinafter calculations by the author (N. M. Mezhevich, Doctor of Economics, Professor of Foreign Relations Department at St. Petersburg State University), unless other references are provided.

2. K. V. Rudy. Structural economic reforms: a necessity for the Republic of Belarus and foreign practices // Belarusian Economic Magazine. No. 1 2015, P. 32

3. A. Moshes (Finnish Institute of International Affairs) “Is it possible to reset the EU–Belarus relationship? PONARS Eurasia memo No. 387 September 2015. P. 3

4. Vilnius becomes a capital of the Belarusian opposition 18.06.2012 Starikov А., Nosovich А., Petrovsky P. Anatomy of “European choice”: NGOs of Poland and the Baltic States in Belarus Andrey Starikov, expert at the Institute of European Studies (Latvia), Alexander Nosovich, observers at RuBaltic.Ru (Russia, Kaliningrad) portal 2015 http://www.rubaltic.ru/upload/medialibrary/ffa/ffafd9c7a92fde4d14d30e2041c2e3a7.pdf