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Opinion
January 26, 2018 www.intellinews.com I Page 21
Economic dysfunction strengthens Moscow’s hold over Minsk
Daragh McDowell of Verisk Maplecroft
Belarusian President Alexander Lukashenko enters 2018 having successfully ridden out an unprecedented series of street protests in 2017, but with few options to move his country forward. The Belarusian economic model, which incorpo- rates large elements of the command economy, has been exhausted due to the steady withdrawal of the Russian subsidies which made it possible. Without them, the economy has become increas- ingly crisis prone, and the populace has become more disillusioned and politically active.
Ironically, the decrease in Russian financial lar- gesse has made Belarus more dependent on Moscow. This is likely to result in greater Russian penetration and control of Belarus’ national en- ergy infrastructure. Over the longer term, Moscow gaining more control over infrastructure would result in a greater stability of supply of oil trans- ited via Belarus. However, in the near term there is a risk of Belarusian oil infrastructure being disrupted due to political disputes with Moscow.
Since 2007, Russia has progressively reduced the overall level of subsidy to Belarus, which has led to a much more tense bilateral relationship. Minsk, how- ever, was unable to cultivate other external partners or sponsors or enact domestic economic reforms.
Since 2007 Russia has switched from using the subsidy as a ‘fee’ to purchase Belarus’ political loyalty, to using it as an instrument of coercion. By modulating financial terms in order to apply economic pressure on Belarus at key moments, Russia has gained diplomatic and commercial concessions.
Lukashenko was compelled to supplicate himself to Putin in April 2017 in order to stave off economic collapse.
This has allowed Russia to increasingly ‘colonise’ the Belarusian economy, for example, by compel- ling Minsk to sell Gazprom a majority stake in the Belarusian natural gas transportation network
in 2011.
Following the 2014 oil price crash, the level of subsidy – ie the difference between the Urals crude price in Europe and for Belarus – shrank from US$50 to just over US$10 a barrel. Effective- ly, Russia is no longer able to maintain the sub- sidy at previous levels even if it were so inclined.
Unsurprisingly, the collapse in the subsidy result- ed in a sharp drop in Belarusian GDP, illustrating Minsk’s dependency on Russian support to gener- ate growth. Belarus emerged from recession only in 2017, due to increased export revenue follow- ing Russia’s more robust economic recovery, and growth remains mediocre. However, in the ab- sence of a substantial, and permanent, increase in world oil prices, Lukashenko’s subsidy-based economic model will no longer be viable.
Adopting a new model for Belarus is exceedingly difficult due to the interrelation of the economic and political regimes. Political control over the national economy, and the corresponding depend- ency of most workers on the state for employ- ment, is integral to Lukashenko’s authoritarian method of rule.
The government’s reaction to the recession has also indicated a limited capacity for policy innova- tion and a reliance on administrative and coercive measures as a response to repeated economic