Page 63 - BNE_magazine_07_2020

bne July 2020
Opinion 63
Another pillar of Belarusian prosperity over the years was unlimited access to the Russian market. Russia remains a destination for 90-95% of Belarusian exports of dairy products, 75% of machinery and equipment, and 70% of vehicles. On top of that, the power-consuming heavy industries of Belarus are only competitive because they rely on cheap Russian gas as their energy source. In other words, the Belarusian economy became dependent on Russia in so many ways that it could be seen as merely a function of the economy of its big brother.
However convenient for Belarus, the trade of billions of dollars in subsidies for declarations of friendship began to face mounting opposition in Russia. Over time, the Kremlin started to demand more and more concessions, while Minsk still wanted to stick with kisses. This discrepancy was the main trigger behind numerous conflicts between Russia and Belarus popularly known as Oil, Gas, and Dairy Wars that have occurred every few years.
During one such conflict in 2010, Russia effectively stopped all its subsidies to Belarus, leading to the collapse of the Belarusian economy and the severe economic crisis of 2011.
Unable to recover properly, Belarus has been immersed in stagnation, which lasts untill this day. The country’s GDP has remained largely unchanged since 2010. Real wages of 2020 have dropped to just 70% of their 2010 level (considering the inflation rate). Public debt has skyrocketed.
But most importantly, the social contract of the 2000s, which can be described as a limitation of personal freedoms and rights in exchange for economic prosperity, has stopped working. All this was reflected in Lukashenko’s popularity, which plummeted from pre-crisis ratings of 50-60% to just 20% in 2011.
During the elections of 2015, Lukashenko regained his support mainly because of the war in Ukraine, when a new social contract
The level of Belarus’ public debt. The official one is in blue and the real one is in red (wikipedia.org)
temporarily emerged: popular support in return for security and protecting Belarus’ sovereignty. It didn’t last long, though. Right after the election, economic stagnation turned into a full-on recession and with it, support for Lukashenko has only dwindled. In summer 2016 his rating dropped below 30%, right after which the authorities permanently banned any independent surveys.
In recent years, there have been limited attempts at economic liberalisation, but any real reforms coming from the government have been blocked by Lukashenko and his conservative administration.
Instead, even more restrictions have been introduced, the most prominent of which is the so-called ‘social parasite tax’ which essentially fines people for being unemployed.
At the same time, massive cuts began in the struggling state sector. Many of those who weren’t fired were forced to work part-time. As a result, in the past decade, Belarus has turned from being a country with a positive net migration into a country with a negative one. Hundreds of thousands of Belarusians have moved for work to Russia. Well over 50,000 now work in Poland.
But the most alarming fact for the Belarusian authorities is that the economic stagnation of the 2010s was set against decreasing but still significant Russian subsidies. Recently, Russia has launched a so-called tax manoeuvre, which in a few years’ time will essentially strip Belarus’ petrochemical sector of its lucrative margin that is crucial to sustain the country’s economy.
The Kremlin says it is ready to resume its financial support, but under one pesky condition – Belarus and Russia will have to form a union state, envisaged once in a 1999 treaty, which for Minsk would essentially mean giving up its independence and becoming one of Russia’s oblasts. There is no doubt Lukashenko would never agree to that, as it would mean
the end of his career as an authoritarian leader.
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