Page 40 - bneMag April 2022 Russia living with sanctions

40 I Eastern Europe bne April 2022
The sanctioned Belarusian economy
bne IntelliNews
Sanctions keep taking their toll on the Belarusian economy, making it more and more isolated from global value chains. The Belarusian government is trying out new policies to ease the effects of sanctions. However, in the coming years we’ll see a Belarus with either very low or negative growth.
Sanctions effects on Belarus’ economy
Last week, Switzerland, Norway, Canada and Japan tightened their sanctions on Belarus. The pace, width and extent to which the Belarusian economy is currently being isolated is unprecedented.
In total, over 100 companies have left Belarus since the war started; another way to look at this is to note the fact that nearly 6,000 apps were removed from App Store in Belarus between February 24 and March 14 this year. Companies’ divestments in Belarus are increasingly rapidly, striking a heavy blow to the regime’s attempts at becoming an entrepreneurial hub.
The exodus of IT specialists from Belarus has been increasing, hitting the one sector which has been diversifying
the Belarusian economy and the only sector which was actually helping the Belarusian economy to improve its resilience to macro-economic shocks.
Even the state flagship company park “Great Stone” is being affected, as the German Port of Duisburg pulled out its investments from the Great Stone park last week. The Great Stone park has been vital for the regime’s image as a manufacturing and logistical hub for trade between China and Europe.
Furthermore, this threatens Chinese investments in Belarus, as the latter's importance along the “Belt and Road Initiative” is further diminished by increasing tensions with the West. While last year’s sanctions certainly slowed down Belarus’ GDP growth, they
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were not a major hindrance to it and throughout last year Belarus' GDP kept increasing. This was fuelled mostly by rapidly increasing export revenues from higher raw material prices.
However, now the Belarusian GDP growth is seriously losing steam. In January this year, Belarus GDP gained 2.7% compared to January 2020; but in February the year-on-year rise was only 1.2%. After the massive number of new sanctions during March, this month’s y/y development is unlikely to be any higher.
One could assume that Belarus’ two
oil refineries Mozyr and Naftan would benefit from the higher prices on petrochemical products. The only problem is that they’ve lost one of their biggest markets, Ukraine, due to Russia’s war. What’s more, Mozyr and Naftan lost one of their major export routes through Estonia in February.
Together with the exodus of IT companies and its crumbling financial system, the reduced oil exports will most likely cause an even further slump in GDP growth this year.
Since the oil is traded in dollars, it’s also an important source of foreign currency revenues for the Belarusian economy; and its export hindrances are definitely
not helping the Belarusian banking sector’s lack of hard currency.
All major Belarusian banks have, since the war, imposed tough limits of how much foreign currency can be withdrawn, as people have rushed to ATMs and bank offices to secure their savings in the more stable euros or dollars rather than the more volatile Belarusian ruble.
The Belarusian regime is probably looking into new ways of getting more loans, or restructuring old ones with other countries than Russia.
On Friday,18 March, Prime Minister Golovchenko and Lukashenko’s son Viktor Lukashenko returned from the UAE, from what is believed to have been loan negotiations.
Today, Russia announced that it will give Belarus a deferral of 5-6 years on its state loans going to Russia, which owns more than 50% of Belarusian state debt. This gives Belarus time to focus on paying back the rest of this year’s loans; Belarus also gains significant time to restructure its economy and achieve a balance under the new hard sanctions, so that it can confidently pay back future loans.
Belarus’ latest measures
The Belarusian finance ministry has imposed measures which will help its
Belarus' Ministry of Finance.