Belarus: Hallmarks of 2013 and Prospects for 2014

Publication: Eurasia Daily Monitor Volume: 11 Issue: 4

Presidents Vladimir Putin and Alyaksandr Lukashenka (Source: RIA Novosti)

The year 2013 was marked by Belarus’s deepening economic dependency on Russia. It became apparent that the generous socio-economic model of the Belarusian state—including heavily subsidized utilities and mortgage loans; free health care and education; a retention of the Soviet-era recreational facilities such as day care centers, summer camps for children, and sanatoria; the quality upkeep of cities, towns, rural villages and roads; as well as the post-Soviet region’s most extensive, in per capita terms, residential construction—cannot be sustained without external aid. The excess of imports over exports and slowing economic growth exacerbated the situation. Russia came to the rescue, transmitting the fifth ($450 million) tranche of the Eurasian Economic Community’s $3 billion crisis loan to Belarus (in April 2013) and pledging to transmit the sixth tranche in 2014 (http://www.camarade.biz/node/12319 ).

Belarus’s most visited news portal, Tut.by, has offered a roundup of the 2013 hallmark events (http://news.tut.by/economics/380820.html). Thus, the Conflict of the Year culminated in the arrest of Vladislav Baumgaertner, the former CEO of Russian potash producer Uralkalii, following the disintegration of the joint Russian-Belarusian trader that used to sell up to 40 percent of potash on the world market.

In 2013, the $10 billion-worth construction of the nuclear power plant in Grodno Oblast, just 53 km from Vilnius, Lithuania, was launched. This was the Construction of the Year. The station is to be commissioned in 2018.

The Pet Idea of the Year was President Alyaksandr Lukashenka’s pledge to start charging Belarusians crossing the western border a $100 exit fee in order to compensate the state for the hard currency that these Belarusians buy in domestic banks so they could procure consumer goods abroad. Following loud public displeasure at that pledge, Lukashenka changed his mind.

Three public expressions of Lukashenka’s own displeasure received equal score in the Tongue-lashing-of-the-Year contest. Thus, in April, the head of state vented his anger at energy producers and in November at wood processors. In personal terms, it was Deputy Prime Minister Vladimir Semashko who was slammed verbally more than anybody else.

The Standoff of the Year was the June 27 strike of shuttle traders who were required to accompany what they sell to the general public with a certificate acknowledging where the product (mostly clothing) was made, which fabric was used, etc. However, most uncertified products are obtained at wholesale markets in Moscow, where the required information is usually unavailable. The standoff was defused by the postponement of the aforementioned requirement until sometime in 2014.

The designation of the Willful Decision of the Year is shared by Lukashenka’s two re-nationalization decisions. First, a plastic surgery unit was transferred under state control after a young woman died following rhinoplastic surgery. The second decision had to do with a sizable producer of construction materials.

The Loss of the Year was the death of Hugo Chavez of Venezuela who used to be Lukashenka’s ally. Several joint ventures had resulted from their cordial relationship. The Emergency of the Year was the African swine fever. Its splash in June–July in the western districts of Minsk Oblast resulted in significant loss of pigs. Finally the Sum of the Year was Vladimir Putin’s late December pledge to lend Belarus $2 billion dollars in addition to the $3 billion anti-crisis loan. This pledge was truly a New Year’s gift.

Consequently, it is highly likely that significant Belarusian production units will be transferred under Russian control in 2014. One of them is the Mozyr oil refinery, 43 percent of whose shares already belong to Russia’s Slavneft. The long-negotiated merger of Belarusian MAZ and Russian KAMAZ (both produce trucks) will probably be finalized, and most shares of Grodno-based Azot (Nitrogen), a fertilizer plant, and of Minsk Wheel Tractor Plant will probably be sold to Russian buyers as well.

The most frequently read material published by Belorusskie Novosti, a moderately opposition-minded news portal, was the article titled “Lukashenka pushes Europe to its knees?” and devoted to Europe’s initiatives to unfreeze relations with Belarus despite the lack of concessions from Minsk (http://naviny.by/rubrics/computer/2013/12/31/ic_articles_128_184115). The second-most read material was devoted to an unconfirmed rumor that hard currency personal accounts in Belarusian banks may be banned; and the third article was devoted to Lukashenka achieving his goal to make Suleiman Kerimov, a Russian tycoon, sell his shares of Uralkalii. Kerimov, whom Lukashenka accused of scheming against Belarus, indeed sold his shares to Mikhail Prokhorov, and there is a possibility that the joint Russian-Belarusian potash trader may now be reinstated.

Based on the national surveys of the Independent Institute for Socio-Economic and Political Studies (IISEPS), Lukashenka’s rating had been rising from its lowest level of 20.5 percent in September 2011 to 42.6 percent in September 2013. Yet, by December 2013, the rating had declined to 34.8 percent (http://www.iiseps.org/). The aforementioned percentages reflect the share of respondents who would vote for Lukashenka if the elections were “today.” So far, Lukashenka’s rating is closely following the dynamics of real personal income. For example, from January to October 2013, the per capita monthly income adjusted by inflation was 17 percent higher than during the same period of 2012. That after October 2013 the economic situation, as perceived by the average Belarusian, has not worsened and yet Lukashenka’s rating has lost almost eight points represents uncharted waters. It is yet unclear what, if anything, has occurred to the heretofore stable income-rating correlation.

This may be clarified in 2014. According to Sergei Nikolyuk, an IISEPS analyst, there is no realistic prospect of regime change in Belarus. First, the ratings of the opposition figures are minuscule. Second, unlike other countries that experienced “color revolutions,” there is no schism within the Belarusian political elite. And yet, a fairly modest growth of personal incomes (just 6 percent) is planned for 2014, a potentially troublesome year for Belarus’s government which has to deliver the repayment of Russian loans, face sluggish economic growth, and still maintain social benefits (http://naviny.by/rubrics/politic/2013/12/21/ic_articles_112_184017/). It remains to be seen if Minsk is able to overcome its economic problems and still retain a reasonably high level of public trust in the government.