Lukashenko’s Last Stand, Part 1: the rise and fall of post-Soviet Belarus7 min read

 In Analysis, Belarus, Eastern Europe, Politics

Lukashenko’s Belarus was long considered a success story in the post-Soviet world. In the 2000s it had some of the fastest GDP growth in the world. Belarus had the lowest unemployment rate among all the countries of the former Eastern Bloc, the lowest level of poverty in the region, one of the best public health services, the best road infrastructure, and no foreign debt. In 2003 it became the third country in the region whose GDP returned to its 1990 level (after Uzbekistan and Estonia). Over the next five years, its economy had grown by another 60%. During the financial crisis of 2009, Belarus remained the only post-Soviet country whose economy didn’t shrink. These outstanding results made scholars talk about Lukashenko’s Belarus as the post-Soviet economic miracle. But what were the foundations of that miracle?

After Aleksandr Lukashenko was elected the President of Belarus in 1994, he immediately rolled back market reforms and privatisation and reintroduced a Soviet-style planned economy. His reforms implied, among other things, the preservation of state ownership of overscaled and inefficient industry and agriculture. This helped to maintain a low unemployment rate but at the same time required constant state subsidies to keep these sectors afloat.

Lukashenko’s enormous popularity over the years can be largely explained by the fact that he managed to find the source of these subsidies – Russia. Starting from the mid-90s, Lukashenko has been constantly offering his friendship to the Kremlin in exchange for tangible economic benefits. That policy became popularly known as “oil and gas in return for kisses”.

Thanks to this policy, Belarus enjoyed heavily discounted Russian energy, as well as unlimited access to the unlimited Russian market. One of the main sources of Belarus’ prosperity was Russia’s cheap oil, which Belarus processed at its refineries and then resold at market prices to Europe, keeping the margin. This simple trick brought tens of billions of dollars to the Belarusian economy. In the 2000s, petrochemicals amounted to over 30% of the country’s export despite the fact that Belarus barely has any oil deposits.

Belarus’ economic growth in the 2000s depended heavily on Russian oil and gas subsidies. Image source

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 occur 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 properly recover, Belarus has immersed in stagnation which lasts till this day. The country’s GDP has remained largely unchanged since 2010. The real wages of 2020 have dropped to just 70% of the 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 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.

This graph charts Lukashenko’s approval ratings from 2005 to 2016. The blue line indicates “readiness to vote for A. Lukashenko in presidential elections” and the orange line indicates “confidence in the President of Belarus”. Independent surveys have been banned in Belarus since 2016. Image source

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 were 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 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 thousand 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 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.

Effectively, Belarus has ended up in a deadlock. The old foundations of its economy are long gone but no new formula has been found to replace them. The attempts of the last five years to improve relations with the West returned almost nothing as Lukashenko still refuses to make any democratic reforms. For many years, Belarusian authorities have been cherishing hopes that China could replace Russia as a key partner and donor, but Beijing hasn’t shown much interest. Basically, Belarus’ only visible achievement from the past ten years is increasing debt.

This graph illustrates the public debt of Belarus from 2000 to 2019. The purple lines indicate public debt as reported by the government and the orange lines indicate public debt as determined using the expanded methodology of the International Monetary Fund. Public debt skyrocketed in the 2010s as Russia adjusted its economic relationship with Belarus. Image source

At the same time, all available surveys show that the absolute majority of Belarusians want market reforms. So are Lukashenko’s ministers, whom he openly accuses of being ‘marketeers’ and ‘crypto-liberals’. However, all liberalisation and modernisation attempts are being blocked by Lukashenko, who insists that the key to recovery is more discipline and a wartime mobilisation. Because of all this, Lukashenko’s popularity in the last four years has been oscillating around 20-30%. Not much, but enough if you control the Election Committee and have no real rivals.

But then came the coronavirus. Lukashenko not just completely disregarded it, he accused victims of being not healthy enough or eating cheap low-quality food. He advised people to simply work more, play ice hockey, and drink vodka. The authorities openly ridiculed people for wearing face masks or taking other precautionary measures. It was not the state but ordinary people who were collecting money and providing struggling medics with necessary equipment. The state said that there is no virus, just a ‘psychosis’.

For many people, it is reminiscent of the way the Soviet authorities treated the Chernobyl disaster, Belarus’ national trauma (Belarus is the worst-affected country by the disaster with more than 20% of its territory still contaminated). With more than 60 thousand COVID-19 cases, Belarus has one of the worst figures per capita in the world. The last remaining part of the social contract between Belarusians and Lukashenko – limited freedoms in exchange for security – has been irreparably broken.

The featured image for this article is adapted from a photo by Sergey Gapon for the Associated Press.

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