By Anezka Ferreira

Often referred to as the last remaining dictatorship in the heart of Europe, Aleksandr Lukashenko’s Belarus has resurfaced as the focus of international affairs after his regime rigged yet another election this month and brutally suppressed peaceful protests, arresting almost 7,000 people.  Battered by his mishandling of the pandemic while clinging to power amidst mass protests, Mr. Lukashenko seems like a relic of an era the world has long forgotten.

Mr. Lukashenko first rose to prominence in the early 1990s, when he took the floor of the Belarus legislature in December 1993 to thunder against “crooks,” calling Belarusians “hostages of a monstrous, immoral and unprincipled system that manipulates and deceives the people.” Thus, he was transformed overnight into the country’s savior, becoming the first elected president. In 26 years as president, he turned Belarus into a strategically important buffer between Russia and NATO-member states like Poland. However, he has failed to cultivate popular support in recent years, letting it wane as the Belarusian economy has limped from crisis to crisis.

The system Mr. Lukashenko has created is centered around himself, where all decisions and power flow from him. The Soviet-style economy is almost entirely controlled by him and his close circle, while his government is known to harass, jail, and even torture dissidents. Faced with mounting opposition and international criticism over the election, especially from the European Union and the United States, Mr. Lukashenko finds himself in a precarious position.

In such a position, Mr. Lukashenko has turned to Moscow for help, but the relationship between the two states has never been smooth sailing. Tied to Belarus under an alliance agreement that highlights the two counties’ deep cultural ties, Mr. Putin has reluctantly agreed to help Lukashenko by setting up a police reserve force. However, it clearly stated that the force would not go into Belarus unless “extremist elements using political slogans as cover cross a certain boundary and start armed robbery, setting fire to cars, houses, banks, try to seize government buildings and so forth.”

So far, Western involvement has been minimal; the failure to act swiftly in the face of brutal repression elucidates a decline in Western influence. The failing coordination between London, Paris, Berlin, and Washington has allowed Minsk to get away with several brutalities. Although sanctions have been imposed, no concrete action has been taken against Lukashenko, who openly abuses human rights. Moreover, Russia’s involvement forces the West to tread carefully where Belarus is concerned.

Belarus’ problems go beyond political issues. The previously stagnating economy has been impacted by the political conditions which are bound to precipitate a greater economic crisis. As the economy took a nosedive, so did Mr. Lukashenko’s untouchable position.  While former Soviet satellite states started to transition to a market economy, Lukashenko remained unenthusiastic about such reform.  Under his rule, Belarus has maintained a controlled economy where the public sector is dependent on heavy industry and dominated by state-owned enterprises (SOEs). The economy relies on Russia, as its low-quality industrial goods are not competitive in the West.

The further deterioration of the economy due to coronavirus has frustrated the people. After the election, the price of Belarusian Eurobonds fell, driving yields to 8-9%, a level that Belarus cannot afford. Fed up with the systems, workers in large state-owned enterprises, traditionally the corner-stone of Lukashenko’s socio-economic model, have gone on strike. “People are tired of lies, of not having freedom of speech,” says 41 year old electricity worker, Aleksandr. The workers are joined by professionals across industries, state officials, and journalists who are hoping to achieve a better economy in the long run.  

Moreover, Belarusians flocked to banks to withdraw their rouble deposits and convert them to other currencies, doubling the demand for currency exchange and forcing the national bank to spend its foreign reserves to meet it. Despite this, the ruble depreciated by 9%.  Furthermore, the IT sector- the jewel in the cumbersome crown of the economy- has been threatening to move operations elsewhere. This is not an empty threat as about 12 companies are packing their bags, 59 have already moved their staff, and about 112 are reconsidering their options.  IT companies like Wargaming and EPAM are offering a relocation option to their employees, and Russian tech giant Yandex has evacuated some of its staff out of Belarus. While the sector will not disappear overnight, it will undoubtedly stagnate, and Belarus is under threat of losing its image as an IT hub if things do not change.

The country is on the verge of economic breakdown. The economy is crying out for liberalisation and privatisation. Once the most prosperous and developed state of the post-soviet empire, Belarus is characterised by highly educated people and a well-developed industrial and agricultural base. The country’s assets, such as its excellent educational system, substantial software industry, and functioning central bank, provide a robust framework for liberalising the economy. Thus, unlike most post-soviet states, corruption complaints are limited to Lukashenko’s circle, which simplifies the process, and under new leadership, it should be able to attract international funding to maintain macroeconomic stability. 

Another possible route would be a closer economic union with Russia. Although a far-fetched possibility, it is still an option worth considering, and one Moscow would likely exploit. Lukashenko signed off on a Union State deal with Russia in 1999 that would extend and deepen the current Eurasia Economic Union (EEU) partnership by creating a “Roublezone” that mirrors the Eurozone: open borders with totally free movement of labor, capital, and goods as well as a common currency “from Brest to Vladivostok,” as Lukashenko said last week.  In exchange for this union, Moscow would gain oversight and control of these transfers, thereby deepening its geostrategic footprint.

The integration would certainly provide a more robust currency and better macroeconomic management. However, it remains unclear how the West would react to such a union. Even if a well-planned roublezone is set up, the Belarusian economy will suffer in the short term. EU sanction targeting individuals will ensure reshuffling by investors, and if Russian buyers are on the sanction list, it further complicates the situation. Deeper integration with the East would make Belarus less attractive as a gateway to the Russian markets for EU economies, which is an inevitable outcome of the trade-off between institutional sovereignty and an economic union. Lastly, there are considerable risks as structural weaknesses plague the Russian economy. 

Hence, as it floats listlessly on the periphery of a Roublezone that is unlikely to be underpinned by a fully-fledged political union, Belarus may find itself drifting away from Russia in the long term. If Lukashenko is left in power, Moscow will lose the goodwill of the strongly pro-Russian public, planting the seeds for instability further down the line. Furthermore, the opposition is unlikely to vanish, even if Lukashenko has its leaders arrested. The protests have permanently undermined Lukashenko’s authority, eroding it to a final line of defense provided by the security forces and Moscow.

During an interview, Veronika Tsepkalo stated that “We just want to change our country and have the right to be independent. We don’t want to be part of Russia. We don’t want to be or are ready to be, part of the European Union. So, we just want to stay independent”. Thus, Belarus’ current crisis goes beyond the confines of a geopolitical threat.  The economic crisis which is unfolding currently is only the beginning of Belarus’ economic woes. While not as evident as the political crisis, these conditions will result in long-term economic stagnation, which must be resolved.  However, while discussing the failures of Lukashenko’s regime, it must be not be forgotten that the protests are about the people and freedom from all oppression. It is not a battle between the West and Russia; it is not about NATO expanding but about freedom from repression and ensuring justice.

The opinions expressed in this article are the author’s own, and may not represent the views of The St Andrews Economist.