The Economic Factor in Belarus
Because international investors have avoided Belarus and its authoritarian regime, the country has long suffered economic stagnation. But all the signs suggest that the rot is concentrated at the top, which implies that a change in political leadership could really change everything.
STOCKHOLM – Following a fraudulent election on August 9, Belarusian President Aleksandr Lukashenko’s authoritarian rule may soon come to an end. Massive protests are sweeping the country, and workers from many critical sectors going on strike. And if Lukashenko falls, Belarus’s prospects for establishing a normal market economy are surprisingly strong.
Under Lukashenko, Belarus has maintained a Soviet-style, state-dominated economy that has been stagnating since 2012. Lukashenko, in power since 1994, has concerned himself with nothing other than remaining in charge and enabling his family and a close circle of cronies to enrich themselves. The public sector comprises three-quarters of the economy, which is highly dependent on heavy industry and dominated by just a few big state-owned enterprises (SOEs). The five most important enterprises – the potash company Belaruskali, the two largest oil refineries, the Minsk Tractor Works (MTZ), and the Minsk Automobile Plant (MAZ) – tend to be subsidized and inefficient, and the economy overall is heavily regulated.
Belarus’s economy has remained highly dependent on Russia. Its low-quality industrial goods are not competitive in the West, so it relies on Russia to buy them, while selling the West potash and refined oil. Until recently, Russia was subsidizing the Belarusian economy by furnishing cheap energy worth some 10% of the latter’s GDP. But, with bilateral relations deteriorating in recent years, the Kremlin has gradually eliminated these subsidies in order to pressure Lukashenko’s regime.