Political Situation in Belarus

On January 21, 2004, Dr. Pavel Daneiko, Director of the Institute of Privatization and Management in Minsk and a member of the Belarussian opposition, spoke at the Carnegie Endowment on the political situation in Belarus. Daneiko focused on recent social, economic, and domestic policies of President Alexander Lukashenka, the role of Belarussian opposition forces, and the upcoming parliamentary elections.

The year 2003 was challenging for all aspects of Lukashenka’s regime. In the spring of that year Lukashenka’s approval rating dropped to 12 percent after sustaining an approximate approval rating of 40-45 percent for the last seven years. Several members in Lukashenka’s administration attempted to pressure him by attacking his network of firms that helped him economically. In the summer of 2003, KGB forces initiated arrests of all the directors of such firms, and Daneiko said that the final results of this action would be hard to predict.

Worrying about the fall in his rating but not willing to share power, Lukashenka tried to regain support by appealing to nationalists. Daneiko noted that Yeltsin managed to get reelected starting with an approval rating of only three percent because the Russian elite supported him. Lukashenka does not have such support; therefore, he started playing on feelings of national identity, delivering his speeches in Belarussian. Lukashenka went as far as to state that “Belarussians were the best Russians” who preserved the finest Slavic traditions. As a result of his tactics, the President’s rating went up to 25-30 percent by January 2004. Daneiko expects Lukashenka’s rating to be at least about 20 percent in the future due to a constant backing from “people with Soviet mentality who always would support a strong leader.”

Lukashenka’s recent appeal to nationalists became a challenge for the opposition. In the past, the opposition parties were united against the President’s desire to “sell Belarus to Russia.” Some Belarussian opposition leaders had worked with Russian democratic parties, notably the United Civic Party with the Union of Right Forces (SPS), hoping to change the regime in Belarus. However, the results of the latest Russian Duma elections scared some Belarus opposition leaders who were now more willing to support Lukashenka. Daneiko did not see an easy solution to this situation. He said that the upcoming parliamentary elections in Belarus would be a serious chance to test the system and opposition’s strength.

Traditionally Lukashenka had skillfully played different Russian constituencies against the Kremlin, notably, the communists in the Duma and regional governors. As a result of the elections, such opportunities had dried up. Lukashenka would be forced to face Putin one-on-one, which was what he wanted least of all.

Belarussian media names the United States and Russia as the two main enemies of Belarus. Lukashenka blocked all the signed agreements on the creation of the Union with Russia because such a union would limit his power. In particular, Lukashenka wanted to preserve his control of the energy sector, the sphere where most Belarussian capital is created, and this sector is considered the main source for financing political activity. Lukashenka believes a union with Russia would lead to foreign capital inflow into Belarus, especially affecting the oil and gas sector. Daneiko noted that privatization of oil and gas companies were not likely, especially after Voloshin, who pushed for privatization, left the Kremlin. Likewise, Lukashenka would never allow Belarus oil and gas businesses to be under Gazprom’s control.

Last year Lukashenka managed to sign an agreement with Ukraine on transfer, profit sharing, and pricing of Russian gas. He effectively manipulated different financial groups within the Russian government to achieve his goal. Lukashenka offered to buy almost 50 percent of the gas from the company Transnafta at a price of $46 per thousand cubic meters, almost twice the Russian domestic gas price. It was the most profitable contract Transnafta signed. Daneiko suggested that Transnafta was connected with the St. Petersburg team, and therefore part of the profits would go there. In effect, the private trading company Transnafta has taken even the business previously pursued by Itera. However for the first time since its independence, Belarus entered a new year without an agreement on gas supplies from Russia because Gazprom conditioned gas prices on privatization of Beltransgaz, the Belarussian state-run natural gas distributor. Meanwhile, Daneiko argued that Russian gas subsidies to Beltransgaz would continue.

Daneiko then turned to the economic performance in his country. He pointed out that official economic indicators for 2003 were healthy. On paper, the economy looked stable with a five percent GDP growth, reduction in poverty level and unemployment, increase in wages, and 25 percent export growth. The export growth was possible due to high sales of refined petroleum products. However the polls indicate that Belarussian people are rather pessimistic about their economic prospects. The general population is dissatisfied with the economic situation because, along with growing wages, they face inflation that limits their purchasing power. Daneiko argued that this discrepancy shows that Belarus remains a quasi-market economy, in which official statistics are not very accurate.

In Belarus, state and private enterprises with more than 500 employees must meet a state economic plan. As in the Soviet era, directors of state enterprises who fail to fulfill the plan are fired. The goal is to provide employment and complete the plan. Therefore, directors often “submit a correct number on paper” while in reality, an enterprise could be unprofitable, even accumulating debt.

The Institute of Privatization and Management, headed by Daneiko, studied the distribution of private businesses in Belarus. The studies concluded that the Western part of the country had the lowest number of private businesses, but at the same time the highest wages due to border trade with its neighbors. This trade would suffer as neighboring countries continue to enter the European Union.

As for the income increase, it was achieved due to forced bank loans which enterprises used to pay higher wages. The government set a goal to garner an average monthly salary of $350 by 2005. Under pressure from large enterprises, the Central Bank softened its policy by lowering the interest rates. In fact, Belarus had negative interest rates in December of 2003. If continued, such policy would lead to stronger pressure on ruble value against the dollar. Since June of 2003 the Central Bank has actively been selling currency to maintain the ruble rate. Daneiko stressed that the change in ruble rate remains the main threat to the Belarussian economy.

In 2001-2002, the opposition parties prepared a document on market economic reform and social change in Belarus, discussing the opportunities for donor support to implement the policies. Daneiko said many experts in his institute continue to work on the technical aspects of the program. In the fall of 2003, five opposition parties, including communist and nationalist parties, created the coalition “Five Plus.” This coalition developed a “United 100 plus 100 List” of candidates when for each running candidate there would be a substitute. In order to gain a maximum number of seats in the parliament, the coalition plans a strong public relations campaign with 200 volunteer groups in different regions of the country. Another goal is to secure transparency and monitoring of the elections. Daneiko hopes that “the elections will bring real changes in the system,” and he says the opposition “has an urge to succeed.”

Daneiko concluded by highlighting that Lukashenka, who “has fear of dialogue with the West due to his Soviet mentality,” had no concept for future economic and political development in Belarus.

Summary prepared by Kate Vlachtchenko, Junior Fellow with the Russian and Eurasian Program at the Carnegie Endowment.