Throughout his nearly thirty-year reign, Belarus’s contested ruler Alexander Lukashenko has said that state assets should not be given away. True, he hasn’t always abided by this rule himself: Russian state-owned gas giant Gazprom controls the country’s gas transportation system, and a quarter of the banking system is also in Russian hands.
 
Still, most Russian plans to expand into the Belarusian economy have been frustrated. Some thought Belarus’s involvement in Russia’s full-scale invasion of Ukraine and the subsequent exodus of Western investors would give Moscow another opportunity to snap up assets. But Belarus has played hardball.
 
At the end of October, Lukashenko signed a decree making it extremely difficult for so-called “unfriendly” Western countries to sell their Belarusian assets. The message was obvious: it’s better for you to continue operating in Belarus.
 
But there was also a less obvious—albeit just as important—message for the Russian business community. Following the attack on Ukraine in February 2022, Russian businesses expected to benefit as Western companies fled the Belarusian market. That was not, however, how events unfolded.
 
As early as summer 2022, Minsk decided to make it difficult for Western owners to dispose of stakes in Belarusian companies. That can now only happen after a long process of negotiation with multiple agencies. The list of companies subject to those restrictions runs to some 1,800 names (between 25 and 30 percent of all Belarusian firms with Western capital). The Russian businesses had to limit their appetite to the smaller firms that were not listed.
 
The pickings were even slimmer, because despite its role as a staging ground for the invasion of Ukraine, Belarus has not become as toxic as Russia for Western business. An estimated 20 percent of Western companies have exited the Russian market entirely since the start of the war, while in Belarus that figure is no more than 5 percent. Companies like Coca-Cola, the fast food corporation Yum! Brands, and brewer Carlsberg have left Russia, but remain in Belarus.
 
The foreign companies on Belarus’s list have a choice: sit tight or sell and take a financial hit. The vast majority chose the former. In the year since the list was drawn up, just 1.5 percent of the companies on it have formally applied to liquidate their assets.
 
The reason is pragmatism. Principles are all well and good, but business is booming in Belarus as a result of increased Russian defense orders, joint Belarusian-Russian import substitution projects, and the replacement of Western software.    
 
It’s true that some Western companies have formally separated their Belarusian assets from the rest of their business. But there is no public information about deals involving the Belarusian assets, and firms continue to operate as before.
 
The Lithuanian timber company VMG, for example, set up a factory in Belarus in the mid-2010s with money from the European Bank for Reconstruction and Development to process orders from the furniture retailer IKEA. After IKEA’s exit from Russia following the full-scale invasion of Ukraine, VMG changed its name in Belarus to Novus. Not only has Novus begun selling furniture to Russian clients, but it’s planning—in a consortium with other former IKEA contractors in Belarus—to take IKEA’s place on the Russian market. That doesn’t violate Western sanctions, and VMG’s reputation does not appear to have suffered.
 
Some Western companies did sell their assets and leave the Belarusian market—and Russian business has been the biggest buyer. According to experts, Russians have taken part in at least 70 percent of those deals, including the acquisition of the local assets of French energy management firm Schneider Electric, British American Tobacco, and fashion retailer Global Fashion Group.
 
In total, Russian companies have gained control of about two dozen businesses formerly owned by “unfriendly” Western investors in Belarus.
 
Russian businesses have also snapped up the assets of Belarusian owners who sold up in the wake of a crackdown in 2020 sparked by huge opposition demonstrations following presidential elections tarred by widespread fraud. These assets include video game company Wargaming Group’s Russian and Belarusian assets, as well as the Belarusian subsidiary of mobile game firm Playrix. Many of the dozens of companies acquired in this way were market leaders in their field.
 
Still, the number of Belarusian assets obtained by Russian companies would have been much higher without the decree making it harder for Western investors to sell. It doesn’t just make it difficult to get permission to sell off assets, it also means foreign owners are required to pay the Belarusian government at least 25 percent of the value of the assets sold.
 
Minsk has also intervened to block Russian investors. The story of McDonald’s illustrates how the Belarusian authorities have sought to curtail the influx of Russian capital. The local licensee who acquired McDonald’s in Russia (rebranded after the full-scale invasion as “Tasty and That’s It”) wanted to do the same with Belarus’s eateries. But he was blocked at the highest level because Belarus did not want to see a Russian takeover. As a result, McDonald’s in Belarus was renamed Mak.by, and remains independent.
 
Russia, for its part, has not been in a hurry to help Belarusian businesses get hold of the assets of its own departing Western investors either. The Belarusian authorities have never hidden their interest in the Russian assets of carmaker Volvo, for example, but they were acquired in September by the Russian banker Igor Kim.
 
Despite its international isolation, Minsk does not intend to allow the uncontrolled Russian acquisition of Belarusian assets. The first in line to get their hands on companies up for sale will be the Belarusian state, or loyal tycoons and businesses. No one else should expect any favors.