Research (May-June 2011)

Pros and Cons of the Growth in Belarus’ Foreign Debt
Examining the issue of the growth in Belarus’ external debt, required to preserve relative economic stability, BISS asks the questions if it is worth propping up stability in the first place and what the cost of these efforts is. The payments on the debt, while now not as significant, will peak in 2013-2014 reaching $2.7 and 2.5 billion respectively. According to IMF forecasts, this would amount to 3.7-3.8% of Belarus’ GDP. This could prompt budget cuts of more than 10% on social programs, health, education and infrastructure. Given the current deficit it will pose a significant challenge for economic policy and will threaten long-term economic growth. In such circumstances, further growth of public external debt should be regarded as undesirable.

The bailouts from both the IMF and the Eurasian Economic Community will considerably soften the foreign currency crisis however loans themselves won’t address the underlining problems. The Fund, if it does provide a loan, will demand the commitment of Belarus’ administration to structural reforms. Clearly, launching reforms will be impossible without transformation in the regime. The implied political conditionality (release of political prisoners as a necessary condition to extend the loan) will also be in the loan conditions, although no one will articulate these terms openly. The government’s readiness for this is a question of trust for the creditors. The BISS analysts conclude it is geopolitics and not economical logic that is likely to drive the process.

The full version of this article in Russian, Belarusian and English appeared on the BISS website on June 6

Belarus’ Foreign Policy Index
The second issue of Belarus’ Foreign Policy Index, an analytical report by BISS assessing the key trends in international relations engaging Belarus, marks a significant reduction of foreign policy space and a growing trend of self-isolation. The reviewed period of April 1 through May 31, 2011 contains a number of important events that affected Belarus’ foreign policy: trails of the participants of the December 19 events, the terrorist explosion in a Minsk subway, the foreign currency and economic crisis, and the search for external funds. On the one hand, the findings presented in the report may indicate a strengthening of the repressive practices inside the country, and on the other, signal that in the near future the Belarusian foreign policy pendulum could swing in the opposite direction – to the West.

Compared to the foreign policy “wind rose” in the beginning of the year, one can notice that the formerly super-positive Russian vector has significantly shrivelled and is now exceeded by a negative European vector.

Meanwhile the vectors of China, the developing countries of Asia, Africa and Latin America and the newly added Ukrainian vector remain little affected. This situation does not allow for the tactics of balancing the Russian vector with European, and Belarus is therefore forced to agree to the format and content of bilateral relations set by Russia. The latter is pursuing the process of “dismantling” the authority of Lukashenka and the “Belarusian model” and attaching conditionality to the aid, and this trend is expected to continue. Condemnation of the human rights situation in Belarus by the Russian media became indicative in this regard.

As for Belarus’ relations with the EU, the escalation of the conflict continues while a search for potential ways out of the conflict is beginning to take place. Another trend is an intensification of the strategic uncertainty of Europe regarding Belarus: most of the EU statements and decisions seem to be made in the style of “a tooth for a tooth”. This can be partially explained by the developments in the Middle East and the Mediterranean that have distracted Europe’s attention.
The full version of Belarus’ Foreign Policy Index report in English, Belarusian and Russian is available on BISS website

Living in Credit: Old Approaches in New Situation
Alena Rybkina reflects on the response of the Belarusian authorities buffeted by the economic crisis. She notes that that there is no coherent position among various governmental bodies, which is only intensifying the panic among the population. Furthermore, the approach to replenish swiftly diminishing currency reserves remains the same – asking for loans instead of initiating structural reforms. The author calls “living in credit” the quintessential feature of the Belarusian economy. And now, having alienated external borrowers, Belarus needs to look for money from domestic sources – population, banks and businesses by imposing new regulations and deranging the earlier program on economic liberalization. For example, export businesses are forced to sell 30% of their foreign currency income to the state that sets the exchange rate. Banks are “offered” to participate in social programs on providing loans to rural areas. Moreover, according to the governmental decree repayments on loans guaranteed by state, mainly for the purchase of agricultural equipment (4.5 trillion rubles, or $1.4 billion according to the National Bank) are frozen from April 1, 2011 to December 31, 2012. This will hit state banks with new losses. The author observes, that the economic crisis expected to peak in fall-winter, is turning into a political crisis.

The full version of this article in Russian appeared on the Agency for Political Expertise/ BISS website on May 13, 2011

Loans in Portions for Privatisation in Portions
Talking about a much needed $3 billion bailout from the Russian-backed Eurasian Economic Community, Tatiana Manionak discusses the most probable “candidates” for sale in the result of privatization of state property – a condition with which the loan has been updated. While officials in Russia say that Belarus is free to decide what to sell, it is the assets that are of interest primarily to Russian monopolies and corporations that Belarus is forced to sell, as the country has locked the possibilities to cooperate with the West and the IMF.

The most likely list of assets includes a gas transportation company Beltransgaz, potash producer Belaruskali, oil refinery enterprises, producer of nitrogen compounds and fertilizers Azot, and Belarusian oil transit operators. Moreover, the previously announced prices of some assets are unlikely to remain the same. Thus in the case of Beltransgaz, $2.5 billion for 50% of stocks (the remaining 50% is already owned by Gazprom) is likely to be dropped. In May, Russia completed the construction of the first line of the North European gas pipeline and the second line will be completed in 2012, decreasing the volume of gas transit through Belarus. Retaining Belaruskali, the most liquid Belarusian asset, is going to be difficult following the merger of Russian potash producers initiated by the Kremlin, coupled with the situation of Russia’s programme of “pointed” loans.
The author concludes that Russia’s help is not going to come for free anymore. The loans will be provided in portions in exchange to the guaranteed sale or abatements of state assets.

The full version of this article in Russian appeared on the Agency for Political Expertise/ BISS website on May 23, 2011

Investigation Wide Open
Aleksei Medvetsky scrutinizes possible implications behind the leaks around the most high-profile case in Belarus in recent years – the April 11 bomb explosion in a Minsk subway station killing 14 people and wounding about 200. While capture of the perpetrators was unprecedentedly swift, the informational work was an unprecedented failure. The author asks how it is possible that a Russian website became the main channel of insider information on the investigation when the investigation was personally controlled by the president and when the authorities in Belarus exercise all power over the media. A poor level of coordination over the three agencies in charge of the
investigation – the Attorney General, KGB and Interior Ministry – could be named as one of the reasons. However an initial implication is that the state was not a victim of circumstance but purposely used the leaks to solve its own tasks.

First, the information leak concerning the suspect having an appearance of a person from the Caucasus was followed by a meeting on the work of the State Border Committee. Besides the issue of illegal migration, the president talked about “performance management” and one can only guess how to interpret this. Another piece of information leaked to the media was that the suspect had been fingerprinted just days before the April 11 terrorist act within mass fingerprinting of the male population following a 2008 bomb explosion. This might not have such straightforward implications, but it does raise serious questions of another kind. If fingerprinting of the suspect holds true, it could have been a probable motive for the crime as the perpetrator had only several days before his fingerprints would be processed.

The full version of this article in Russian appeared on the Agency for Political Expertise/ BISS website on May 10, 2011

Public Policy for Civic Activists
BISS presents a practical guide on public policy prepared by Iryna Vidanava within the European Commission project “Development of Social Dialogue on Socioeconomic and Political Alternatives: Strengthening the Capacity of CivilSociety in Belarus”. This is the first publication on the subject in Belarus. As the author writes ‘Modern theory and the practice of public policy may seem a far cry from the reality of today’s authoritarian Belarus. But even here, where political processes are distorted, and civil society has to fight not only for its rights, but also for survival, the state loses its monopoly in the sphere of public policy’. Referring to some examples from Belarus, such as 2007-2008 civic campaign against the construction of a nuclear power station, and noting their defensive nature for the most part, Vidanava’s book aims to supply Belarusian civil society activists with theoretical and practical skills to ensure that in future they are able to ‘fully and effectively engage in the process of democratization and reform’.

The publication covers the basic theory and practice of policy analysis and design, legitimization and implementation of public policy, focusing on the participation and the role of civil society in public policy process. As Vidanava points out, public policy has gone far beyond the concept of governmental policy and management. In democratic societies, governments are connected to citizens and non-profit organizations in the way that civil society not only demands but also offers their own solutions to existing problems, and governments not only inform and listen but respond and include citizens in decision-making process. The book looks in detail into the aims of civic participation in public policy, stakeholder analysis, and mechanisms of participation. Discussing the role of public-private partnership programs in the design and implementation of public policy, Vidanava notes in Belarus that they are still to emerge as the country ranks last in USAID’s NGO Sustainability Index for Central and Eastern Europe and Eurasia.

 A PDF-version of the handbook is available on BISS website