Sanctions will not drive Belarus into Putin’s arms

By Jelle Baartmans

When Alexander Lukashenko was declared President of Belarus by the Central Election Commission in August 2020 after elections that were far from free and fair, many European countries did not recognize the election results and therefore do not recognize Lukashenko as President of Belarus. Before and after the elections, Belarusians took to the street to protest the imprisonment of opposition candidates Sergei Tikhanovsky and Viktar Babaryka (before) and the falsified results (after). Lukashenko’s regime brutally cracked down on the protests.

From personal to economic sanctions

After the elections, the European Union has slowly but steadily tried to increase pressure on the Belarusian regime via sanctions. The first sanctions were introduced in October 2020, when restrictive measures were imposed against 44 individuals identified as responsible for political repression. These personal sanctions include a travel ban and an asset freeze. The list of individuals was later expanded and today includes 166 people (including Lukashenko), as well as 14 entities. In July 2021, the first economic sanctions were imposed on Belarus as a response to the forced landing of a Ryanair flight in Minsk and the subsequent detention of Roman Protasevich and Sofia Sapega in May 2021.

The economic sanctions against Belarus prohibit the sale to anyone in Belarus of “equipment, technology or software intended primarily for use in the monitoring or interception of the internet and of telephone communications”. Trade restrictions have been imposed for the petroleum, potash and tobacco sectors. On the financial side, Belarus has lost access to EU capital markets and Europeans are prohibited from selling insurance to the Belarusian public sector. The European Investment Bank has frozen its existing agreements with Belarus and, accordingly, will not provide any more payments. Apart from the EU, sanctions have been imposed on Belarus by other European countries (including Ukraine, Switzerland and the United Kingdom), as well as Canada and the United States. What is the effect of these sanctions? Do they work? Do they threaten the survival of the Lukashenko regime? Or do they push Belarus further into the hands of the Kremlin?

Limited impact

There is no doubt that the economic sanctions will negatively impact the Belarusian economy—and consequentially the state, which controls 70% of the economy. The Vienna Institute for International Economic Studies observes that in 2020 petroleum exports to the EU and UK represented 50% of total Belarusian petroleum exports, and 6.4% of total export of goods. Potash plays a significantly smaller but still substantial role (12% of potash exports go to the EU, UK, Canada and USA, 1% of total export of goods). Both petroleum and potash are sectors controlled by the state, so, as a result of sanctions, lost export markets will hurt the state budget. Petroleum is a particularly profitable business for Belarus: it imports crude oil from Russia for artificially low prices (a deal between the two countries) and exports it as refined oil at market prices.

However, there are caveats. The restrictions on potash trade are less harsh than they appear at first sight. The EU and UK have distinguished between types of potash, and the type most exported to Europe is currently not included in the sanctions. In fact, employees of the main potash producer Belaruskali have complained about the EU and UK’s omission of some types of potash. Meanwhile, the US has sanctioned Belaruskali, the potash producer, but not BPC, the exporter of Belaruskali-produced potash across the Atlantic, making trade with BPC a bit of a gray area. Another potential problem with the sanctions’ impact is that it is only temporary. It is possible that over time Belarus finds new destinations for its petroleum and potash exports. In the case of potash, one could even imagine Belaruskali ‘swapping’ export markets with Uralkali, Russia’s biggest potash producer (and unaffected by sanctions). All in all, the sanctions currently in place are expected to have a fairly limited impact on the Belarusian economy.

Into the arms of Putin?

Some media have suggested that Western sanctions against Belarus have definitively alienated Lukashenko from Europe and driven Belarus into the arms of Russian President Vladimir Putin; while Lukashenko used to balance between east and west, he has now become fully dependent on Russia for financial support, as Belarus has lost access to EU capital markets. Considering there was no alternative to imposing sanctions on Belarus (doing nothing was not an option after the past year’s repression), Belarus’s previous act of balancing between Russia and the EU was not much more than a facade. In reality, Belarus has long been dependent on Russia to the extent that its financial and economic stability depend on it. Almost half of Belarus’s total external debt (48%) is owed to Russia, and Russia keeps loaning money to its neighbor. Russia has never shied away from acting as an ATM for its Near Abroad: Abkhazia, South Ossetia, Transnistria, Donbass and Crimea can testify. Subsidization schemes such as Belarus’s import of Russian crude oil below market prices and subsequent export at world market prices are classic examples of Russian economic ‘aid’ for like-minded regimes. Natural gas discounts are another example. In conclusion: Lukashenko’s regime has always been and always will be dependent on Russia for its survival. Sanctions will not drive Belarus into Putin’s arms: it was already there.

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