News & Analysis

Russia’s modest financial support for Belarus offers short-term lifeline, but little else

Alexander Lukashenko, now widely viewed as the illegitimate president of Belarus following a rigged election on August 9 that he almost certainly lost, has long insisted that only he can preserve the decades of economic stability that have in many ways been the backbone of his 26 years in office.

With the country’s economy having taken a serious hit as a result of the global downturn caused by Covid-19 and sporadic strikes at major industrial plants, as well as capital flight, he was on September 14 however forced to go cap in hand to Russia, which agreed to provide Belarus with a critical economic lifeline of 1.5 billion US dollars.

Russia also agreed to uphold its promises of security assistance for its neighbour, which will include military exercises “practically every month” for the next year.

Speaking after a meeting with Russia’s president, Vladimir Putin, in the Black Sea resort of Sochi, Mr Lukashenko said that “the economy is at the heart of everything”, betraying his concerns that the rapidly falling value of the Belarusian rouble may be a bigger threat to his position than the mass protests that have taken place since the August 9 election.

There was another protest on September 13, with more than 100,000 people on the streets of the capital, Minsk. For the first time since the protests began, water cannon were used against protesters. The country’s interior ministry said that 774 people had been detained.

The slogan for the protest, with Lukashenko’s meeting with Putin very much in mind, was: “We won’t let him sell the country”.

He appears to have little choice. The Belarusian rouble has lost more than 10 per cent of its value against the dollar since early August (26 per cent since the beginning of the year) with the country’s 4.3 billion US dollars in foreign currency reserves as of early September sufficient for less than a month and a half of imports.

Mr Putin’s financial support, on closer inspection, is modest. The 1.5 billion US dollars promised by Russia is not new money, but merely a cancellation (or a delay – details are sketchy) of 1.6 billion US dollars Belarus already owes. The deal also includes an unspecified amount of Russian investment in Belarus but this is unlikely to be forthcoming in the immediate future. It may also have strings attached.

“There can be little doubt that the Kremlin would be more than happy to offer further financial support to the struggling regime in exchange for a greater share of Belarus’s considerable state-owned economic assets,” says Vladislav Inozemtsev at the Atlantic Council.

According to the International Institute of Finance (IIF) if the current regime remains in power, Russia is expected to continue to roll over existing debt and may provide additional funding, thereby alleviating external financing stress. Nevertheless, pressure on Belarus’ already-low reserves would be significant, even if manageable over the near term.

Russia already has extensive economic interests in Belarus “and has frequently demonstrated an appetite for further acquisitions”, says Mr Inozemtsev. Since 2011, Russian energy giant Gazprom has owned the strategically important Belarusian gas pipelines used to transit Russian gas to Poland and Germany. Russia also owns a 42.5 per cent stake in Belarus’s giant Mozyr oil processing facility via Slavneft, which is currently controlled by Rosneft and Gazpromneft.

External financing from anywhere except the East looks impossible as long as Mr Lukashenko remains in office. Talks with the International Monetary Fund for 940 million US dollars in Covid-19 support have fallen through in the wake of the rigged election.

A peaceful transfer of power to Svetlana Tikhanovskaya, however, widely accepted as the winner of the presidential election but currently in exile in Lithuania, would attract inflows from international finance institutions and bilateral partners in the West, says the IIF, “while maintaining its strong relationship with Russia”.

Pavel Latushka, a former Belarusian culture minister and ambassador to France, Poland, and Spain, who is now a part of Mrs Tikhanovskaya’s coordination council hoping to negotiate a transfer of power, attempted to reassure Russia last week that its interests in Belarus would not be threatened by a new government.

Speaking from exile in Poland, he said that if Russia wants to protect its strategic interests in Belarus, it needs “to talk with those who will be in power tomorrow”.

On September 14 he appeared to suggest that it was doing just that, despite the very public meeting between the Russian and Belarusian presidents.

“The Kremlin has already made a decision and is moving to fulfill a careful plan to have Lukashenko removed,” he told the Associated Press.

Meanwhile, the United Nations Human Rights Council has agreed to an EU proposal hold an “urgent debate” on Belarus on September 18.

The European Union cited the steep deterioration of human rights in Belarus following the August 9 in its request for an urgent debate.

In a speech to the council, UN High Commissioner for Human Rights, Michele Bachelet validated these concerns. She said her office has been receiving alarming reports of ongoing violent repression of peaceful demonstrations, involving excessive use of force by law enforcement officials.

“Thousands of arrests, many of them apparently arbitrary, and hundreds of allegations of torture or ill-treatment, including against children, with some reports indicating sexual violence,” said Bachelet. “Recently, abductions by unidentified individuals of people associated with the opposition have also been reported…There has been limited evidence of any steps by the authorities to address these reports.”

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