The Russian Shoppers Are Coming

Thousands of shoppers from Russia cross the Belarusian border every day to buy large quantities of cheap Belarusian goods. Shopping in Belarus became very attractive after the Belarusian rouble lost over a half of its value in 2011. 

Belarusian shops cannot satisfy the demand of Russian consumers and often run out of stock, leaving the locals without essential goods. Some shops have begn to introduce rationing and refuse to sell more than a certain quantity to satisfy as many people as possible. That results in quarrels and even clashes between local Belarusians and Russian shoppers.

Belarusian service of Radio Liberty reported last week that a quarrel between local and Russian buyers in the Mahiliou region turned into a real fight. Similar scenes were seen in the Vitsebsk region. Radio Liberty quoted a local resident who conveyed the general mood in his area: "The Russians are buying out everything. Perhaps it is good for the economy but it is certainly bad for us. It is frustrating that we cannot afford to buy what we want for our salaries".

Belarusian exporters sell even more products directly to Russia. Unlike Belarusian buyers, the Russians pay in hard currency, not in Belarusian roubles which are rapidly losing their value. The Russian shoppers bring in the badly needed hard currency but often leave Belarusians with empty shops and frustration.

In the 19th century, the Great Famine in Ireland caused millions of deaths.  While people were starving large quantities of food were shipped to Britain. Then the poor had no money to buy food and the government did not ban exports. Although there is no famine in Belarus, many people struggle to afford basic things and the government can neither limit Belarusian exports not make their people richer. 

Export restrictions would contradict the Customs Union arrangement with Russia and Kazakhstan, which came into effect in 2011. Without any significant oil reserves, Belarus does not fit very well in the union with oil exporting Kazakhstan and Russia. 

But over the last two decades Belarus acted as if it had its own oil because Russia was happy to supply it at very cheap prices. The Belarusian authorities then redistributed revenues from processing and reselling cheap oil to the Western markets. They had no incentive to modernize the Soviet-style economy. When Russia reduced its subsidies, the Lukashenka economic model collapsed and the real income of Belarusians fell sharply.  

What lured Lukashenka to join the Customs Union was the opportunity to get cheap oil and gas. Not as in the good old days but still better than the market prices. According to Vladimir Putin, the gas price formula for Belarus now stipulates the same profit margin as supplies to the European Union. But it will also include an "integration-related" coefficient, which will apparently depend on Lukashenka's conduct. Ukraine decided not to join the customs Union and according to Putin will continue to pay much higher gas prices. 

Lukashenka strikes deals with Russia not because of his ideological preferences. It is simpler than that - Russia is the only country in the region which is able and willing to waste billions to support its imaginary geopolitical goals. Like a group of bad boys who want to be noticed, many in the Russian elite want to be in charge in Belarus and they pay for it. Like their Belarusian counterparts, the Russian political elite is not accountable to the Russian taxpayer. That makes it easy to engage in buying loyalty of neighboring dictators rather than building roads or modernizing Russia's own economy. This is one of the ways the Russian elite is trying to heal the psychological trauma caused by the dissolution of the Soviet Union. 

But even with relatively cheap Russian oil and gas supplies, the Belarusian government can neither find a quick fix for its economic problems, nor is it capable of serious structural reforms. Nearly all senior officials in Minsk are in their late 50s and worked most of their lives in the Soviet Union. When Russian subsidies helped to keep they economy afloat they felt comfortable. Today they face a different economic reality and do not know how to deal with it. They are pathologically scared of market reforms and dislike the very idea of privatization. But they will have to do it because it looks that there will be no other way out. 

For a long time the Russian elite has been keen to engage in a different kind of shopping. Rather than buying Belarusian dairy products and electronics, they hope to get control of major state-owned assets. Belarus already committed to sell the rest of its transit pipeline to Gazprom to ensure cheap gas prices. More state enterprises are likely to follow. Similar to consumer goods the prices for these assets are likely to be very low. 

YK

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