The outgoing year of 2012 has left a contradictory record in the modern history of Belarus.

It has seen numerous events that came as a real shock for Belarusians and foreign observers – primarily in the economy and politics. At the same time, 2012 gave the nation several moments of pride and satisfaction. However, with the exception of sport victories abroad, positive events of the year came as a mixed bag. 

Below is a list of the top 5 negative and top 5 positive events that happened in the Belarusian economy and society in 2012. Belarus Digest reported about most of them throughout the year. Here is a retrospective glimpse at them.

On the Negative Side

1. Unprecedented growth of solvents schemes

The Know-How of the Year award undoubtedly goes to the solvents exporting scheme that the Belarusian government exploited with great enthusiasm until the Kremlin stopped in August. The authorities in Minsk and their partners in Russian business circles found a loophole in the legislation of the Customs Union of Belarus, Kazakhstan and Russia.

They disguised oil products as solvents and exported them in large quantities to the EU, predominantly to the Netherlands and Latvia. This way Belarus avoided paying export tariffs on oil products back to the Russian budget, because the Customs Union’s laws do not classify solvents as oil products and do not establish any export tariff on them.

This became a tricky path to economic growth for Belarus. The country saved about $2bn, which significantly helped to solve the problem of the trade balance deficit and eased pressures on the national currency. However, the easy money which came from exporting solvents took the issue of economic reforms off the government’s agenda. Solvents became a sort of alcohol that obscured the Belarusian authorities’ consciousness. And the hangover might be extremely painful.

2. Shocking nationalisation of Spartak and Kommunarka chocolate factories

The Most Shocking Event of 2012 happened in October when Alexander Lukashenka nationalised two leading chocolate producers in the country, Spartak and Kommunarka. He claimed that the owners and managers of the factories duped the state and all Belarusians by engaging in criminal production and export schemes. In Lukashenka’s own words, he had to restore justice and defend the interests of the people.

The nationalisation got extensive coverage in the international media and significantly damaged the investment climate in Belarus. No surprise that the ambitions investment forum that took place in Minsk a month later did not result in any investment projects despite the government’s high expectations.

3. Introduction of a new form of serfdom

The Madness of the Year prize can be awarded to Presidential Decree No.9, signed in early December. The decree essentially legalised a new form of serfdom in Belarus. It tied workers to their workplaces. Now they can only quit their current jobs with the permission of their boss. Otherwise, they will have to pay the state or be subjected to forced labour. At the moment this affects fewer than 20,000 employees. But many fear that the decree might well become a model imposed across the whole economy later.

No doubt the decree violates the rights of employees, which Belarusian and international labour unions quickly pointed out. But Lukashenka thinks that this is the only remaining option to make state-owned wood-processing factories modernise themselves. In fact, this is rather a sign of the Belarusian government’s growing dysfunctionality.

4. No lessons learned: salaries grew fast again

The obvious favourite for winning the Worst Student nomination is the Belarusian government for their failure to learn the major lessons from the 2011 economic crisis. Or to be more precise, for the failure to put into practice what they learned.

In the first half of 2012, Lukashenka and other top officials kept reminding the public that salaries in the country should no longer grow faster than the labour productivity indicator. They rightly concluded that the administrative increase of salaries in 2010 had been one of the factors that led to the macroeconomic collapse of 2011.

Nonetheless, in practice the government became more concerned about bribing the electorate before the parliamentary election in September. Raising salaries is a typical way of doing this. As a result, real wage growth surpassed the corresponding dynamics of labour productivity. In January-October 2012, according to the Belarusian Statistics Agency, the former grew by 18.1 per cent and the latter – by only 4.3 per cent.

5. Prompt executions of convicted terrorists that raised suspicions

The Suspicion of the Year prize should be awarded for the executions of Dzmitry Kanavalau and Uladzislau Kavaliou, whom the Supreme Court sentenced to death for organising the terrorist act in theMinsk metro in April 2011. The trial itself caused hot debates both domestically and internationally. Many observers claimed there were numerous procedural violations by the court and on those grounds questioned its decision. Others approved of the harsh sentence.

But the very prompt executions of the convicts looked suspicious in the eyes of all. Opinion polls conducted later revealed a growing number of Belarusians who oppose death penalty and who see the government’s actions as unjust. The executions also intensified Belarus’s conflict with the EU.

On the Positive Side

1. Macroeconomic stabilisation

Very few economists believed that the Belarusian authorities would be able to stabilise the macroeconomic situation after the crisis of 2011. But the government did manage to provide some fragile stabilisation.

It is, of course, difficult to talk about proper stabilisation when inflation reached almost 22 per cent. But compared to the 108.7 per cent a year before, this looks like an achievement. The same can be said of the national currency. After the three-fold devaluation in 2011, in 2012 the Belarusian rouble appeared more reliable.

However, as said above, the fragile stabilisation has to do not with any prudent reforms but rather with factors like the solvents exporting schemes. And this leaves no grounds for future optimism. In any case, the government gets the Stabilisation award.

2. Improved business climate in small and medium-sized towns and rural areas

The Best Piece of Legislation prize goes to Decree No.6 that Lukashenka signed in May. It became one of the most advanced legislative decisions that the incumbent has ever made. Essentially, the decree established an enormous special economic zone that is spread over half of Belarus’s territory.

Unfortunately, this is also a “half-happy event”. In the background of terrible implementation practices and barbarian acts like the nationalisation of Spartak and Kommunarka, Decree No.6 can hardly make a real difference.

3. Proclaimed administrative reform

A good candidate for the Hope of the Year award is the administrative reform that Lukashenka proclaimed in October. After long deliberations he appointed a commission to think about how to reduce government bureaucracy by 25-30 per cent and draft reforms of the government apparatus.

There is very little probability that such a reform will ever take place and be successful. Lukashenka will inevitably face strong resistance from his “power vertical”. Moreover, it is highly doubtful that the man who is constantly expanding state powers will ever be able to cut his own red tape. But the idea of administrative reform certainly points in the right direction.

4. Historical football victory

The Dream Come True award goes to the FC BATE Borisov. Its performance in the 2012 football Champions League made the whole world talk about Belarus. On 2 October the club from a medium-sized town near Minsk defeated the legendary Bayern Munich. This was the best achievement of any Belarusian football club since the country gained independence.

BATE Borisov brought pride and happiness to Belarus. It was one of those few occasions when the country featured in international news without its notorious tags of “dictatorship”, “economic crisis” or “diplomatic rows”.

5. Our No.1 in the world

Finally, the Achievement of the Year award goes to Belarus’s major sports star, Victoria Azarenka. For the first time ever a Belarusian tennis player climbed to the very top of the world tennis rankings. This happened in January after Victoria defeated Maria Sharapova (whose parents also come from Belarus) at the Australian Open.

Victoria did not win any other Grand Slam tournament in 2012. But she got close on a number of occasions. She also took a bronze medal in the individual tournament at the Olympic Games in London and won gold together with Max Mirny in the Olympic’s mixed doubles. As a result, Azarenka remained No.1.

Let us hope that the 2013 will bring significant positive events not only achieved by Belarusians abroad, but also at home.