Belarus in US Congress: Economic Interests or Concerns about Human Rights?
On July 17, 2015, Representative Steve Pearce of New Mexico proposed a bill imposing sanctions on JSC Belaruskali, one of the world’s largest potash miners.
Titled "Belarus Democracy and Sanctions Enforcement Act of 2015", the bill emphasises human rights violations in Belarus and warns that the October 2015 election is unlikely to be free.
The call for sanctions is coming at the time when the relations between Belarus and the USA have marginally improved in the light of the Ukrainian crisis.
The aim of US sanctions has always been to promote democracy and punish human rights violators in Belarus. Yet Pearce and many other supporters of sanctions in the US Congress seem to be more interested in trade protectionism than in promoting democracy in Belarus. Such uneasy coexistence of economic and humanitarian concerns risks undermining the credibility of the US commitment to human rights in Eastern Europe.
Who is Afraid of Belaruskali?
The recent surge in attention of a number of New Mexico’s congressmen to Belarus resulted from Belaruskali’s importance to the global potash market. New Mexico is a state where several potash miners operate, including Intrepid Potash and Intercontinental Potash Corporation. Contributions from potash companies pay for political campaigns of Republican and Democratic congressmen alike.
In June, two senators from New Mexico requested an investigation of “whether JSC Belaruskali is evading trade sanctions.” Democrats Tom Udall and Martin Heinrich wrote to the US Treasury that the Belarusian firm “threatens law-abiding U.S. potash companies.”
In March 2014, Belaruskali split from the state-owned petroleum and chemical conglomerate Belneftekhim, under US sanctions since 2007 for its ties to the Belarusian President. The split allowed it to start exporting potash to the US following a 7-year hiatus.
In March 2015, Belaruskali agreed to sell its potash to China for the first half of the year at a below market price. The contract disadvantages North America’s exporting cartel Canpotex, which had been holding out for higher prices.
The agreement also devalued the shares of Intrepid Potash, one of top campaign contributors for Representative Steve Pearce, who proposed the July 17 bill. According to the non-partisan Sunlight Foundation, Intrepid Potash also donated money to campaigns of Senators Tom Udall and Martin Heinrich, who requested an investigation against Belaruskali last month.
Motivated by Christian Activism?
Representative Steve Pearce’s approach to Belarus mixes economic considerations with missionary zeal. The Congressman travelled to Belarus in May 2015 to talk about God, freedom and democracy. Capitol Ministries, a DC-based evangelical group that “provides Bible studies, evangelism and discipleship to political leaders,” sponsored the trip.
Pearce "talked about how biblical concepts of truth, honesty, fairness, trust and hope—the underpinnings of the U.S. Constitution—can benefit the country that was once a part of the Soviet Union.” He also emphasised the importance of the country’s position between the West and the East. The congressman's move against Belaruskali, however, suggests that instrumentalises human rights rhetoric to protect the economic interests of his US constituents.
The religious tinge of US foreign policy goes back to the presidency of George Bush, Jr., who signed Belarus Democracy Act in 2004. A year earlier, Bush claimed that “liberty is both the plan of Heaven for humanity, and the best hope of progress here on earth.” Critical of human rights in Belarus, the Bush administration overlooked no less egregious abuses in oil-rich Azerbaijan.
Defending Human Rights
With some changes, Representative Christopher Smith, a Republican congressman from New Jersey, reintroduced Belarus Democracy Act in 2003. As a chairman of the House Foreign Affairs subcommittee on human rights, Smith also sponsored the subsequent reauthorisation acts.
Smith has been an uncompromising critic of Lukashenka and other human rights violators for a long time. In 2011, following a meeting with former Belarusian presidential candidate Ales Mikhalevich, the Representative went as far as to ask the Obama administration to seek the indictment of the Belarusian President by the International Criminal Court (ICC).
Such activism earned Smith the ire of China, Cuba, Russia, and Belarus. In 2013, he was denied a visa to travel to Moscow. In his rhetoric, Smith often brings up God-given rights; his conception of human rights was criticised for excluding gays.
Rep. Frank Pallone, a Democrat from New Jersey, has also maintained a long interest in Belarus’s politics. Pallone introduced a bill focused on Belarus as early as in 1996. The bill called on the US government to “press the Government of President Lukashenka to abide by the provisions of the Helsinki Accords and the Constitution of the Republic of Belarus and guarantee freedom of the press, allow for the flowering of Belarusan [sic] culture.”
A representative of the Belarusan-American Association (BAZA) told Belarus Digest that Pallone frequently “provides statements in conjunction with March 25 celebrations, at the specific request of his Belarusian-American constituents.” The association has interacted with Members of the U.S. Congress and their staffs to draw their attention to Belarusian politics since the 1950s.
Members of the organisation's DC Chapter noted two factors driving attention to Belarus in the US Congress: constituent interests and/or “a cause that is important to that particular Member of Congress.” Notably, interest in Belarus is bipartisan. The US Congress has passed Belarus Democracy Act and its subsequent reauthorisation acts unanimously.
US Congressmen also occasionally visit Minsk, meeting with both governmental officials and families of political prisoners. Such visits frequently end with renewed calls for sanctions. For example, Senator Richard Durbin, a Democrat from Illinois, returned from a trip to Minsk in 2011 to introduce a resolution calling for the expansion of sanctions.
Belarus and other countries criticised for their human rights violations often question US motives and accuse Washington of double standards. Belneftekhim has traditionally maintained that sanctions were an attempt at unfair competition.
Though genuine concern over human rights is behind many initiatives in the US Congress, economic interests do seem to feed the interest in sanctions, as the bill proposed by Pearce in July demonstrates. Economics may play an even greater role in determining which authoritarian states are able to avoid congressional scrutiny.
Because economic sanctions are bound to generate domestic winners and losers, congressional support for sanctions may never be motivated by concerns about human rights alone, even for such small economies as Belarus. In the long run, the use of human rights rhetoric in pursuit of other interests undermines the credibility of the US commitment to democracy and human rights.
Creeping Signs of the Approaching Crisis – Belarus Economy Digest
The first half of the year has shown clear evidence that the Belarusian economy needs better incentives to revive its industrial strengths.
In July the authorities announced their plans to provide financial assistance to several "giants" of industry. However, this decision has cast doubts over whether or not other taxpayers will ask the same from the state.
Also, this month the government carried on negotiations with the IMF and Eurasian Fund for Stabilisation and Development and are seeking to attract additional potential sources of loans. After their preliminary meetings all parties have decided to continue consultations showing striking unity on the necessity of economic reforms.
Economic Data: Spinning Down
Belarus’ GDP fell 3.3 per cent in first half of the year, which raises questions about the government’s official forecast growth rate of 0.7 per cent and fears that the country’s efforts to bring a halt to the nation's current economic turmoil by the end of August may not be enough.
The hardest hit were mostly exporters to the Russian market Read more
Belstat, the official state statistical body, released on 6 July its report on loss-making enterprises in Belarus for January-May 2015. Net losses for these enterprises hit around $0.8bn and more than doubled in comparison with the same period from last year. The hardest hit were mostly exporters to the Russian market, where shrinking demand was compounded by the further decline of the Russian ruble.
Yet in June, in comparison to May, industrial production rose by 3.8 per cent. Manufacturing seems to be in better shape, while the industrial activity of Russia continues to shrink by 4.8 per cent. If Russia’s economy does not start seeing a recovery in the near future, things will get nastier for its strategic partner as well.
The problem of wage arrears presents a particular concern. According to Belstat, by the beginning of July 555 enterprises (mostly from the agriculture, hunting and forestry sectors) not paid 95,200 of their employees. The overall amount of overdue debt has increased from May by a considerable 37 per cent.
The numbers indicate that economic reforms are taking much too long. But where to begin? So far the government has failed to show a proactive approach to improve the situation.
State Support: Saving the "Giants"
Belarus’ economy needs new ways to kick-start economic growth. However for the moment the government is relying mostly on increasing public borrowing. On 1 July, the President signed several decrees in order to support and stabilise the financial and economic situation at MTZ and Gomselmash (see figure 1) – two manufacturing "giants" dragged down by low sales.
Given this grim picture, Belarus has clearly decided to bear the burden. The Ministry of Finance provides the main chunk of state financial assistance by issuing $425.8m in foreign currency bonds. This currency injection is supposed to act like a shot of adrenalin for Gomselmash – a leading manufacturer of combine harvesters and agricultural machines.
The MTZ, producer of a wide-range of tractors, is the second party to receive the states help, it will receive currency bonds worth around $150m underwritten by the company’s assets. Operations with these bonds are exempt from taxes, which in reality is a tax credit for those who will buy the bonds.
This mechanism, supposedly, aims to hide the prohibition of direct financing of the economy using the printing of the domestic currency in order to restructure the bad debts of the loss-making industrial "giants". Apparently, in terms of the current regime of monetary targeting a broad money supply, this will lead to its expansion, which strictly contradicts the IMF rules.
In light of this, the only way to get around the IMF’s tough stance on this issue is the gradual closing of the pipeline of state support for all of the other collapsing manufacturers, meaning the remaining "giants" will be slowly edging their way towards extinction. However, in order to avoid the worst scenario imaginable from unfolding, the government may decide to utilise a policy by which it would create artificial demand for "machines" by distributing them to other companies in the country and paying for them out of the national budget.
In any case, all of this unavoidably leads to more money printing, and, thus, creates the necessary conditions to jump start the next round of the familiar inflation-devaluation cycle.
New Credit Negotiations: the Long Way to Make a Deal
The IMF turned down Belarus’ preliminary agenda of economic reform. The snail's pace progress on freeing up the economy and implementing reforms has cast doubts on a new credit line of $3.5bn from IMF. The IMF calls for something more radical than just "formation of a legal framework" meaning the actual liberalisation of prices, a reduction in subsidies, the cancellation of mandatory plans for enterprises, and really carrying out privatisation.
In July Belarus tried to sell new promises of structural reforms to the Eurasian Fund for Stabilisation and Development Read more
A deal with the IMF would help the country to pay for its imports and to refinance its previous debts. From the beginning of the year, Belarus’ foreign-exchange reserves have shrank by 9 per cent from $5,059m to $4,620m, less than what is needed to pay for one month and a half of imports. Without a deal debt payments during the year will eat up more than half of the country's international reserves and leave it with less than one month’s worth of imports.
In July Belarus also tried to reduce the tempo of their declining reserves by selling new promises of structural reforms to the Eurasian Fund for Stabilisation and Development, but they were also largely unsuccessful. However, the real obstacles of negotiating with the Fund have always been the political constraints implicit in working with it, particularly when it is taken into account that Russia holds the largest share of power in it.
Nevertheless, in order to not sink the economy of its strategic partner, the Russian authorities approved a loan of $760m for the repayment and servicing of Belarus’ debts to Russia and the Eurasian Fund for Stabilisation and Development.
Aleh Mazol, Belarusian Economic Research and Outreach Center (BEROC)
This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)