Humanism or Political Calculation: Why Did Lukashenka Pardon Political Prisoners?
On 22 August, the state-run news agency Belta reported that “based on the principle of humanism” the President of Belarus decided to pardon and release from prison former presidential candidate Mikalaj Statkevich and five other opposition figures.
Lukashenka is trying to enter the same river twice – to repeat the manoeuvres of 2008-2010. It has worked so far: the European Union and the United States has already praised Lukashenka for pardoning the opposition activists.
The past 21 years has shown that the release of political prisoners has very little if anything to do with the principle of humanism and will not lead to significant changes in Belarus. The Belarusian president hopes to secure financial support for the struggling Belarusian economy and become more legitimate in the West and at home.
Principle of Humanism: Is it really?
Lukashenka, often labelled in the West as the last dictator of Europe, can hardly be characterised as a politician driven by the principles of humanism. For the past 21 years while in power, the country has consistently ranked low on all democracy scales including Freedom House, and Polity IV Individual Country Regime Trends.
On the suggested three part categorization of a widely used data series on the level of democracy The Polity IV Project scores of "autocracies", "anocracies", and "democracies", Belarus has consistently ranked as an autocracy since Lukashenka came to power. One can notice similar trends in Freedom House and The Index of Economic Freedom scores.
An Internet resource palitviazni.info reports the total of 186 political prisoners in Belarus since the incumbent president came to power. According to the website, Belarus had political prisoners every year for the past 20 years (see the graph).
The release of political prisoners aims to change the focus from the absence of competition in the upcoming presidential election and gain western legitimation of Lukashenka. But political prisoners are unlikely to become history in Belarus.
Just recently on 11 August, Belarusian authorities arrested three graffiti painters, Maksim Pyakarski, Vadzim Zharomski, and Viachaslau Kasinerau for the painted slogan ‘Belarus must be Belarusian’ painted on a billboard that used to have images of policemen. The number of political prisoners may rise again in case of protests against the results of the upcoming presidential election this October.
Economic Crisis and Need for Money
Belarus has experienced a significant currency depreciation since the beginning of 2015. The national currency has lost 9.7 per cent of its value since 1 August and 40.6 per cent since 1 January 2015 (see the graph).
In July, Belarus asked the Russian government for a loan of $3 billion, but only received a tranche of $760 million. Since the Russian government lends in Russian rubles, due to the depreciation of the Russian ruble Belarus in reality only received about $720 million.
While the loan kept the Belarusian ruble afloat even if shortly, in 2015 Belarus has to make foreign debt payments of over $4 billion. The Belarusian ruble has been plunging every day within the past week. To avoid this financial turmoil Belarus needs more loans.
After debt repayments to the IMF and redemption of Eurobonds on 31 March 2015 the Russian government became the main creditor of Belarus in the structure of its external debt. Therefore, obtaining funding from the West, matters also in terms of economic security for diversification of external debt.
Hopes for IMF Credit
Besides hoping for help from its Eastern neighbour, the Belarusian authorities are counting on a new loan from the IMF. From a political point of view, the release of political prisoners increases the chances for the Belarusian government to receive such a loan.
Belarus received the last IMF loan immediately after refusing to recognise the independence of Abkhazia and South Ossetia following a military conflict between Russia and Georgia in August 2008. In an interview with Charter97, Statkevich commented that he suspected his release after learning that Lukashenka was getting short of money and finding out that none of the opposition candidates managed to collect 100 thousand signatures.
From an economic point of view, the IMF has a reason to start new talks, as this year Belarus completed principal payments on the previous IMF loan extended in 2009-2010. According to the official news agency Belta “Now Belarus has fully discharged its obligation to the IMF”.
From 8 to 15 July IMF experts worked in Belarus. They met with the Belarusian authorities. IMF representatives agreed with the Belarusian authorities to continue the dialogue "to ensure the preparation of the program.” If the International Monetary Fund sees that Belarus made "sufficient progress," the mission will arrive for formal negotiations on the program this year.
The release of political prisoners presents another strategic move of the Belarusian government in its game to stay in power. Such moves worked before and likely will work again. EADaily reports that the EU has called the release of Belarusian opposition figures as "significant progress in the efforts aimed at improving relations" between Minsk and Brussels.
It is doubtful, however, that the release of political prisoners will lead to more systemic changes in Belarus. The graph on political prisoners shows sharp increases in the number of political prisoners in 2006 and 2010, the years of presidential elections. Such sudden rises indicate that there are no guarantees that in November the list of political prisoners will not start to grow again.
In the midst of the economic crisis and close to presidential elections, it is important for the Belarusian government to create the appearance of political liberalisation to receive funding and praise from the West. At the same time, Belarus will not leave the orbit of Russian influence due to Belarus' huge economic dependence on Russia.
How Russia's Subsidies Save the Belarusian Economy
On 24 August, the Brent oil price fell to $43, which was close to a 7-year low. Although Belarus has not got its own crude oil, this is terrible news for its economy. The cheaper the oil, the lower are benefits from the energy subsidies to Belarus from Russia.
Over the last 20 years Belarus has maintained, relatively successfully, a quasi-socialist economy mostly thanks to the generous economic aid from Russia. Under Lukashenka’s rule Russia's unprecedented economic support has amounted to a dozen or so per cent of Belarusian GDP annually. But the decline in the world oil and gas prices limits the benefits for Belarus.
The Cheapest Oil And Gas Prices In The Region
Russian subsidies over the last two decades reached around 15% of Belarusian GDP annually Read more
Both government and non-government economists agree that Belarus benefits from a good relationship with Russia. For instance, in 2012 due to favourable energy prices Belarus saved $10 billion or 16% of GDP, according to the Economic Institute of the Belarusian National Academy of Sciences. Using the same methodology would suggest that the average level of Russian subsidies over the last two decades reached the equally incredible level, around 15% of Belarusian GDP annually.
Belarus has the lowest gas price in the region, apart from Russia itself. Until 2007 the gas price was three-to-five times cheaper than for Poland. Then, Russia gradually raised the price for Belarus while still offering Belarus the best deal in the region. In 2014 gas for Belarus cost $170 per 1,000 m3 which is 55% less than for Poland. If Belarus were to pay the market-based price similar to the one Poland pays it would cost it almost $4.2 billion more or 5.5% of its GDP.
In addition, Belarus takes advantage of duty-free oil for its own needs, saving another one or two billion dollars annually. For example, in 2014 Belarus bought one ton of crude oil for $395, only 55% of the average world price, which meant over $2 billion of savings (2.7% of GDP) throughout the year.
Decreasing Grant From Petroleum Products
With hardly any oil resources inside the country, Belarus belongs to the Top-10 net exporters of petroleum products in the world, according to the International Energy Agency. Until 2007 Belarus imported duty-free crude oil at a price close to the Russian domestic one and processed it at its two refineries. Belarus used a third for domestic needs and exported the rest to the West at market prices. This profit added several billion dollars a year and boosted the ineffective economy.
When the Kremlin wishes some concessions from Lukashenka, it often engages its energy leverage. Since 2007 Russia tried to conduct more market-oriented economic relations with Belarus in the oil trade. In 2007-2010 Belarus had to pay approximately 30% of the duty applied to other recipients of Russian crude oil. It was the first time when the energy subsidies shrank.
In 2011 Russia obliged Belarus to transfer to the Russian budget export duties on petroleum products made with Russian oil and exported outside the Customs Union. To sweeten the pill Belarus again could import duty-free crude oil. Yet, in 2011-2014 Belarus transferred to the Russian budget $2.9-3.8 billion of these duties annually. This is quite a lot when compared to the pre-2007 period, when Belarus paid no duties at all.
At the signing of the Treaty establishing the Eurasian Economic Union in 2014, Russia agreed to keep $1.5 billion of petroleum products' duties in the Belarusian budget in 2015 and perhaps more in 2016.
Subsequently Russia introduced tax reform to increase internal tax on extracted oil and lower export duties on petroleum products. As a result, Belarus would pay approximately one billion dollars more for imported oil while potential future gains from leaving duties on exported petroleum products in Belarus would decrease.
The Brilliant Inventions Of Lukashenka
In exchange for generous energy subsidies, Lukashenka vows to strengthen political integration between the two countries, which can be seen as paying Russia back. Yet often he has withdrawn his promises and Russia still tolerates his behaviour. After all, Russia does not have that many friends in the world these days.
In a challenging situation Lukashenka almost always finds a way to cool the Kremlin's economic pressure. In 2010-2012 he surprised his Russian colleagues by importing oil from Venezuela and Azerbaijan. Both initiatives lacked economic sense but they strengthened Minsk's bargaining power against Moscow.
Semi-legal exports of so called solvents and thinners counts as another excellent scheme. In 2011 and the first half of 2012 Belarus traded Russian petroleum products under the guise of goods which remained duty-free according to intergovernmental agreements. As a result, the Russian budget lost about $3 billion in duties. In the second half of 2012 Russia forced Belarus to curtail this “business”.
No other country or regional union could give to Belarus as much as Russia Read more
Recently, Belarus has also taken the opportunity of the Russian food product embargo on Western countries, delivering "Belarusian" shrimps, "Belarusian" salmon, "Belarusian" Parmesan and many other goods exported from the West to Russia under the "Belarusian" brand.
No other country or regional union could give to Belarus as much as Russia. To compare, the net direct gains of Poland from the EU in 2004-2014, included structural funds, add up to around three per cent of GDP annually. It is five times less than Russian energy subsidies to Belarus in the same period. Nevertheless it is Poland that grew faster.
Minsk Hangs On Tightly To Moscow
The Belarusian authorities drive a hard bargain, ensuring cheap energy resources, positive duty-free trade, and preferential credits, for little in return. Discounted energy resources from Russia have provided competitiveness to the Belarusian economy for the last two decades. Only in 2014, the energy subsidies for Belarus, resulted from discounted prices on gas and duty-free oil for own needs, climbed to over $6.2 billion or 8.1% of GDP.
Unfortunately, having a permanent energy grant, the Belarusian authorities did not even think about reforms. Previously, they could reach out for more help and find convincible arguments for the Big Brother to give another discount.
However, plunging oil prices automatically leads to significant reduction in the Russian energy bonus for Belarus, since the difference in price for Belarus and the rest of the world decreases. With no exceptional resources it will be challenging for Lukashenka to keep the ineffective economy alive.