Russian Monologue on Modernisation
On 22 November, Alexander Lukashenka met with Putin`s protégé and head of the Gazprom directive board Alexey Miller.
During the meeting, Miller presented a program on how Gazprom will develop the Belarusian gas infrastructure and make new investments into the economy.
Gazprom has become a pioneer of the grand Russian business which has great influence in Belarus as well. The business circles subordinated to Kremlin offer modernisation and additional investments to the official Minsk in return for selling the Belarusian strategically important enterprises to Russia.
While the European Union suggests some vague “dialogue on modernisation” to the regime, Russia prefers to address Belarusian authorities in the form of monologue. The Russians base their monologue on three factors: privatisation of Belarusian enterprises to Russia’s benefit, granting economic stability of Belarus for the expense of the Russian business and long-time reign of Lukashenka.
Kremlin hopes that Lukashenka will sell some important enterprises under the pressure of economic problems and bad relations with the West. However, the regime is aware that selling of the Belarusian enterprises contains not just economic benefits, but also political threats in it.
The Importance of Gazprom for the Regime
About a year ago Gazprom purchased the remaining 50 per cent of Belarusian gas infrastructure and transportation company Beltransgaz shares and became its only owner. Since that time, the importance of Gazprom for the Belarusian economy has grown and it will keep on growing.
Gazprom grants stable low prices for gas. In 2013, Belarus will pay only $185 per cubic metre. No other foreign partner of Russian gas monopoly pays so little. Moreover, Belarus increases shipments of gas. In 2012, the country will use 22 billion cubic metres of gas, which is 10 per cent more than in 2011. Also Russian corporation promises to increase the gas transit to Europe via Belarus by 30 per cent, which will bring extra money to the Belarusian budget and strengthen the reputation of Belarus as a transit state.
Gazprom will modernise the gas transportation system inside Belarus. The Russian corporation aims to modernise 35 gas transportation stations in Belarus by 2015. Also, Gazprom is going to modernise the underground gas storage in Mazyr and will connect it with the compressor station in Nyasvizh by a gas tube.
The Russian corporation also tries to be socially active. Gazprom will finance construction of an office complex, a multi-apartment residential building for families with many children, a junction, reconstruction of the bus station in Minsk, and one of the barracks of Brest Fortress.
An enterprise from the relatively poor Russia would find it more reasonable to invest money into its own state. However, Russian gas monopoly performs not just an economic function in Belarus. The corporation carries a simple message from the Russian government to the Belarusian society: selling Belarusian enterprises brings welfare.
Gazprom means not just gas industry. The Russian corporation owns Belgazprombank in Belarus. It seems likely that Gazprom will increase its influence in other spheres of the Belarusian economy as well.
The Russian Offer
The example of Gazprom clearly shows that Russia will conduct modernisation of the Belarusian enterprises and will invest money into the Belarusian economy on the terms that Lukashenka will be gradually selling strategically important enterprises to Russia. This means, money in return for independence.
Lukashenka remains a complicated ally for Kremlin, therefore the Russian authorities also work directly with the Belarusian society. In Spring 2012, Gazprom raised the wages of the Beltransgaz workers by 3 times, which worked as a demonstration of the economic and political power. It’s easy to guess that the workers of the sold enterprise greeted such decision of the new owner.
The situation with wages looks surreal. An anonymous “Beltransgas” employee informed Belarusian Internet portal Onliner.by, that, when a vacancy appears at the enterprise the director cannot tell the potential contender by phone about the wages he is going to pay him at this position. Moreover, the director demands that the employees should not tell each other how much they earn.
Kremlin realises that Belarusian economic problems offer the best vehicle for increasing the influence. Moscow demands privatisation from Minsk not because there are liberally-minded people in Kremlin. The reason is more simple: Russia wants to buy all strategically important enterprises in Belarus.
Russia’s modernisation of Belarus combined with involvement into the Customs Union, the United Economic Space and the future Eurasian Union shows that Kremlin hopes to securely chain, if not incorporate Belarus.
The Regime Decides
The official Minsk does not show much willingness to accept the Russian's offer.
First, Belarusian authorities understand the political bias of Russia’s economic influence in Belarus. Officially, on 22 November Lukashenka said: “We greet Gazprom’s arrival to Belarus with huge investments, we support this, we are going to benefit from this”. Non-officially, the Belarusian ruler knows Russian intentions.
On the other side, Lukashenka understands that Russia does not show a good example of modernisation. Russia remains a country which strongly depends on its power resources, not on high-technology industry.
Expansion of Russia’s influence on Belarus is happening on the background of stagnation in the Belarus-Europe relationship. The regime cannot imagine how to improve relations with the West and not to lose its own face. The West suffers from the same problem.
It looks like the regime considers its reputation much more important than the economic independence of the country. According to Polish expert Wojciech Borodzicz-Smoliński "the Belarusian side should understand that putting its own independence in the game and blackmailing the EU is dangerous."
However, the Russian variant of modernisation looks much more secure in financial terms than the “European Dialogue on Modernisation”, adopted by the European Union. Kremlin offers concrete money, which will let the regime survive for quite a long time, although it will happen at the price of gradual succession of the Belarusian independence.
The European politicians cannot send a message which will be heard with interest by the Belarusian regime. Talks about the democratic values and human rights do not find any response in the Belarusian officials. If the EU and the U.S. want to influence the regime, they should offer money – the only thing the official Minsk will definitely react to.
Why Belarusians Refuse to Work in Agriculture
Post-Soviet mass discourse often portrays Belarus as a country of villagers. A big deal of that comes from the image of president Lukashenka himself. He has been director of a farm in Eastern Belarus before going into high politics and is famous for his obsession with agricultural issues. This, however, did not help Belarus farming to turn into a thriving industry.
On 28 November, Belarus parliamentarians hosted deputy prime minister Michail Rusy. He presented plans for agricultural development and voiced some major problems of the sector. It becomes evident that the absence of reforms turned agriculture into a very unattractive place work destination.
An Everlasting Kalhas
Belarus agricultural sector remains largely unreformed since Soviet times. Collective farms, or kalhas (kolkhoz in Russian), is the main production unit in agriculture. Kalhas operates as a state-owned enterprise which usually employs workers from nearby villages.
In the Soviet Union, kalhas was not only the centre of rural economy, as practically all social life of rural community revolved around it. Belarus leadership chose to preservation the Soviet rural economy and community. However, it turned absolutely unattractive for Belarusians today.
Initially Lukashenka regime was not supporting private farming and today it makes less than 2% of Belarus agricultural production. The kalhas system, on the contrary, have been considerably subsidised despite significant losses. With the decline of Belarusian economic model, traditional support of Soviet-style collective farms becomes virtually impossible.
In recent years Belarus attempted to implement some regional policies to support rural development. The government launched a number of national programmes: State Complex Program for Development of Regions, Small and Medium Urban Settlements (2007-2010) and State Program for Revival and Development of Rural Areas (2005-2010). The programmes aimed at fostering economic development and attracting workers to the countryside.
Although some sound measures were introduced, like tax reductions for firms operating in rural areas, little hope for real changes. Two decades passed since the need for transformation became evident, and the current policy tools are unable to change deeply entrenched negative trends.
Growing Problems of the Sector
On 28 November, Belarus deputy prime minister Michail Rusy reported to the newly selected parliament. The subject of discussion was Belarus agricultural sector. Rusy presented ambitious plans for modernization of the sector by 2015.
Meanwhile, he admitted a number of serious problems that exist in agriculture today. Notably, he mentioned that “the problem of personnel able to implement large-scale transformations in agricultural sector has become crucial in recent years”.
Indeed, for Belarus youth agriculture seems the least desirable sector of employment. First, farming offers lowest salaries compared to other sectors of employment.
It makes only 65% of the average national salary, while in industry it averages 120%, finances – 190%, public administration – 125%, education and health – 75%. Of course, the rates depend on the economic condition of various kahas. While richer ones (which are not a common case) can afford paying higher wages, the poor kalhas practically keep their workers in poverty. A monthly salary lower than $200 is not rarity in Belarusian villages. People cope by managing small kitchen gardens of their own or raising a couple of pigs.
sometimes workers do not have day-offs, because they have to replace their drunk colleagues or simply because the staff is scarce Read more
Second, most kalhas have poor managerial capacity. Soviet-style management, rudeness, contempt for initiative keeps young graduates and specialists away from kalhas. Moreover, farms offer very unattractive labour conditions. For instance, sometimes workers do not have day-offs, because they have to replace their drunk colleagues or simply because the staff is scarce.
Third, rural settlements offer very poor infrastructure of culture and entertainment. Libraries with a dozen of old books present the sole element of cultural and social life. Village club serves as the only entertainment place for youth, where they can relax after a hard workday engaging in drinking and fighting. Often though, the culture exists only around the local store, where villagers buy cheap alcoholic beverages and usually consume them right on the spot.
No wonder the youth move to urban centres looking for education, employment and fun. A special policy of mandatory two-year employment in public sector for graduates does not work either. Most of them leave villages after finishing the period and often use various tricks to escape it altogether.
But the problem concerns not only the youth. As Rusy admitted, agricultural workers started to seek employment and migrate to neighbouring states, particularly to Russia.
Paradoxically, in many villages of Eastern Belarus most men work in Russia and not in the local economy. They come home for a while to see their families and provide them with money, and then head for another period of work in Russia. This mode of economy favours neither households nor Belarusian economy in general. The government, however, seems unable to resolve the problem and prefers not to raise it publicly.
Globalisation Pushes for Reform
Addressing the parliament last month, Michail Rusy announced a rather ambitious goal of the program of rural development till 2015. According to it, government is planning to invest $7.5 bn in modernization of agricultural sector till 2015.
The policy of financial support of collective farms will shift from general subsidies to loans by business-plans. Average salary in agriculture will rise to BYR 8 m (almost $1,000) by means of rapid increase in economic effectiveness of production. Today’s salary in the sector varies from $200 to $400 depending on profitability of klahas.
This modernization rhetoric comes from an obvious fact, which Belarus leadership tried to deter for so long. Belarus becomes more and more involved in global economy through integration projects and therefore has to engage in stronger competition. The situation turned especially nasty when Russia joined WTO this year, being in Customs Union with Belarus simultaneously. Belarus was not ready for such developments at all and now has to catch up fast.
Russia consumes more than 80% of Belarus farming production. While other Belarusian production loses traditional markets, food remains a stable due to enormous needs of Russian megalopolises. Now and then, farming products appear in the middle of trade scandals between Belarus and Russia (“milk and sugar wars” for example).
Such an export strategy advantages Belarus producers, as they export at prices several times higher than domestic market can offer. However, it is Belarus population who end up being disadvantaged, because better quality products are going abroad and what remains is sold locally.
The plans of government are costly and ambitious, officials operate with numbers and figures and promise unprecedented growth. Yet the thing is that without a complex regional policy which targets all aspects of human life people will not come to work on the land.