Snoop Dogg’s Love, Civil Society Under Pressure And A Tragic Discovery – Western Press Digest
Belarus has also gained some international notoriety recently. American rapper has proclaimed his love for Belarusian culture by launching an accessory line. In more gruesome news, Belarus has been a gruesome discovery that old Jewish headstones were used as building materials back in the Soviet era.
As 2014 comes to a close, the situation on the ground is becoming more volatile. Pressure on civil society has led to the expulsion of a prominent legal advocacy professional and a fine to a journalist for covering a local event commemorating a Belarusian author.
The events in Ukraine continue to influence Belarus. Economically, Russia's sanctions against EU foodstuffs has led to stricter control on Belarusian food exports to Russia. Domestically, it has meant that Lukashenka enjoys greater public support than a year ago.
All of this and more in this edition of the Western Press Digest.
Legal Advocacy Leader Kicked Out of Belarus – Radio Free Europe/Radio Liberty reports that a Belarusian resident of 29 years was recently forced to leave the country. The police cited Yelena Tonkachyova for an alleged traffic violation and as a result she had her residency permit annulled. Tonkachyova, a citizen of the Russian Federation, runs the legal aid and advocacy group Lawtrend which opened in Minsk back in 1996. According to the RFE/RL report, Lawtrend "promotes freedom of expression, freedom of association, and the right of access to information, justice, and a fair trial."
Reporter Fined for Covering News – Following his being detained by the authorities, a local court fined RFE/RL journalist Mikhal Karnevich $205 for illegally participating in a mass gathering. Karnevich was in a small Belarusian village for an event that celebrated Kastus Kalinovski, a 19th-century Belarusian political activist when the authorities detained him. The RFE/RL reporter, who has been fined before on similar charges, said that he was simply doing his job in covering the event. The RFE/RL article implies that these court rulings essentially mean that by covering an event as a journalist, the Belarusian authorities consider you a participant in the events.
Famous American Rapper Snoop Dogg A Belarus Fan? – Snoop Dogg, one of the most iconic rappers in the world, has launched a Belarusian-inspired line of accessories for his online store according to a recent report by RFE/RL. The line of accessories include laptop cases, t-shirts and backpacks — all with images of traditional Belarusian embroidery. The US Rapper did not, however, come up with the idea all on his own, but rather contacted Belarusian art collective "Hoodgraff" to work on a possible collaboration. According to one member of Hoodgraff, Snoop Dogg had been following the group's art mural projects for a while now.
Despite Hoodgraff's apparent rise in international popularity, they have not received the same warm welcome back home in Belarus. After trying to paint a mural of famous Belarusian writer and Lukashenka critic Vasil Bykau, the local authoraties levied the group with a heavy fine as a result they decided to seek greener pastures abroad in Russia.
On the International Stage
Jewish Headstones Used For Construction – VICE News recently reported a rather disturbing discovery by residents of Brest, a town in western Belarus. When construction began on a new local supermarket, the demolition of old housing revealed that the foundations of the buildings was built from old Jewish headstones. After the local Jewish community was devastated under Nazi Germany, the Soviets set about erasing much of the local community's history. According to VICE, in 1959 a Jewish cemetery the soviets destroyed in order to make room for a new sports stadium. They then recycyled the headstones.
Construction on the supermarket has led to a rapid increase in the number of headstones discovered in the region over the past 6 years. Many of the tombstones now lay in the Brest Fortress, a symbolic monument to the Soviet's fight against Germany in World War II. At the moment different organisations are trying to find a way to collect all of the tombstones and ensure their preservation, though this work is only in its beginning stages.
Economy and Domestic Politics
Russia Toughen Its Stance on Belarusian Meat Imports – In an ongoing trade war between the Customs Union partners, Russia has once again moved to restrict meat imports from Belarus. Reuters reports that the latest move by Moscow to clamp down on food imports from Belarus. This follows allegations that Belarusian exporters had falsely been labelling food products as being destined for Kazakhstan, but smuggled the into Russia. Minsk had earlier assured Russia that it would not import banned EU foodstuffs to enter Russia's market. In order to ensure that the goods are not going to be sold within the Russian Federation, the Russian authorities will enforce more stringent control on the border.
Recent Shake Up at Ministry of Defence – In a somewhat unexpected move, long-time Lukashenka ally Yury Zhadobin has been removed from his post as Minister of Defence. Zhadobin is a long-time insider and has been serving Lukashenka as head of the KGB and Minister of Defence since 2009. According to an interview from the RFE/RL, this may be a move by the government to modernise its defence forces in light of the developments in Ukraine. Belarus and Russia are close military allies, but the conflict in Ukraine has made the head of state weary of similar events unfolding at home.
Ukraine Crisis Helping Lukashenka at Home – Businessweek is reporting that the ongoing conflict in Ukraine has actually worked in favour of Lukashenka. According to a recent poll conducted by the Independent Institute of Socio-Economic & Political Studies in Minsk, the Belarusian ruler has seen his approval ratings climb from 40% to 55% over the past year. Given Belarus's deep economic, military and political dependence on Russia, it may appear paradoxical that things for the authoritarian Belarusian president are on the upswing. Businessweek explains that there are three reasons for his improved position.
First, Lukashenka has done a very good job at balancing the interests of the West, Russia and Ukraine throughout the conflict. Second, the chaos that Belarusians see as a result of Russian TV market saturation in Belarus has led many Belarusians to seek further assurances of security and stability as opposed to the chaos they view in Ukraine. Third, the opposition has been effectively neutralised for fears that if Lukashenka leaves, Belarus could become the next Crimea.
Belarus Is Changing, but the West's Policy is Frozen – A recent analytical piece put out by the Carnegie Endownment for International Peace breaks down many of the West's misconceptions of modern Belarus. According to Balázs Jarábik, the West must be careful not to ignore the evolving reality on the ground in the isolated east european nation. The author of the article states clearly that while things are still in bad shape with civil rights, a restrictive business environment and the absence of a real political culture, things have been slowly, but surely, evolving. The West should respect this gradual change, as well as the regional dynamics, to adapt its policies towards Belarus accordingly.
Belarusian Economy Sinks to Uncertainty – Belarus Economy Digest
Belarus displayed modest but stable growth during past couple of months.
However, future prospects for growth remain uncertain, given the deteriorating economic situation in Russia along with the desire of the authorities to carry out several growth stimulating policies.
Moreover, there are questions with respect to both the exchange rate and interest rate policy that the authorities cannot decide how to deal with the issues.
Output: Sluggish growth stayed put, but its further path is uncertain
During last four months Belarusian economy performs modest and extremely stable growth rate on annual basis – 1.5%. In terms of business cycle, it means that Belarusian economy is still reviving, although the power of this revival is fading away (see Figure 1).
Two factors lay behind these developments. On the one hand, a recent revival of capital investment, a huge expansion in potash fertilisers exports and bitumen mixtures, and less demand on intermediary non-energy imports are all pushing the economy to grow. From the production side, these trends have resulted in confident and strengthening growth in both mining and quarrying, as well as chemical production. This all goes to show that growth actually stems from a very limited number of industries.
On the other hand, weakening consumption growth and a deteriorating external environment have become serious obstacles for growth. At present real wages are stagnating. This new trend has become more or less established as the government gives up on artificially stimulating wages (given the serious challenges with price competitiveness that Belarusian producers face).
The influence of Russian economic problems
Moreover, labour migration dropped as well, largely due to declining wages in Russia — which is the main destination for labour migration — in US dollar terms. Frozen wages began to drive household consumption down. For instance in October, retail turnover recorded growth of just 1.7% in annual terms, while it grew by 13.1% and 9.0% in the first and second quarters of 2014 correspondingly. By the end of the year household consumption growth is will continue to decline and is unlikely to be a source of growth in the near future.
Furthermore, the quickly deteriorating economic situation in Russia is turning into a major issue for the Belarusian economy. According to the available data, there are signs that in October Belarusian producers began to have some problems with sending their goods for export to Russian markets.
These problems are twofold. First, contracting demand in Russia hit Belarusian producers as well as other competitors on Russia's markets. Second, a sharp decrease in price competitiveness for Belarusian producers on Russian markets also unfolded in October.
Russian ruble depreciated enormously against the US dollar in October, while Belarusian ruble kept on modest rate of depreciation vs. dollar. Hence, in real terms Belarusian ruble appreciated to Russian ruble in October by 6.6%, and by 17.6% since the beginning of the year. These figures display the scale of price competitiveness reduction for Belarusian producers (see Figure 2), which restricts their exports.
A more expensive Belarusian ruble (vs. the Russian ruble) also triggered a boost in the demand for imports from Belarus's eastern neighbour. The prices in Russia in dollar terms turned out to become much cheaper for Belarusians in comparison to the domestic market, especially for durable and capital goods.
The combination of growth of promotion and the growth of restrictive factors has created a large amount of uncertainty. This uncertainty alone presents a challenge for the economy. In such an environment many economic agents shift their behaviour to be conservative in tone – they postpone planned investments and purchases of durable goods and/or refrain from new plans until more clarity and certainty about the economic situation is apparent.
In this respect, the government should raise confidence levels by offering reliable response to the crisis. However, the new external environment seems to have completely preoccupied the Belarusian authorities, as they still have not elaborated a clear response. During the last couple of weeks different officials have stated radically different positions in respect to the exchange rate, interest rate, fiscal and wage policy. This forms a threat not only to production dynamics, but also to financial markets.
Monetary Environment: Threats to financial stability are accruing
The National bank of Belarus is trying to keep the USD/BYR exchange rate roughly stable to suppress inflation and lower devaluation expectations. At the same time, it needs to provide at least a stable level of price competitiveness for exporters, especially on the Russian market.
A modest depreciation and stable price competitiveness may co-exist when Belarusian and Russian rates of depreciation against the US dollar are closer to each other (or even if the Belarusian one is more significant). In this case, a stable USD/BYR exchange rate is going to be in line with domestic expectations, while a generally stable (or depreciating) RUB/BYR exchange rate is going to provide accessible level of price competitiveness on the Russian market for Belarusian companies.
Given the sharp depreciation of Russian ruble over last two months, the National Bank had to sacrifice one of its priorities. It preferred to provide a stable USD/BYR rate in order to prevent a new wave of deposit outflows and/or deposit dollarization. A sharp appreciation in the real exchange rate vs. Russian ruble has become another element that (see Figure 2).
However, the current policy mix might not offer up a sufficient solution. External imbalances are likely to progress, which reduces the credibility of the National Bank’s exchange rate policy. Further deposit dollarization is the standard response by Belarusian households in these circumstances.
According to preliminary data, the process of changing the currency of deposits was restored in October and rapidly expanded in November. Hence, the policy of modest depreciation against the US dollar is failing in respect to both priorities: the fragility of domestic financial market is growing, while external price competitiveness has been dampened.
A good solution for the National Bank assumes that the Russian ruble will stabilise shortly against the US dollar, or even appreciate somehow, compensating for its all too rapid depreciation. In this case, the National Bank can ‘catch up’ with the Russian ruble in several months time by holding a modest depreciation rate against the US dollar.
However, the Russian ruble is continuing to depreciate due to dropping oil prices. To make matters worse, oil prices may not have reached rock bottom yet. At the same time, reducing the credibility of Belarus's monetary policy requires new incentives for mitigating deposit dollarization. This would mean that they would have to raise interest rates. But the latter will restrict output growth despite the desire of the authorities to stimulate it.
As such, a huge degree of uncertainty in respect to future path of the economy and the government’s policy was a major characteristic of the Belarusian economy in November.
This article is a part of a joint project between Belarus Digest and the Belarusian Economic Research and Outreach Centre (BEROC)