The New Serfdom in Belarus
The Belarusian government is becoming increasingly dysfunctional. It finds it more and more difficult to perform its daily tasks without resorting to administrative force.
This is the major implication of the unprecedented decree that Alexander Lukashenka signed on 7 December.
The world media have already interpreted the decree as legally introducing serfdom in Belarus. It ties workers to their workplaces. Now they can only leave their current jobs with permission from 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 in Belarus. But many fear that the decree might well become a model across the whole economy later.
Lukashenka Is “Tired of Pleading”
For the last several weeks, Alexander Lukashenka has been particularly busy with the country’s wood processing industry. He visited two large factories in Ivatsevichi and Barysau where he wanted to assess the progress of the state modernization programme.
Since 2007, the government has provided discounted credits worth about €700m for the reconstruction and modernization of nine wood processing factories in different regions of the country. The rationale behind the programme was to boost the productivity of the industry which is based on local raw materials and can be competitive on international markets. Through these measures, the authorities sought to lower their dependence on Russian oil, the major driver of Belarus’s exports.
In spite of significant state subsidies, the Belarusian Statistics Agency did not record any progress of the industry. Some indicators even demonstrate regression. For example, the share of the wood processing industry in the overall output of all processing industries has declined. In 2007 it was 2 per cent. And in 2011 it went down to 1.5 per cent.
During his visits Lukashenka blamed the failure on the government and the factories themselves. In Ivatsevichi he fired the executive director and in Barysau he came up with more radical ideas. He said that he was “tired of pleading” with everyone and ordered the draft of a decree that would prevent employees from quitting their current jobs.
Decree in Violation of National Law and International Treaties
On 7 December Lukashenka’s order materialised in Presidential Decree No 9 “On Additional Measures for the Development of the Wood Processing Industry”.
According to the decree, employees technically become serfs of their bosses. The latter will now decide who can leave for other jobs and who must stay. If an employee disagrees he or she can appeal directly to the governor of the voblast.
The decree specifies no criteria on which governors will have to make judgments. In the Belarusian reality, this means that governors will generally support the factory management, unless there is a personal conflict between them.
Lukashenka believes that the decree will help the factories keep employees who leave in search of higher wages. Today the average salary of workers in the wood processing industry is about $250-300. The incumbent demands that workers additionally start getting monthly bonuses which will depend on their factory’s financial means.
If an employee decides to leave against his boss’s will he or she will have to pay back the whole amount of the bonuses received since 1 December 2012. And if the person has no money to pay, he will be forced to remain at his previous workplace and the amount of all his previous bonuses will be withheld from his salary.
The decree will affect all the employees of the nine wood processing factories that have been part of the government’s modernization program. They make up about 13,000 people. Additionally, it will also affect the personnel of the state construction companies that participate in this program. They amount to around 3,000-5,000 people.
Needless to say that this legal act violates national and international labour standards. It looks shocking even to Belarusians, who are already used to different kinds of forced labour. Many already fear that this model will later be applied to other sectors of the economy. Lukashenka, too, said on 10 December that "the wood processing sector should become an example for others".
Besides the emotional side of this story, it signals that the Belarusian authorities are becoming increasingly dysfunctional. The case of the wood processing industry clearly demonstrates that they cannot perform the task of economic modernization without violating the law and resorting to extraordinary administrative measures. The usual social and economic policies do not work any longer. The authorities have nothing else but to use force.
However, even administrative pressure on the people can hardly solve the problem.
You cannot make your production innovative and your goods competitive by simply forcing your employees to stay with you. And even if you threaten all of them into staying, it does not automatically raise their labour productivity.
You cannot even increase employees' salaries administratively. Well, you can. But as last year's economic crisis has shown, the whole country will then need to pay a very high price for that.
Thus, administrative force cannot solve Belarusian economic problems. Even if the authorities try introducing Stalin-like mobilisation of the whole economy. We live in the era of globalisation. And administrative measures, like the ones in question, seem absolutely barbarian. People have multiple opportunities to overcome them and to make the authorities look even more dysfunctional.
Interestingly, all this is happening in the background of the melting social benefits (rising costs of utilities and goods, worsening access to healthcare and education, etc). The incumbent regime has never really been socialist. But now even the idea of the Belarusian socially-oriented market economy looks more and more like a myth.
Falling social benefits and projected economic difficulties next year will surely bring more similar stories.
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.