Why do the authorities continue to arrest Belarus’s top businessmen?
On 12 April, Belarusian authorities arrested Vitali Arbuzaŭ, one of the most successful businessmen in Belarus. He was another casualty in Belarus's ongoing war against tycoons.
Being close to Lukashenka is by no means a guarantee of safety for oligarchs, and many prefer to register their companies and reside abroad. Those who cannot do so must demonstrate their support for the authorities in various ways and never make a misstep.
As the Belarusian state system is dominated by the security services, they spend their time and resources over-zealously pursuing white-collar criminals rather than improving the business environment in the country. This causes serious damage to the investment climate.
In the absence of strong rule of law, large businesses continue to depend on patronage networks and informal arrangements with the country's leadership.
One arrest after another
On 12 April, Belarusian authorities arrested Vitali Arbuzaŭ, a top Belarusian businessman, on tax evasion charges.
In 2017, Vitali Arbuzaŭ ranked 11th in the annual list of the Top 200 Most Successful and Influential Businessmen in Belarus, though in 2016 he was second and in 2013 third. He is the co-owner of the holding Fenox Global Group and venture fund Fenox Venture. Both companies deal with automobile components, medicine, logistics, food retail, investments in R&D, and the IT sector.
In recent years, Belarus has witnessed a series of arrests of top businessmen. On 19 August, the KGB arrested Uladzimir Japryncaŭ, number 19 in the aforementioned 'Top 200' ranking and the closest business partner of Juryj Čyž, as well as Japryncaŭ's son Kazbek. The KGB stated that Juryj Čyž had informed them of the Japryncaŭ family's illegal activities. They were accused of fraud, and Japryncaŭ junior received eight years in jail; his father received only a fine.
Six months later, on 11 March 2016, Juryj Čyž himself faced criminal charges. Čyž ranked first in the 2013 list of top Belarusian businessmen and was believed to be a close associate of Alexander Lukashenka, as he often appeared near the president in photos planting watermelons or mowing grass. After half a year in jail, and $13m in damages, Čyž was released. In 2017, his position had dropped to 53rd, a dramatic fall and presumably the end of an important business career.
At around the same time, the KGB arrested another Belarusian tycoon, Jaŭhien Baskin, number six in the 2016 ranking, also on tax evasion charges. Baskin owns the company Servaliuks, which deals in agricultural production. He was quick to compensate for the damage and was freed several months later. Incidentally, both Baskin and Čyž were arrested while trying to escape Belarus after they received information about searches in their offices. In the 2017 ranking Baskin scored 21st.
These individuals, of course, were highly important figures. It is important to remember that dozens of smaller-scale businessmen have faced similar troubles since 2015, including Andrej Paŭloŭski (number 26), Dzmitry Ronin (130), Alieh Zuchavicki (157), and a number of other well-known figures. This illustrates the scale of state pressure on large business. So how do the very wealthy manage to survive under Lukashenka at all?
Stay abroad or watch your step
More prudent businesspeople prefer to stay out of Belarus and register their companies abroad to minimise their risk of arrest. Viktar Kisly, number one in the 2017 ranking and owner of the Wargaming group, moved his head office to Cyprus in 2011 and now resides there himself.
Arkadź Dobkin, creator of another renowned IT company, EPAM (Number six in the 2017 rating), lives in the US, where the head office of the company is also located. The owners of the Belarusian retail giant Evroopt, Uladzimir Vasilka (Number eight in 2016) and Siarhiej Litvin (number seven in 2016) left Belarus in 2003 and now reside in Monaco.
Another method for the wealthiest Belarusian businesspeople to stay out of trouble seems to be behaving irreproachably and maintaining good relations with the top decision maker. For example, tobacco trader and retailer Paviel Tapuzidzis (Number two in the 2017 rating), often heads the district-level electoral committee during parliamentary and presidential elections. During the 2016 parliamentary election, when answering naviny.by's question about his reasons for doing so, he openly replied 'this can help me save my business'.
Belarus's number three businessman, Aliaksandr Mašenski, also courts Lukashenka's favour and has reportedly joined him on a number of trips and events; he worked as Lukashenka's authorised representative during his 2010 presidential campaign. Number four on the list, Aliaksandr Šakucin, is also a member of the president's entourage; he has held the post of senator in the upper chamber of the Belarusian parliament.
What is the main obstacle to business?
According to anonymous sources, since the beginning of the economic crisis in Belarus, Belarusian businesspeople have tried to hide or move their capital. The security services control these activities thoroughly and organise public arrests in order to warn others and prevent growing shadow schemes.
Conducting large-scale business in Belarus almost always involves informal arrangements with the country's ruler. Security forces remain the most influential group in Belarus after Lukashenka, and they see their job as hunting for illegal activities rather than improving the investment climate. Lukashenka is also highly concerned with personal security and stability, and therefore remains unlikely to downgrade the influence of the siloviki.
Back in 2011, Lukashenka outlined his approach to 'dishonest' businessmen: 'If you've damaged the state's interests – pay double or triple the sum and you're free'. Lukashenka is believed to personally control the arrests and releases of tycoons. He claims that there are no privileged people in Belarus and everyone is responsible for him or herself. What's more, trials of high-profile businesspeople offer a perfect opportunity to fill gaps in the budget as the economy continues to struggle.
The series of arrests of Belarusian businesspeople stands in contrast with the institutional changes under way in the country. In 2017, Belarus scored 37th in the Doing Business rating, surpassing a number of EU members including Italy, Hungary, Belgium, Greece, and Luxembourg. In trying to increase the country's attractiveness for investment and realising the high risks, the Belarusian government has so far refrained from punishing any foreign businessmen, except for the Russian Uralkali case.
Nevertheless, the overall negative atmosphere contributes to the fact that foreign investment in Belarus remains negligible compared to its neighbours. Non-transparent game rules, dependence on patronage, and the dominance of the security services also frighten investors away. This is a serious challenge for lobbyists advocating a liberal and transparent business environment in Belarus. The Belarusian government should seek to treat the country's top businessmen more fairly if it wants to improve its image internationally.
Who benefits from the alcoholisation of Belarus?
Belarus is perhaps the world’s second booziest nation. In 2014, Belarus topped the World Health Organisation’s report on alcohol consumption. According to the WHO, an average Belarusian drinks around 17.5 litres of alcohol per year, while the median global consumption hovers around 6.5 litres.
Meanwhile, alcohol prices are considerably lower than in neighbouring western countries. Despite the government’s attempt to set up a programme for prevention of alcoholism and rehabilitation of alcoholics, Belarus has so far failed to combat heavy drinking. Moreover, alcohol prices tend to decrease right before elections or during economic crises.
Cheap alcohol in Belarus has become a tool to neutralise activism and numb national consciousness. By decreasing alcohol prices, authorities guarantee themselves more loyalty and support.
The alcoholisation of Belarus
According to the WHO, Belarus is among the most bibulous countries in the world: in 2016, the organisation calculated that the average Belarusian drinks 17.5 litres of alcohol per year. This enormous figure is well over the WHO consumption standard of 8 litres per year. It’s recommended for regular drinkers to also take custom bottled water to stay hydrated and avoid hangover.
Nevertheless, it is unclear how much Belarusians really drink. Over the past several years, the WHO has estimated that 17-18 litres per year seems to be the average amount of tipple.
At the same time, due to differences in methodology, the Belarusian Ministry of Health denies the WHO’s data and claims that in 2016 the real figure was closer to 8.8 litres.
Statistical agencies also struggle to estimate the true scale of illegal alcohol production. In the beginning of May, police in the town of Maladziechna uncovered the largest illegal alcohol production scheme in the region in the last five years. Law enforcement found more than 100 litres of moonshine and 21 tonnes of brew.
In many villages, home-made spirits have become a huge social problem, sometimes leading to death. Neither international nor national sociologists are able to determine the exact level of alcohol consumption per person due to illegal alcohol production.
The (anti-) alcohol policy
The Belarusian government is attempting to combat the alcoholisation of Belarus while still profiting from alcohol sales. In 2011, the government introduced an anti-alcohol programme which restricted sales and advertisement. However, later in 2013, alcohol producers persuaded Lukashenka not to ban the sale of cheap ‘wine’ (or Charnila), one of the most popular alcoholic drinks in Belarus. Additionally, in 2013 the Ministry of Trade discussed the idea of selling alcohol over the Internet.
The Belarusian government not only ignores the problem of alcoholism, it also encourages its sale. In 2016, Belarus sold 6,954,100 dekaliters of alcohol, reports Belta. As of 2015, Belarusians can buy booze at night after the government cancelled its moratorium on alcohol sales between 10pm and 9am. Recently, in April, Minister of Antimonopoly Regulation and Trade Uladzimir Kaltovich stated live on the channel Belarus 1 that Belarusians will soon be allowed to bring their own alcohol to cafes.
Over the last several years, the government is starting to take the problem of alcoholism more seriously. the Ministry of Internal Affairs, which is preparing a document on the matter, believes that the state would benefit from the reduction of alcohol sales by spending less money on treatment for the addicted.
The document suggests restricting alcohol sale between 10pm to 9 am and requiring separate departments for alcohol in large stores. Nevertheless, the strong alcohol lobby has so far been able to prevent the document from coming into force.
The availability of alcohol exacerbates the country’s alcohol problem. Belarusians can currently buy alcohol at any time in any store and at petrol stations. In Lithuania, in contrast, alcohol can be sold starting at 10 am until 10 pm; in Sweden, alcohol stronger than 3.5% is available only at one government-controlled chain and can be purchased until 7 pm.
Moreover, prices for alcohol in Belarus have remained relatively stable for years, despite the economic crisis and inflation. The experience of neighbouring countries, such as Russia, proves that increasing the price for cheap wines and strong cheap spirits could decrease alcoholism.
Why does the State Benefits from Alcoholism?
Alcoholism in Belarus continues to lead to serious social problems. Orphanages are one result of the high level of alcohol consumption, and alcohol remains one of the main reasons for suicide. Moreover, Belarusians commit more than 80% of murders while drunk. If that weren’t enough, thanks to alcohol, Belarus has one of the highest divorce rates in the world.
Cheap prices and the widespread availability of alcohol bring economic benefits to the state. The authorities have been discussing banning the most popular form of alcohol, cheap fortified wine, since 1999. However, the profit cheap wine brings in, making up around 30% of the profit of the entire industry, makes a ban seem unlikely. Political scientist Jury Čavusaŭ believes that ‘local budgets completely depend on profits from alcohol sales’ and that ‘any anti-alcohol policy is ineffective as long as the price for alcohol remains so low’.
Besides the economic benefits, alcohol serves as a means of political and social manipulation. Along with salary raises and growth of pensions, cancelling restrictions on alcohol sales on the eve of elections (as in 2015) is a form of bribery for society.
Alcohol has become a tool to conceal economic and social problems which the state has failed to overcome. By supporting the production of cheap and easily available alcohol, the state minimises existing social discontent. As Vitaĺ Rymašeŭski, co-chairman of the Belarusian Christian Democracy Party, noted to Radyjo Racyja: ‘cheap alcohol has contributed to the alcoholisation and degradation of the nation’.
In addition to the absence of a strong anti-alcohol policy, Belarusian society has failed to mobilise to solve the problem. Investment in rescue premises and care centres for alcoholics, involving both the government and society, should be the first step to solving the alcoholisation of Belarus.
Increasing the price of alcohol, along with cracking down on illegal alcohol production, would have a positive effect on alcohol consumption rates. However, until society and the state adopt a common alcohol policy, the government will continue to make money and manipulate Belarusians. Although the state declares its concern for the increase in alcoholism, it continues to consider alcohol sales a cash cow.