Russian International Reserves Fall $15.7 Billion in Week to Dec. 19

Lukashenko May Survive Currency Plunge, Opposition Says

Belarusian opposition members whose family members and colleagues have been sentenced to years in prison for protesting elections said a worsening economy may not herald the end of President Alexander Lukashenko’s regime.

“If the economy crashed, Lukashenko wouldn’t have to turn to the West -- he could turn towards Russia instead,” Andrey Dmitriev, who was chief of staff for presidential candidate Vladimir Neklyaev in the run-up to the December 19 elections, said in an interview in Warsaw.

Lukashenko, who has ruled Belarus since 1994, was returned to power for a fourth term after an election that the Organization for Security and Cooperation in Europe said wasn’t free or fair. His regime, dubbed the “last dictatorship in Europe” by the administration of former President George W. Bush, has been forced to seek international aid as the ruble’s value slumps amid a spiraling current-account deficit, pushing it to the brink of collapse.

The Belarusian authorities and the central bank began talks with the International Monetary Fund today after the country asked for a new stabilization loan, a statement on the government’s website said. Belarus expects to raise $3.5 billion to $8 billion from the IMF under a new program over a three to five year period, state news agency Belta reported, citing Prime Minister Mikhail Myasnikovich. The IMF mission will continue until June 14, Belta said.

Interest Rates Rise

Belarus raised its key interest rates twice last month, with the former Soviet republic’s refinancing rate rising 2 percentage points to 16 percent from today, in an effort to stem outflows and buoy the ruble, which Belarus devalued by 36 percent against the dollar on May 23.

“Circumstances will force Lukashenko to reform the economy to a certain extent, but not much -- we’re going to see low, creeping economic growth and selective changes here and there that are very small in the aggregate,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said in a telephone interview. “My basic bet is that he’s still going to be around five years from now, and that things aren’t going to change that much.”

Russia and other partners from the former Soviet Union agreed last month to loan Belarus as much as $3.5 billion over three years, while Russian Finance Minister Alexei Kudrin has said Belarus should sell state assets worth $7.5 billion to help its economy recover.

Economic assistance of various kinds to the Belarusian regime has already cost Russia “at least $50 billion,” according to Polish Foreign Minister Radoslaw Sikorski.

Mismanaged Economy

“We thought President Lukashenko knew the scale of his economic challenge this year,” Sikorski said in an interview. “But the bill for mismanaging his economy has just arrived, and he’ll need to be rescued by those who endorsed him.”

A “key danger” with a 60 percent probability is that “Belarus fails to follow through with sustainable policies to implement substantial cuts in quasi-fiscal lending, or starts a credible privatization program and loosens business regulations,” Ivan Tchakarov and Anastasiya Golovach, economists at Renaissance Capital, said yesterday in an e-mailed research note.

“This could lead to an untenable spiral of constant devaluations, compensatory increases in public sector wages and current account crises, debilitating the economy and running entrepreneurial activity into the ground,” they said.

Deficit Soars

The IMF has warned the country must curtail spending, raise interest rates and liberalize its managed exchange-rate system as foreign reserves slide and the current-account deficit soared to 16 percent of gross domestic product.

Lukashenko, in an April 21 speech, said there were “efforts to spur panic buying in the foreign exchange and consumer markets, with the assistance of domestic and foreign analysts.”

“It’s obvious that someone is eager to destabilize the country, and sow chaos and distrust of the government, and after the problems that ensue could later strangle our country and our independence,” Lukashenko said.

President Barack Obama said last week during a trip to Poland that Belarus, a country of 10 million wedged between European Union member Poland to the west and Russia to the east, was “backsliding” as political repression intensifies, potentially harming other countries in the region.

New U.S. Sanctions

The U.S. will pursue new sanctions against some Belarusian state-owned enterprises, in addition to travel restrictions and asset freezes already in place, after the sentencing of opposition presidential candidates, Obama said.

“Lukashenko has to understand there can only be dialogue when the prisoners are released,” Daria Korsak, whose husband Alexander Atroshchenko was sentenced to four years in a forced labor camp after the elections, said at a press conference in Warsaw on May 30.

More than 700 opposition activists were arrested after a rally in Minsk following the Dec. 19 elections. So far, 45 people have been sentenced on charges in connection with the post-election protests, five of whom were Lukashenko’s rival candidates, the Solidarity with Democratic Belarus office in Warsaw said.

Even if Lukashenko were forced to step down, it’s not clear whether Belarus would become a democratic country, Dmitriev said. Neighboring Ukraine, whose 2004 Orange Revolution was hailed as a milestone in the country’s path to democracy, has since been mired in corruption allegations and parliamentary brawls.

‘Pretty Strong’

The Belarusian regime’s elite is “pretty strong” and would be “quick to buy and take over the running of currently state-owned enterprises” if Lukashenko were to lose power, Dmitriev said. “They’d call themselves by a new name, but nothing would really change.”

Like Korsak, Sikorski said the EU shouldn’t engage with the Belarusian regime until the political repression has ended.

“Political prisoners must be released and pardoned for dialogue with the EU to continue,” he said. “Years in a labor camp for participating in an election is a grotesque provocation of the international community.”

To contact the reporter on this story: Katya Andrusz in Warsaw at

To contact the editor responsible for this story: Willy Morris at

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