Compass Money: The Economics of the Situation in Belarus – An Interview with Dr. Anders Åslund

Belarusian President Alexander Lukashenko met with Russian President Vladimir Putin last week in light of continued protests against Lukashenko’s rule. More than 100,000 protesters have gathered for the past six Sundays in Belarus following the highly disputed election on August 9. During the two leaders’ meeting, Putin offered his support as well as a $1.5 billion loan to assist Belarus’s struggling economy. Atlantic Council Eurasia Center Senior Fellow and former Georgetown MSFS Adjunct Professor Anders Åslund sheds light on the economic aspects of the current crisis in Belarus. 

Lukashenko has been in power for 26 years. He won the August 9 election that many spectators, including the European Union and the United States, believe was rigged. After the Belarusian election committee announced that Lukeshenko won with 80 percent of the vote, Belarusians across the country took to the streets calling both for his resignation and for free and fair elections. Belarusian authorities have violently arrested more than 7,000 people since the protests began over a month ago. Opposition leader Svetlana Tikhanovskaya, and others in the opposition’s  Coordination Council, have been detained or forced into exile.

Lukashenko has long been known as “Europe’s last dictator” for his long rule and repressive policies. When asked why he thinks these protests are happening now, Anders Åslund replied, “The repression has been quite severe. There was little consciousness, understanding, national sentiment before. Too long a time has passed, the question isn’t why it’s happening now, but why didn’t it happen before.”

Regarding the motives behind the current protests, Åslund said, “There are two dominant problems: lack of freedom, that the elections were stolen, and that the economy is stagnant. It would be wrong to try to distinguish between them.” Belarus has seen low rates of economic growth since 2012, and though poverty has decreased, wealth inequality continues to grow. 

When asked about how Belarus landed itself in its current economic predicament, Åslund responded, “Lukashenko was elected president in ‘94, and he ran on an anti-corruption platform, against the old communist establishment. And then he adopted the old communist establishment’s policies. It’s a completely Soviet economy: state-owned enterprises (SOEs) dominate the economy and one fifth of the prices are still controlled. The big state-owned companies get subsidies from the state budget when needed.”

In a 2019 report about the urgent need for economic reforms in Belarus, the World Bank said that one of Belarus’s biggest problems is its SOEs and how they are spending more money than they are bringing in. The World Bank found that in 2015, it cost the state 9.5 percent of its GDP to support these SOEs, which make up an estimated 75 percent of the country’s industrial output. To make up for these losses, Belarus has been taking foreign loans, largely from Russia, to the order of more than $1 billion. Åslund says that Belarus will likely just use the whopping $1.5 billion loan Putin has promised in order to pay Russia back on old debt—essentially refinancing.

On how Belarus could escape this economic crisis, Åslund says, “If you don’t change anything politically, nothing will change economically. Lukashenko will not go for privatization to real private enterprises. [...] Putin’s scheme now is to take over Belarus through nominally private Russian companies that are completely obedient to the Kremlin.” The Belarusian people are wary of this prospect, as the slogan of the protests on the day before Lukashenko’s meeting with Putin was, “We won’t let him sell the country.”

In her address to the European Parliament last week, Tikhanovskaya emphasized that the current revolution in Belarus is neither “pro-Russian” nor “pro-European Union,” but rather “a democratic revolution.” 

But Åslund is not sure that such neutrality is much of an option. With the EU preparing sanctions and Belarus in desperate need of money to avoid an economic crisis, Belarusians will likely face a geopolitical choice, and it seems that Lukashenko is choosing Russia. 

Looking forward, Åslund says, “The [ideal] solution is that Lukashenko goes and the people take over, and that’s not likely to happen. I think that Putin is holding firm. The best Belarusians can do is stand up and protest.” 

**Disclaimer: Anders Åslund is the father of the writer Marianna Aslund.