Economically, Belarus has its back against the wall - are the EU and the USA now helping?

Created: 05/24/2022, 19:50

By: Aleksandra Fedorska

Alexander Lukashenko, President of Belarus, listens to questions during an interview with the Associated Press (AP) news agency at the Independence Palace.

© Markus Schreiber/dpa

After several rounds of sanctions, Belarus is feeling the consequences of its policies.

The economic recession could be in double digits this year.

Minsk - It took quite a while for the Lukashenko regime to feel the economic consequences of its brutal rule.

The economy shrank by 0.4 percent in the first quarter of this year.

The recession is expected to deepen significantly over the course of the year.

“The World Bank expects Belarusian GDP to fall by 6.5 percent in 2022.

Other estimates range from eight to twelve percent of GDP.”

writes Lev Lvovskiy of the Belarusian Economic Research and Outreach Center (BEROC).

Belarus has been sanctioned in the violent crackdown on protests following the rigged 2020 elections.

However, these sanctions were only half-hearted and included long transition periods.

The regime was therefore able to adapt well and even had some export successes in 2021, which raised doubts about the effectiveness of the sanctions.

On closer inspection, however, these were orders that were postponed due to Corona and later made up for.

Some exceptions related to special product groups, such as the Belarusian wood products, which could actually benefit from the material shortage in the West.

Effective sanctions are quick and clear cuts

Belarus' role in the Russian invasion of Ukraine is ambiguous, as the Belarusian armed forces do not take part in combat operations.

However, the Russians used Belarusian territory and the country's military infrastructure to invade Ukraine and bombard the country with rockets.

For this reason, stricter sanctions were imposed on Belarus on March 2nd.

This affected the export of wood, metal and steel products.

On April 8th, Belarusian freight forwarders were excluded from transport in the EU.

As a result, westbound exports collapsed.

This also applies to the Ukrainian market.

Before the war, Ukraine was Belarus' second most important trading partner.

Exports to Ukraine accounted for up to 5.5% of GDP annually.

The massive loss of export potential resulted in further problems.

Since then, foreign investors and business partners have been withdrawing from Belarus.

"The Belarusian state is also currently unable to refinance its foreign debt, which not only leads to a decrease in foreign exchange reserves, but also exacerbates solvency problems."

writes Belarus expert Kamil Kłysiński in his report for the Center for Eastern Studies (OSW).

The economic prospects for Belarus

The Lukashenko regime will hardly manage to get out of the economic crisis on its own.

Further aid from Russia for Belarus is therefore being discussed.

The Belarusians want to divert exports via Russia to Asia and are hoping for the support of the Kremlin.

Regime officials are trying to postpone the repayment of loans due to Russia until 2027-2028.

"Lukashenko has even discussed the construction of a freight terminal near St. Petersburg," the Center for Eastern Studies (OSW) said.

It is said that the Russian authorities have already approved it.

However, construction would take several years.

However, these strategies and ideas will probably fail because of Russia, since the aggressor first has to save himself economically

and is otherwise disappointed that the Belarusian armed forces stayed out of the war in Ukraine.

EU and US help Belarus because of Ukraine grain?

On the other hand, another idea that aims to bring Ukrainian grain to export markets in order to prevent the hunger crisis in the Middle East and North Africa has a better chance of a gradual return to normality.

It is about a proposal by the European Commission that the grain should be transported via Belarus to the EU ports.

The Wall Street Journal reports that the United States is considering the possibility of a six-month suspension of sanctions on the export of Belarusian potash fertilizers in exchange for the transit of Ukrainian grain.

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The idea is called “Humanitarian Freight Corridor” and puts the geographical focus on shipping grain via Baltic Sea ports.

However, these ports would have to be prepared for this.

“Klaipeda port is potentially capable of handling enough – about 8 million.

tons and this capacity could be further increased by investments.

Unfortunately, due to current infrastructure limitations, it is currently only possible to bring 1-1.5 million tons of Ukrainian grain to Lithuania per year,” said Lithuanian Transport Minister Marius Skuodis.

Belarus could at least partially redeem itself and save its economy if it helps the free world to prevent a global hunger crisis.