WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

by Rumen Dobrinsky
photo: Максим Шикунец - Own work, CC BY-SA 4.0

• The political crisis in Belarus manifests a collapse of the previous socio-economic model.
• The crisis also left a leadership vacuum below and around Mr. Lukashenko, who has been eliminating potential contenders for many years.
• Today, all indications are that the era of Lukashenko in Belarus is coming to an end. The question is how this will happen: in an orderly manner or through a violent societal clash.
• The Belarusian economy is plagued with numerous chronic problems that any government will face.

The political background

The fundament of the socio-political system in Belarus was Mr. Lukashenko’s constitutional reform of 1994 which empowered the president with far-reaching authorities such as the right to dissolve parliament, issue decrees with the force of law, appoint the prime minister and the members of the government, call referenda, and many more. Under this system the president de facto had greater power than the legislative branch.

In 2020 his system collapsed, and we see now its debris in the streets of Minsk. The arrogant disregard of expert opinions and public concerns related to the Covid-19 pandemic as well as a massive manipulation of the election results, as evidenced by many individuals on the ground who confessed being forced to falsify the vote, led to the implosion of Belarus’ political system.

One peculiar feature of the current political situation is an absolute leadership vacuum below and around Mr. Lukashenko. During his decades long rule, he systematically and purposefully eliminated all those whom he suspected as potential contenders to his post, both within his own circle of power and outside it.

As regards the nature of the current “opposition”, it seems to have a very heterogeneous political structure and is only united by one key demand: the departure of Mr. Lukashenko. Ultimately, at present there is virtually no one on the Belarusian political scene, neither among Lukashenko’s entourage, nor among the opposition, who could be seen as a possible successor. From this perspective, the cheerleaders of the protests do not seem to possess genuine political weight and most likely they will mostly serve a transitory role.

What are some of the possible scenarios for the succession of power?

The first one would be that the key demand of the protestors – the immediate departure of Mr. Lukashenko – is met. Under the assumption of an orderly succession this would imply the holding of new presidential elections under the current constitutional order. In the interim, the presidential powers are temporarily transferred to the prime minister. In principle, such a succession is plausible and would allow for a smooth transition of power.

However Mr. Lukashenko categorically rejects such an option. Given his firm grip over the security forces, he can protect his reign through oppressive means at least for some time to come. A second caveat is related to the actual constitutional order in the country. Lukashenko’s constitution provides for presidential super powers that de facto overrule the power of both the parliament and the executive branch. The risk is that premature new presidential elections under the current constitution would just reproduce a new Lukashenko or even bring to power a worse replica.

A second option would be a rapid constitutional reform that would restore a balanced sharing of power between the three branches of government and holding elections under a new constitution. However, this option features critical caveats as well. For a new constitutional order to be firmly grounded, it needs to enjoy the support of a core majority of the population. And, a constitutional reform would have to be prepared under the current governance structures whose credibility and legitimacy are challenged by a critical part of the population.

On the other hand, it cannot be excluded that the protests expand and radicalize towards the use of violence and, in the extreme, a forceful ousting of Mr. Lukashenko. The outcomes of such a disorderly succession are difficult to predict and in this case one also needs to factor in possible external interventions. In particular, one cannot exclude a reaction by Russia in a situation when it sees threats to its own geopolitical interests. Moreover, in the case of Belarus, there are some bilateral and multilateral conventions that can be invoked in such circumstances.

These are only some of the possible scenarios for the succession of power in Belarus. Obviously, scenarios of a disorderly succession involving violence and possible external intervention are the least desirable options for the country.

The future of the Belarusian economy

The Belarusian economy is plagued with numerous chronic problems and whatever will be the outcome of the current political crisis the future rulers of the country will be confronted with formidable challenges.

Probably the most difficult economic policy issue is the fate of the large unreformed state-owned industrial companies. These firms constituted an important component of the Belarusian “social contract” as they provide privileged employment to thousands of Belarusians. For decades, these firms benefited from various direct and indirect subsidies and, last but not least, from Russian energy subsidies to Belarus. At present, these subsidies are draining and Belarus is running out of financial resources to continue supporting the large state-owned companies so the reform of this sector of the economy seems inevitable.

However, the streamlining of the state-owned sector (not to speak of privatization) will have grave social consequences as it will inevitably be associated with massive layoffs. In this context, it should be pointed out that there exists no proper social safety net in Belarus. So launching an enterprise restructuring reform in the absence of a proper safety net would undoubtedly give rise to serious social tensions. On the other hand, establishing such a system from scratch is in itself a momentous administrative task that cannot be accomplished overnight.

A third serious economic policy challenge is the servicing of the large external public debt which has become a heavy burden on the public finances. In light of the current developments, Belarus was forced to revert to its “lender of last resort” Russia and during his recent visit to Russia Mr. Lukashenko secured new emergency loans amounting to USD 1.5 billion. This will probably not be the last such recourse and it only remains to guess what political concessions Russia demands in return for such bailouts.

In the meantime, the political crisis, coupled with the uncertainty about the ability of the authorities to service the large public foreign debt, gave rise to nervousness on the financial markets and growing pressure on the currency. As a result, the Belarusian rouble rapidly depreciated in the course of the past weeks. If this process continues, this will be another serious headache for the authorities.

These are some of the problems that any present and future government in Belarus will have to face. Most of them are interconnected and need to be addressed in a complex manner. However, the way these problems are tackled will very much depend on the outcome of the political crisis.

This article is based on the wiiw Policy Note  What Can Be the Way out of the Impasse in Belarus? by Rumen Dobrinsky.