Russia Insists on Economic Conditions for Belarus Bailout

There may no longer be a Soviet Union, but there are still regional political and economic realities. Russia, as the successor to the Soviet Union, has a strong interest in developments in the Ukraine and in Belarus. Even without reunification, Moscow would like Kiev and Minsk tied to its umbilical cord rather than drifting towards the European Union –  or worse- into NATO.

Viktor Yanukovych
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Viktor Yanukovych

During the Soviet Union and the Warsaw Pact period,  Moscow was willing to subsidize other communist countries economically in order to avoid a situation where economic  discontent would stoke political discontent, forcing Moscow to choose between intervention and acquiescence to regime change. Eventually, under Gorbachev, this policy of subsidizing unpopular regimes became too onerous for the Soviet Union.This was particularly true when the Soviet Union itself was wracked by economic difficulties.

Moscow is about to extend a loan to financially beleaguered Belarus. The regime of Alexander Lukashenko has managed to prop up its popularity by a policy of full employment and state subsidies. This has exacted an economic toll, particularly in the run-up to last December’s election when Belarus went on a subsidy binge to swell Lukashenko’s popularity.

The far from democratic practices of Lukashenko, who has ruled for nearly 20 years and has been dubbed Europe’s last dictator, does not endear him to the West, nor does he have any natural resources that could entice the Chinese. This leaves Russia as the economic savior of last resort.

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Russia has been ambivalent about the Lukashenko regime, occasionally supporting it and occasionally attacking it.

Russian policy is to provide Lukashenko with loans, but in the best IMF style, force Belarus into economic reforms such as the devaluation of the ruble. For the average citizen of Belarus, the purchasing power of the ruble has now been slashed by a third. The devaluation will undoubtedly accelerate inflationary pressures that already stand at 13%.

The situation is different in the Ukraine. As opposed to Lukashenko, the Ukrainian president Viktor  Yanukovych has so far adhered to his election pledge of steering a middle course between Russia and the European Union.

Russia would like the Ukraine to join a customs union that includes Russia, Belarus and Kazakhstan. Russia is attempting to influence the Ukraine to join by subsisting subsidizing energy exports to the Ukraine. However if the Ukraine were to join, it would be effectively ruling out an Association agreement with the European Union. The Yanukoyich approach is to try to have it both ways by proposing a free-trade agreement.

The middle course is also calculated to preserve unity within the Ukraine. The president’s power base is the pro-Russian Eastern Ukraine, while nationalist Western Ukraine opposes anything that would mean solidifying ties with Russia.

Lydia Timoshenko, the former Prime Minister and opposition leader, warns that Ukrainian entry into the Russian-dominated customs union would be forfeiting Ukrainian independence. Russia already commands 40% of the voting power in the organization and would only need Kazakhstan or Belarus to have a majority and impose its wishes on the Ukraine.

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Source material can be found at this site.

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