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Commentary: Selling Belarus's Family Jewels

By Yuri Drakakhrust Will Belarus's famous tractors be up for sale? ( While the system constructed in Belarus over the last decade may not have been the most repressive in the post-Soviet world, it was certainly the most Soviet -- in terms of both the people that run it and the socioeconomic reality.

It is in Belarus, after all, where a memorial to "Stalin's Line" of fortifications was erected, where the president continues to address compatriots as "comrade," and where the private sector's share of gross domestic product (GDP) is the lowest among the CIS states. Belarus has preserved not only a Soviet-style welfare state, but also Soviet-era attitudes toward private property.

But things appear to be changing. Mobile-phone operators, factories, banks -- the family jewels of the national economy -- are suddenly up for grabs. Belinvestbank, the country's fourth-largest bank, is being sold to Germany's Commerzbank. Russia is in talks to purchase Belarusian automobile giant MAZ and the Palimir chemical factory. And Turkey is set to buy the mobile-phone company BeST.

What is going on? The most obvious explanation is pure fiscal expedience. The increase in the price Belarus pays for Russian energy initiated in 2006 left a gaping hole in the Belarusian economy. By 2011, Belarus will pay market rates for Russian gas. Efforts to identify alternative cheap energy sources (Venezuela, Azerbaijan, Iran) have thus far yielded few results, and Europe won't provide economic aid without fundamental political reforms. There is nothing left to do but sell.

Oligarch Envy

However, there are other, social motivations for the current spate of sales.

The Belarusian ruling elite is acutely envious of its counterparts in other post-Soviet states, especially in neighboring Russia and Ukraine. Government officials there -- or, more accurately, the ruling business elites -- tend to be very wealthy individuals. They vacation on the Riviera and educate their children at the Sorbonne and Harvard.

Their counterparts in Belarus, on the other hand, are forced to be cagey about their relatively meager wealth, which is under constant threat of seizure by the authorities. Pity these martyrs of Belarusian social equality! The Gini coefficient (a measure of inequality of wealth distribution) is comparatively low for Belarus (3-4). By contrast, Poland and Lithuania have a coefficient of 6-7; the United States, 9; and Russia, 13.

The recent burst of privatization is not only a gold rush for the already powerful, but could herald a fundamental change in the style and substance of Belarus's political system.

Belarus's president, Alyaksandr Lukashenka, long ago abandoned the populist people's avenger persona that brought him to power in 1994. He has long since exchanged that role for one of "leader of the bureaucrats." Privatization may lead to the further consolidation of this role -- in defending Lukashenka, the new Belarusian oligarchs will also be protecting their own wealth.

This presents Belarus's leader with a few problems. First, exerting control over oligarchs is trickier than controlling cowed subordinates. Second, in the wake of the privatization process, Lukashenka will likely lose the support of his traditional power base -- the common people. Economic circumstances already make it difficult to provide socialist-style subsidies for all, and privatization will only exacerbate that difficulty.

In the short term, a shift in the power base -- from the broad masses of the poor to the narrow circles of the rich and influential -- might even result in a strengthening of the system. In the long term, however, the ever-widening gap between the haves and have-nots will undoubtedly lead to corruption and possibly social unrest. In such circumstances, Belarus could rapidly descend on a path similar to the one that led to the demise of the USSR. It was, after all, the corruption of the system under Khrushchev and Brezhnev that augured the beginning of the end of the Soviet Union.

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