Suddenly, just when it seemed like the worst was over, everything seems to be crumbling. Hard currency reserves are practically depleted and, on the verge of de facto devaluation, the Belarusian ruble is now being exchanged at various rates, depending on which bank one visits.
These events allow us to draw certain conclusions that, although not new, are important in the light of the currency crisis:
When Russia start cutting back on them in 2007, significant problems in the Belarusian economy began to emerge. Notice that it was precisely in 2007 that Belarus's foreign debt started to rise.
It's hard to believe that until the mid-naughts, Belarus survived without having to take significant loans; now, the country's survival depends on them. Without them, we see the "cracks" that are becoming evident today.
Ironically, in return, Minsk simply "dumped" the IMF, having reneged on even the most minimal contingent conditions the fund attached to the loan (i.e. the creation of an agency to finance state programs and a committee to oversee privatization, or the privatization of five major industries).
Doubtless, without the IMF loan, the economic situation in the country would have been far worse than it is today. And so would the mood of the populace. With the IMF loan, the presidential election campaign would have transpired in a completely different social climate -- and it's doubtful there would have been talk of even a 50 percent share of the vote for Lukashenka.
Moreover, on December 19, 2010, there would have been far more than 10,000 to 30,000 people protesting the election results on Minsk's central square.
The IMF is primarily the United States and the European Union. It is a mystery to me why they chose to bail out Lukashenka's regime.
-- Belarus is very sensitive to outside pressure, which can be very effective.
So what leverage does the West have? There are currently rumors that the EU might follow the United States' example and impose sanctions on Belarus petrochemical giant Belnaftakhim by boycotting products made by Belarusian oil refineries. It's hard to say whether this will happen, as it may backfire on European business itself.
But the EU does have certain tools with which it can apply pressure on Belarus without incurring damage to itself.
It can ban loans to Belarus via international financial institutions such as the IMF, the World Bank, and others. It can outlaw loans to Belarusian commercial banks. It can prevent the sale of Belarusian bonds in Europe. (Such bonds went on sale in January, just when European politicans were growing increasingly outraged over political repressions in Belarus.) It can block Belarus's accession to the WTO, an organization that Belarus customs union partners Russia and Kazakhstan are about to enter.
In a word, if the West really wants to see political prisoners in Belarus set free, it has a whole arsenal of tools to do that.
And so does Russia.
For six months, Moscow waged a media war against Lukashenka, culminating in a series of scathing "Godfather" documentaries. What it didn't do was rely on its oil, gas, and monetary loans.
Pressure on the Lukashenka regime is simply a question of political will.
-- Valer Karbalevich