The next Russian puppet?

Belarus does not always set people’s imaginations alight. But it should at least grab their attention, now Russia threatens its independence. Almost 40 per cent of Germany’s imported gas arrives through Belarusian pipelines. Belarus’s loss of independence would directly affect Poland’s relationship with Russia, and upset Ukraine’s balancing act between east and west. Yet Russia still feels the former Soviet Republic is part of the motherland. Belarus is a primary Russian transit artery to Europe and a strategic buffer against Nato. The armed forces of the two countries are integrated. And now Russia may have finally bought the subservience of its neighbour with a £1.8bn loan.

Since 1994, the Belarusian President Alexander Lukashenko has maintained an irksome autonomy from Russia, partly through determination and guile, but largely thanks to his ability to control his people. Now, however, the economy is in crisis and, after 17 years in power, Lukashenko is being forced to choose between control of his country, and independence from Russia. He could lose both. And the immediate beneficiary of his troubles is likely to be Russia.

Until recently, the discomforts of this “brotherly” relationship have been borne by Russia. On becoming president, Lukashenko swiftly moved Moscow’s men out of the political apparat and the KGB (still so named). He made a virtue of the fact that he ruled a congenitally Sovietised country. He retained state control of the economy and kept Russian oligarchs out. He grasped that this country of industrial workers and collective farmers preferred full employment and rudimentary social welfare to the hazards of post-communism. He pursued a model of “union” with Russia that sustained Belarus’s sovereignty yet secured a significant gas subsidy at the expense of Russia’s increasingly cost-conscious energy sector. On these foundations he built the most authoritarian regime in Europe.

Since taking power 2000, Vladimir Putin has used stealth and pressure to destroy this malign synthesis, and Lukashenko has responded with duplicity and defiance. As his nerves and his country’s financial reserves wore thin, he also signalled his interest in a path to the west. When, in 2009, the Hobson’s choice—lose your gas subsidy or surrender your assets—could no longer be deferred, the IMF dispersed a £2.1bn loan, and the EU devised an additional £2.5bn package. This was done under no illusion that Lukashenko would convert to western liberalism. But he was expected at least to adopt western pragmatism and a moderate degree of reform.

Instead, he responded with a toxic dose of communist pragmatism and communist economics, pretending to observe the IMF’s conditions while funds intended to restructure the economy were simply used to subsidise it. All of the EU requirements about the election process were observed—until the election itself. Since 1994, no Belarusian election has met European standards. But the presidential elections of December 2010 failed even to meet Belarusian standards. So blatant was the falsification, so brutal the crackdown, that it seemed almost designed to rebuff the west.

Perhaps it was. Inside the Belarusian regime, those open to reform are amply balanced by those who dread it, and it is the latter who command the security services and police. It is also possible that the real election returns induced panic in Lukashenko. For such a leader, winning can be fatal if he wins by significantly less than he did before.

On 4th June, Lukashenko finally accepted the Russian coin: £1.8bn in exchange for the “privatisation” of £4.6bn of state assets. Yet it is far from certain that either party will fulfil its bargain. Belarus is insolvent, on the verge of hyperinflation. Despite oil price rises, Russia is not awash with money, and even it demands market reform from Belarus in return for its cash.

Russia might not get this. Lukashenko’s contract with his people is frayed, and a dose of real economics may break it. True to form, he has requested a new standby facility of up to $8bn from the IMF. No one will benefit if he gets it, and the EU, which rescinded its £2.5bn offer after the fraudulent election, seems to agree. The west has failed to impose “conditionalities” on this regime. In time, circumstances will impose new conditions. It is in Europe’s interest to prepare for that day.