Defiant Belarus faces uncertain future

“Dictator starts burning the last bridges. Normally does not end well.”

This was how Carl Bildt, Swedish foreign minister, tweeted this week about a flaring of tensions between the European Union and Alexander Lukashenko, Belarus’s authoritarian president.

Minsk and Brussels carried out tit-for-tat recalls of ambassadors after the EU broadened sanctions against the country, called “Europe’s last dictatorship” by the US.

The former Soviet republic reacted harshly to the EU’s extension of travel bans and financial sanctions to another 21 officials, who were responsible for arresting democracy activists, and expelled the Polish and EU envoys from Minsk on Tuesday. Within hours, Lady Ashton, the EU’s top foreign policy official, responded by pulling out all EU ambassadors from Belarus.

“Brussels is choosing the path of escalation and tension,” said Andrei Savinykh, Belarusian foreign ministry spokesman. “This is a dead end.”

One explanation for Mr Lukashenko’s deepening defiance of the EU is that Belarus’s economy was saved from collapse last year by neighbouring Russia. This has given Minsk leeway “to react much more sharply to EU sanctions”, said Anna Maria Dyner, an analyst with the Polish Institute of International Affairs.

But Mr Lukashenko’s reaction may also reflect concerns that the Russian bail-out will only last so long. Although the EU’s sanctions appear limited, they could hamper Minsk’s efforts to win further international financing to support its inefficient, Soviet-style economy.

“I felt that these new sanctions were not enough, but even these soft steps seem to be working because the regime is fighting back,” said Irina Bogdanova, sister of Andrei Sannikov, a candidate in Belarus’s December 2010 presidential elections, later sentenced to a five-year prison term.

Relations have been frigid since Mr Lukashenko disregarded EU pleas to make the 2010 election free and instead rigged the vote. He crushed resulting demonstrations, arresting hundreds. The EU answered with sanctions aimed at key government officials, support for the fractured opposition and by hosting independent media outlets, mainly in Poland.

Belarus quickly found itself dealing with a balance of payments crisis set off by Mr Lukashenko’s reckless pre-election salary and pensions rises.

The economy nose-dived. Foreign currency disappeared, leaving queues to buy euros and dollars outside currency exchange offices. Shops stopped importing foreign goods and prices of food and fuel soared.

However, Mr Lukashenko, a wily survivor who has ruled since 1994, squashed dissent. Even a protest using stuffed animals carrying signs resulted in a jail sentence for the organiser.

A crucial boost to Mr Lukashenko came in November with a $3bn loan from a Russian-led group of former Soviet republics. In return, Belarus sold strategic assets to Russia, including the $2.5bn Belarusian share of a natural gas pipeline running across its territory to Gazprom.

But Andrew Wilson, author of “Belarus: the Last European Dictatorship”, says Moscow attached fewer strings than expected. Russia opted to display solidarity after Vladimir Putin launched his presidential re-election campaign by pledging to turn a customs union between Russia, Belarus and Kazakhstan into an EU-style single market.

“Lukashenko got a wodge of cash for relatively little,” said Mr Wilson.

But the cash may not last long. Although the economy managed to expand 5.3 per cent last year, growth slowed to zero in the final quarter, according to the IPM Research Centre, a Belarusian economic think-tank. Inflation hit an annual 108 per cent in December and the current account deficit is again creeping up.

Belarus is hoping for a loan from the International Monetary Fund, although the body is insisting on wide-ranging privatisation and economic reforms. Lilit Gevorgyan of IHS Global Insight, a political risk consultancy, suggested Mr Lukashenko was annoyed that wider EU sanctions could complicate its talks.

“Worsening relations with the EU send an alarming signal to the IMF that Lukashenko is sliding back to his old ways again,” she said.

Coming months look difficult. Mr Lukashenko’s support has withered from about 60 per cent before the last election, said Ms Dyner, to about a third in the latest surveys.

The EU has no plans to let up the pressure and prominent businessmen who provide crucial support for Mr Lukashenko could find themselves targeted by the next round of EU sanctions this month. Former Soviet states are balking at paying another tranche of their bail-out. And parliamentary elections due in autumn could add to pressure on the government.

“Belarus knows very well what it has to do: free political prisoners,” said Radoslaw Sikorski, Poland’s foreign minister. If it did not, he said, further sanctions could result.

By Jan Cienski, Neil Buckley, «Financial Times»