Barricades of Tomorrow

While Lukashenka was eating water porridge in Sochi, a new reality has come.

The results of the Sochi talks held on February 7 are disappointing. He asked gas at $100 and was offered only at $127. The oil will be as equal as the world prices, while a package of integration road maps is on the horizon of a misty future. Now the business community and analysts eagerly try to guess what will happen to prices, rates, state programs and private business plans.

Lukashenka determined the main direction on the eve of the meeting on February 6.

"First of all, the economic sector and the government as a whole need to have plans to respond to any possible challenge, rather than to rush to the barricades when the fight has already begun. The main thing is to conserve peace and tranquillity in the country, the sustainability of the economy and the confidence of citizens about the future".

Our plans have been stable in recent years. They are properly approved, but, for some reason, by a very peculiar algorithm. First, the government forecasts economic growth by 2-2.5%. Therefore, after the meetings the dose doubles, and in reality, it does not even reach 1.5%.

Analysts predict scandalous dismissals in the government, which for some reason occur in completely different terms. Officials who failed with previous programs go to bank boards, Eurasian Committees or the Senate. They are replaced by even more market-oriented and pragmatic colleagues. Like their predecessors, they obey instructions from above to maintain the same socio-economic model.

Everything is more or less stable with peace and tranquility. The economy has little growth, which is not accelerated in any way. However, the plans for inflation and some other indicators are being fulfilled, so one can win over some positive reports.

Explanations for failures are always at hand. First of all, there are external circumstances. They are unfavorable for the economy. It is a good option for excuses. World trade and political conflicts, protectionism, global warming, the Chinese virus, the intrigue of western and eastern regulators - all this hinder plans to be fulfilled.

Secondly, there are internal problems. It involves poor discipline. Directors and intermediaries play dirty games, and specialists escape. The population does not live within their means, but it does not want to give birth and do not want to invest in their native economy. One feels utterly discouraged.

Perhaps the government could find tools to ensure GDP growth, budget performance, price stability and even progressive income growth for all segments of the population. However, the parts (political will) for these tools have not been brought in for a quarter of a century. Beautiful words cannot replace it. It requires specific and unpopular solutions. Not for the "exam year", but for decades to come.

Undoubtedly, officials will gladly obey the order "not to rush to the barricades". However, when did they show readiness to make sacrifices? The initiative in the administrative and command system is always punishable, and the inclination for radical changes is a sign of unsuitability for a profession.

Yes, all day long they wrote and rewrote programs, strategies, laws, decrees and regulations. They spent days and nights in Moscow corridors to get a discount on prices for hydrocarbons. They broke through the Rosselkhoznadzor barrier reef. It may be too pathetic to call it a feat, but something "heroic" sometimes emerges.

Of course, it hasn't come to the barricade yet. It cannot be remembered, whether any of the high-ranking officials took a risk, challenging the superior instructions. Or may the public simply not know who sacrificed his career, bonus, position, cottage and other benefits, defending his professional opinion and civic position? The country barely knows its "heroes" of the invisible management front. It's more about officials, directors and businessmen arrested for bribery and kickbacks.

One can demand "no resident of Belarus, no enterprise to experience consequences from any manoeuvres of our partners". But the reality will bring this for sure. The more populism invested in search of mechanisms to compensate losses, the more painful it will be. After all, the "tax manoeuvre" and requirements to fulfill the terms of the union agreement are not just "losses". This is a new reality.

"Regular disputes on energy issues" with Russia have exhausted the model of "promises of integration for energy and financial resources". The search for alternative energy suppliers will no longer save refineries. There will be no super profits from the export of petroleum products if oil prices are set as explained recently by First Deputy Prime Minister of Belarus Dzmitry Krutoi.

The saddest part is that while the rulers were eating water porridge in Sochi, the gas price fell to a 16-year low of $102.7 per 1000 cubic meters in Belgian Zeebrugge, to $95.7, and in the American Henry Hub to $52. But the Western competitive markets are far from there. Since plans to achieve Smolensk prices have collapsed, another barricades will be closed by Belarusian industrial enterprises. From 1 January 2020, the gas price for them is about $263 per thousand cubic meters. Unfortunately, not everyone in the country is entitled to preferential tariffs or an opportunity to set 100% markup.

Belneftekhim will have a good reason to increase retail gasoline prices not at a penny, but more. It will not be done at once to avoid social unrest. Or they may be deregulated at all. I remember that in November 2018 the concern carried out a survey. The majority of respondents spoke out for market prices. Now there are conditions to meet the wishes. Increased transportation costs will trigger price growth for all other goods and services. So, the achievements of the National Bank to curb inflation and plans for inflation targeting are about to face a great challenge.

There are many ways to deal with the loss of oil and gas revenues. One can impose austerity, freeze salaries of officials, reduce bureaucratic and power apparatus, get rid of unused state assets, limousines and residences, abolish pompous parades and championships.

Or one can save money on science and social sphere, increase taxes and fees from the population. And, of course, to strengthen control. Fines and additional taxes will not fill the hole in the budget, but something may be collected.

So, it's up to you fathers to decide which order to issue: "On!" or "Follow me!" Anyway, there is nowhere to retreat. We have macroeconomic stability and confidence in the future behind us. But I would like to know how it will look like...

Leonid Fridkin, lfriedkin.com