‘One Tyrant Is Trying To Manage Enterprises’

How China became the main enemy of Belarusian industry.

Belarusian officials are increasingly complaining about China, which is pushing them out of the Russian market. Chinese trucks compete with MAZs in Russia, and household appliances produced in China are displacing their Belarusian counterparts.

How competitive are Belarusian products today? Charter97.org website talked about this with Belarusian economist and political scientist Dzmitry Balkunets:

“It seems to me that this is an indicator of the situation in which during the 30 years of Lukashenka’s rule, Belarusian enterprises created in the Soviet Union did not receive any modernization. They simply work according to the technologies and established technological structures that developed 40 years ago, or even more. Obviously, in such conditions they cannot compete in leading markets.

The Russian market is quite competitive, and taking into account the fact that Western companies are leaving, Chinese ones are entering. Russian companies are also increasing their production; for example, in February of this year, a new tractor production plant was built completely from scratch in Rostov.

This will continue to happen because Lukashenka did not modernize anything. This will apply not only to mechanical engineering, but also to other industries, including agriculture, processing industry and other areas. The only salvation for Lukashenka will be the introduction of some quotas and restrictions for Chinese manufacturers on the Russian market.

But Russia is unlikely to agree to this, because this situation is not a headache for the Russian government, it is a headache for Belarus. Of course, in such conditions, this will globally lead to the fact that production will work at the warehouse, as has been the case for many decades in Belarus.

Products that no one needs will continue to be produced. For example, there is such a watch factory “Luch”, I don’t know who wears these watches, but it is obvious that they are not able to compete today, to be some kind of really interesting enterprise and produce cool products. Or the Motovelo plant, which Lukashenka has been trying to squeeze out for several years, transfer to someone, and so on. They are not in the business of producing high-quality bicycles that could be used for city rentals and so on.

This, of course, is due to the fact that one tyrant is trying to manage enterprises. The result is a situation where any competition drops, people are afraid to take any initiative, because they will be punished for it. Officials receive some meager salaries and simply carry out the plans that are handed down to them from above, without trying to think about any kind of modernization.

There is another problem that is now emerging in both Russia and Belarus; it is related to technological lag. All leading technologies of the countries of the former Soviet Union were obtained or stolen from the West. This includes machine tool manufacturing, aircraft manufacturing, and automobile manufacturing - all this was stolen in the West. The USSR practically did not have any of its own technologies; almost everything was copied and so on. And now, when Russia and Belarus are cut off from technology, they will either steal and clone, or work on what they have.

— Things are bad even in the traditionally profitable areas. For example, oil refining. Last year ended with a loss for Navapolatsk Naftan and Mazyr Oil Refinery. Belaruskali also has problems, it is being forced out of the large Chinese market. What fate can await the flagships of Belarusian industry?

— Russia is likely to take away these assets someday. For example, these two refineries may go to Rosneft or some other Russian corporation, this may well be the case. It is obvious that Belarusian refineries have lost their key markets — Ukrainian and European, but at the same time they use Russian oil.

Due to the sanctions policy, this oil can now only be used for domestic needs. Probably, they have an opportunity to sell these refined petroleum products on the Russian market due to well-known reasons that arose after the attacks on Russian refineries.

At the same time, I believe that such a situation could be a threat for the Belarusian oil refineries themselves, because any arrival of an explosive object by air or something similar at these enterprises could paralyze the Belarusian economy. Moreover, Belarus generally does not have the technology for any attempts to modernize or improve its refineries.

If we talk about the unprofitability of these enterprises, then I would probably do it with a stretch, because after all, quite a lot of profit was generated there. But the money was transferred by Lukashenka’s family to offshores, not even to offshores, but to some Arab countries, where he transferred assets to his relatives. I believe that now they will try to increase fuel prices and so on. It is unlikely that these enterprises will be unprofitable globally; their profitability will simply drop significantly.

As for the potash plant, there was a problem related to the construction of the second complex, which was handled by the oligarch Mikhail Gutseriev. Due to sanctions, this project was postponed. As I understand it, the state has now taken over the assets and is trying to somehow launch this project there.

The main direction where these products were planned to be sold was the Chinese market. But after dumping, which was organized by a Canadian company, a very uncomfortable price range, I would say, for a Belarusian enterprise, has developed on the potash market. Most likely, Canada is generally considering the possibility of ousting Belarus from the world potash market. This will have catastrophic consequences for the entire Belarusian economy, because the potash plant was a city-forming enterprise that generated fairly large foreign currency earnings.

Belarus also lost its port in Klaipeda, which made the logistics of cargo delivery more complicated. Not just cargoes containing potassium, but all of them. You can somehow send it to China by rail, but it takes a very long time, about two weeks one way and two weeks the other way. That is, in almost a whole month the train makes a turnover. All together, this makes the logistics of delivering these goods extremely expensive. But at the same time, production may be carried out even in the same volumes as before 2020, while profits have fallen significantly. This is all a consequence of the anti-state policy that Lukashenka pursued with the support of Putin.

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