As the Russian ruble plunged 45 percent against the dollar last month, Andrey Kabanov made two forays from Belarus into Moscow. The entertainment entrepreneur is now the owner of two secondhand BMWs bought for about two-thirds the market price in his native Minsk. Not that he needed the cars for everyday use. “A friend is now driving one of them, and the other is just sitting in the garage," Kabanov says. "But it is an asset that I can always sell at a profit." Thousands of Belarusians such as Kabanov flocked into Russian cities before the New Year, taking advantage of the cheap ruble and the absence of border control between two countries united in a trade association known as the Eurasian Union.
For Belarusians, at least at first, their neighbor's economic crisis and worsening relations with the West brought a variety of benefits. When Moscow retaliated for EU sanctions by banning imports of cheese, apples, and salmon, some Belarusian businesses took to repackaging European products so they appear to have been made in Belarus. Two entrepreneurs involved in the repackaging business explained how the scheme works: EU-produced fruit and vegetables are swapped for their Belarusian-produced equivalents of inferior quality. The latter would be sold in the guise of EU produce in Belarus, while EU-made products would proceed to the much more lucrative Russian market. (Neither person involved in the repackaging would agree to be identified.)
Another scheme involved sending trucks full of EU produce from Belarus to Kazakhstan, also a member of the Eurasian Union. The cargo would never reach its destination, vanishing somewhere along the long route that cuts through Russia. Alterations to products exported from Europe also allowed a change in their nationality. Norwegian salmon salted in Belarus would become Belarusian, for instance, even if the entire process amounted to sprinkling a heap of fish with a handful of salt.
Many people are now opting out of the repackaging business, in part as a reflection of increasing legal risks and the waning appeal of the Russian market. The cross-border shopping bonanza has also ended now that the Belarusian ruble has fallen 30 percent against Western currencies this month, reflecting the country's overwhelming economic dependence on Russia.
When it comes to order, security, and relatively low corruption, Belarus looks something like a post-Soviet Singapore. But its economic policies are decidedly backward, smacking of the late USSR. "While the devaluation in Russia was conducted in a transparent way without imposing any restrictions on the circulation of hard currency, the Belarusian government opted for the most confusing and convoluted way possible," says economist Yaroslav Romanchuk. The explanation is simple: President Alexander Lukashenko had publicly pledged there would be no devaluation and no price hike, Romanchuk says, so when that outcome became inevitable, the devaluation was conducted in a way that allowed officials to avoid ever using the dreaded word.
The government first introduced an obligatory 30 percent commission on the purchase of hard currency, which over the next few weeks was gradually reduced to zero while the Belarusian ruble was allowed to fall by the matching percentage. When it became impossible to hide that the currency was being devalued, Lukashenko fired his prime minister and the head of the central bank, effectively using them as scapegoats for his own policies. To keep Lukashenko's promise, the Belarusian government for several weeks maintained a flat ban on raising retail prices for food and other goods. Some shops in Minsk were closed for daring to ignore it. As the situation became unbearable for businesses, the government eventually allowed the prices to go up—but only under a complicated formula for devising the price ceiling.
"When you do maths on the basis of that formula, you realize that people are forced to work at a loss. It is anti-business fascism," says Kabanov, the double BMW buyer who is also a prominent blogger.
As in the Soviet times, price manipulations led to shortages. Earlier this week, Belarusian social networks avidly discussed the virtual disappearance of tomatoes in central Minsk, and a visit to three otherwise well-stocked supermarkets on Tuesday found no tomatoes whatsoever. "None for a few days at least, and no aubergines either," said a shop attendant. "I've found tomatoes, will disclose the location for a modest donation to my Swiss bank account," joked one Facebook user from Minsk.
Economist Romanchuk expects the Belarusian ruble to follow suit as long as the Russian ruble continues its catastrophic slide, and the Lukashenko government's clumsy anti-market policies are likely to make Belarus even more financially volatile than Russia.
Lukashenko, a maverick leader who has ruled Belarus with an iron fist for 20 years, is facing new elections this fall. Election years are usually associated with massive giveaways in the form of pension and public-sector salary hikes. This year, however, Lukashenko will have to be more inventive to maintain his “stability for freedom” social contract with the population. Lukashenko’s propaganda is already switching away from promises of a better life, Romanchuk says, and instead contrasting the perceived stability of Belarus against volatility in war-torn Ukraine and crisis-stricken Russia.
As the war in Ukraine has unfolded, Lukashenko has distanced himself from Moscow by effectively condemning the occupation of Crimea and visiting Kiev in a clear show of support. But once dubbed "Europe's dictator" by former U.S. Secretary of State Condoleeza Rice, the Belarusian leader is unlikely to get too many favors from the West while his political opponents remain either in prison or under extreme pressure from the authorities. Lukashenko's unchanged harsh stance on the opposition is highlighted by the upcoming deportation of prominent human-rights advocate Yelena Tonkacheva, a Russian national who has lived in Belarus for two decades. She will be banned from entering the country for three years—ostensibly for violating speed limits on a motorway.
