For a quarter of a century, Western Europe and North America paid little attention to Alexander Lukashenko's increasingly repressive dictatorship in Belarus. The events in and around this country since August 2020 are also a consequence of this: Lukashenko perceived the West’s behaviour as passive approval of his regime.
Economic relations with Belarus – that is de facto, with the Lukashenko regime – were very rarely present in political, public and media discourse in Austria until August 2020, not to mention any consideration for human rights, morality, international law, etc.. This study attempts to fill that gap, among other things by constantly relating politics to economics. The study of any area of contemporary Belarus must assume a constant close connection between these two factors: the more autocratic a regime, the more implausible are narratives of an apolitical economy and apolitical trade. At the same time, the point is not to criticise someone in particular, but to point out relevant empirical facts. All the information used were taken from open sources.
Specifically, this paper addresses the following questions:
- What is the nature of the political and economic system in Belarus, how tight is Lukashenko’s control of the Belarusian economy?
- What is the political background of Austrian-Belarusian economic relations?
- What type of trading partner is Belarus for Austria (considering, among others, the activities of Telekom Austria, Raiffeisen Bank International, Kronospan)?
- How (in)effective are EU economic sanctions?
- How deeps is the West’s (lack of) understanding of recent political and economic developments in Belarus (and Russia)?
In addition, the paper offers some recommendations at the end.
All translations from German and Russian are by the author.
The Political and Economic Context in Belarus
Even after gaining its independence at the end of 1991, the Republic of Belarus remained a planned economy. Market elements were only introduced to a small extent. A large part of the workforce remained and still remains employed in state-owned or state-controlled enterprises, and the state is still the largest investor in the country. Large state-owned conglomerates, which account for about half of the workforce, are required to avoid layoffs (unless for political reasons, in which case they are even desired) and to increase wages regularly. Their business model is based on large production volumes. They have to buy primary material from suppliers assigned to them, most of whom are also state-owned companies. The state-owned enterprises, most of which are unprofitable due to their outdated product range and high staffing levels (exceptions are the suppliers of petroleum products and potash fertiliser) receive cheap loans from the state and some private banks, which, in turn, are capitalised by the state. As a consequence, around 70 per cent of Belarus' economic output is still generated by state-owned enterprises.
Only when the economic situation increasingly deteriorated, the state leadership (i.e. Lukashenko himself) decided in 2007 to gradually deregulate parts of the economy. State-set prices were now only maintained for goods which the state considers socially important, such as food or medicine. The registration of new enterprises was simplified, and the reporting obligation for private and parastatal enterprises was abolished. However, the state-owned large manufacturing enterprises continued to receive state instructions. Also, to this day, private enterprises – with the exception of the IT sector, which is courted by the regime (which, as will be shown below, is also important for investments from Austria) – are steered, bullied and, if necessary, forced to close with the help of harassing ‘audits’ by tax and financial authorities, administrative pressure and coercion, but also informal agreements.
However, this variant of state capitalism led the country into an institutional dead end, since it largely preserved obsolete structures dating from the Soviet era. The orientation towards the fulfilment of central instructions and the strengthening of the state administrative powers of control and law enforcement restricted economic flexibility. Lukashenko, however, was never concerned with a more effective economy (or "even" an increase in the general prosperity of the population) as such, but with the use of economic tools and conditions to control and dominate as large a segment of society as possible: if large parts of the population are employed by state enterprises, they are of course ultimately also kept "in line" by the state.
From the beginning of his rule (1994), Lukashenko had made sure that he does not have to consider interest outside of those of his own clan. Under his rule, all mechanisms of self-regulation in political, economic and social life were gradually eliminated. In the economic sphere, market elements such as free pricing and competition are highly limited. In social and political life, institutions of democratic self-government were abolished or degraded to de facto "empty shells". All this allows Lukashenko to make all political, economic and managing decisions from the sole perspective of maintaining his power. In Belarus – as in Russia and in most of the former Soviet republics in Central Asia – there is a neopatrimonial political system, which means that rule is exercised through a combination of personal power and bureaucratic regulation. The supreme patron – Lukashenko – stands at the top of a pyramid of networks controlled by subordinate patrons and a layer of high functionaries in administrations and enterprises he appoints and replaces at will. This allows him to siphon economic rents, preferably from commodities production and energy business.
Thanks to this state of affairs, the dominant state-owned enterprise sector is his most important instrument of power, along with the security apparatus. Especially in the provinces, state-owned enterprises can exert political, social and personal control particularly effectively, as they are often monopsonist employers. For this reason, too, no far-reaching reforms of the Belarusian economy are to be expected as long as Lukashenko is in power: if he were to change this, he would effectively undermine his own rule. Comprehensive privatisation was thus never an option. Hence, Western companies who invest in this system or participate in it – in whatever way – inevitably contribute to the consolidation and perpetuation of Lukashenko’s rule, regardless of their claims to be "not interested in politics’ and to ‘have to abide by [his, M.M.] laws’.
Lukashenko's economic model can only survive in the 21st century through its continuous reliance his big brother in Moscow: Vladimir Putin’s Russia spends billions of dollars every year to keep Lukashenko in office. This is done in various ways; for example, through deliveries of natural gas and oil at prices far below what other customers of the Kremlin (including in the EU and, of course, Austria) have to pay. This allows the Belarusian dictator to maintain his population's standards of living, which quells social unrest, and to afford his security apparatus (with the secret police KGB, which was not even renamed in post-Soviet times).
On the Political Context of Austrian-Belarusian Business Relations Since 2017
Bernd Alexander Bayerl, Austrian Ambassador to Belarus, was quoted in 2017 in a pro-Lukashenko source praising the regime for its "responsible stability policy". Valery Voronetsky, Chairman of the Committee on International Relations of the House of Representatives of the National Assembly (the Belarusian Parliament, which is in full allegiance to Lukashenko), returned the favour: He praised Austria for ‘contributing to the expansion of cooperation between Belarus and the EU, its business structures and associations’.
In 2017, Minsk hosted the Organization for Security and Co-operation in Europe‘s (OSCE) Parliamentary Assembly. At the event’s margins, Lukashenka held talks with then OSCE’s chairman, Austrian Foreign Minister Sebastian Kurz, who had personally gifted him wooden skis: ‘That meeting turned out to be instrumental for enhancing Belarusian-Austrian dialogue, particularly as Kurz later assumed the position of his country’s Federal Chancellor.’ He then invited Lukashenko to Austria in March 2019 (reiterating an invitation previously extended by Austria's President Alexander Van der Bellen), an invitation Lukashenko accepted, praising Kurz for his ‘great contribution to the rapprochement of Belarus and the EU’ and particularly emphasised his regime's good economic relations with Austria and its investments in Belarus.
Lukashenko's visit to Vienna took place in November 2019 and was even more noticeable given he had turned down several previous invitations to travel to the EU. For example, he declined attendance to the Eastern Partnership’s Brussels Summit in November 2017, to the World War I anniversary events in Paris in November 2018, to the Munich Security Conference in February 2019 and to the World War II remembrance ceremony in Warsaw in September 2019. The Belarusian political scientist Artiom Shraibman (who left his homeland for Ukraine in the spring of 2021) considered Lukashenko's trip to Vienna as "reward" for Austria as it has always supported the abolition of the European sanctions against his regime and also for being the alleged second largest investor, after Russia, in the Belarusian economy.
In Vienna, Lukashenko was received with military honours in the residence of the Austrian President – the Hofburg palace. Both Van der Bellen and Lukashenko praised the bilateral relationship. In a joint press conference, Lukashenko spoke of Austria as an ‘extremely important and reliable partner’. Van der Bellen added: ‘Austria is the second largest investor in Belarus. We are very keen to further deepen these good economic relations’. He also credited Lukashenko for having contributed in ‘bringing Belarus closer to Europe’ and in ‘easing tensions’. Still, Van der Bellen could not fail to mention Lukashenko's upholding of the death penalty – reason for which Belarus is not a member of the Council of Europe – noticing that ‘it is inevitable that there will also be differences of opinion among friendly nations’. Lukashenko countered that the death penalty had been ‘introduced by a referendum in 1996’ and could only be abolished again with such a referendum. The Austrian side did not react to what was an open lie and kept just as silent when he claimed that, according to opinion polls, the majority of the Belarusian population supported the measure, and that ‘a referendum is not worth it’, adding cynically that ‘that's just the way democracy is’. Instead of pointing out to him that Lukashenko himself had gradually abolished democracy in Belarus in the 1990s and replaced it with his personal dictatorship, Van der Bellen literally declared that he ‘understood’; and the topic was not mentioned again. This passivity was all the more incomprehensible that Van der Bellen grew up politically with the anti-authoritarian Greens – which he led from 1997 to 2008. The common ground Van der Bellen and Lukashenko thought they had found was even more disingenuous at the geopolitical level. At the joint press conference, the latter pretended not to understand what was wrong with his human rights policy. Instead, he painted a picture according to which many things are better in his country than, for example, in Austria. In Belarus, he said, there is a ‘right to life’ and a ‘right to work’, i.e. the guarantee that ‘every citizen can work – even abroad’. Pretending there were ‘no restrictions today’ on mass media, he additionally claimed that education in Belarus – unlike in Austria – was free. Every Belarusian has middle school education, he said, and more than half receive free higher education. ‘We also have a free healthcare system. Name me just one country in the European Union that can be proud of such achievements’ concluding that Austria and the EU would ‘soon learn democracy from Belarus’. The Austrian side did not defend itself against these absurd taunts, and Lukashenko’s antisemitism, which has becomes more apparent over the years, was not even addressed. It would actually have suited Austria, for well known historical reasons, to draw attention to this. Instead, the Austrian side also ‘accepted’ Lukashenko as the ‘host’ of the Maly Trostenets memorial (at this place the German occupiers murdered at least 65,000 people, primarily Jews, in 1942-1944), where Van der Bellen and the German Federal President Frank-Walter Steinmeier went in June 2018 and met Lukashenko, among others. Obviously, it was much easier to relish in the ‘good relations between Austria and Belarus’ than to address such unpleasant facts.
During his visit to Vienna, Lukashenko also met the Speaker of the National Council (the Lower House of the Austrian Parliament), Wolfgang Sobotka and attended the ‘Belarus-Austria Business Forum’ at the Austrian Economic Chamber. Nobody in Vienna was visibly afraid of being seen with the dictator from Minsk.
As recently as mid-August 2020, a few days after the start of the extensive protest movement against the rigging of the presidential elections in Lukashenko's favour, Austria's Foreign Minister Alexander Schallenberg (People's Party) defended the Belarusian dictator's visit to Vienna. But now, according to Schallenberg, ‘red lines have clearly been crossed’; the elections ‘were clearly a farce, not free and not fair’. Lukashenko had his power machinery take severe action against the demonstrations, which is why the EU implemented sanctions against his regime. However, soon the rumour began to spread that the Austrian Government was trying to soften them as much as possible or to arrange them in such a way that Austrian investors in Belarus would be affected as little as possible, and preferably not at all. Schallenberg – unsurprisingly – strongly denied this.
Between August and the end of November 2020, and according to the United Nations, more than 30,000 people were arrested, at least 2,600 injured, and more than 450 tortured in Belarus. The opposition counted eight dead. Publicly, all parties represented in the Austrian National Council except the right-wing populist and pro-Russian and pro-Lukashenko Austrian Freedom Party supported the protests. A look at the voting behaviour of the Austrian EU parliamentarians shows a clear line: in every vote, all EU parliamentarians apart from the Freedom Party delegation supported sanctions and stood behind the protesters, most recently in mid-June 2021 due to the forced landing of a Ryanair flight in Belarus by a Belarusian fighter plane on May 23rd, 2021 in order to seize opposition activist Roman Protasevych (Belarusian: Raman Pratasevich). Unlike other right-wing parties in their group in the European Parliament, such as the Alternative for Germany (Alternative für Deutschland, AfD), the Freedom Party members abstained from voting instead of voting against the sanctions against Lukashenko.
At the end of April 2021, all Austrian parties except the Freedom Party took part in a meeting with Belarusian opposition leader Svetlana Tikhanovskaya (Belarusian: Sviatlana Tsikhanouskaya) in Vienna, initiated by the green member of the National Council Ewa Ernst-Dziedzic. Van der Bellen and Chancellor Kurz also met Tikhanovskaya on this occasion. She was subsequently received several times in Vienna at the highest level (by the president, the chancellor, and the minister of foreign affairs), during which the business of Austrian companies in Belarus, which benefit Lukashenko's regime, were also and especially discussed. Austria, however, had no intention to promise to limit or stop these activities. In her meetings Tikhanovskaya regularly emphasised that Austrian companies should not cooperate unconditionally with Lukashenko's regime. However, all this did not have any impact on the situation ‘on the ground’ in Belarus or on Austria‘s economic relations with the regime there. As Austria's Foreign Minister Michael Linhart (People’s Party) said in November 2021 that "our goal [...] is not regime change".
After the abduction of Protasevych, the EU agreed on a new set of sanctions. However, according to the Austrian Broadcasting Corporation (Österreichischer Rundfunk, ORF), this had not been ‘self-evident’, as Austria stood ‘on the brakes’. Pavel Latushko, a former Belarusian Minister of Culture and now in the exiled opposition, criticised Austria for ‘putting business interests above human rights’. He also mentioned sources from Brussels that confirmed to him that Vienna was blocking a part of the financial sanctions against Lukashenko's interests. Predictably, Austria‘s minister of foreign affairs rejected such reports as ‘absurd’. But the largest opposition party, the Social Democrats, had none of it. Their deputy parliamentary group leader in the National Council and spokesman for European affairs, Jörg Leichtfried, stated:
during the visit of the Lithuanian head of government [Ingrida Šimonytė], [Federal Chancellor] Kurz emphasised that Austria supports targeted sanctions against Belarus. Less than a week later, we learn from the media that it is precisely Austria that is putting the brakes on sanctions against the banking sector within the EU. This is a slap in the face of the massively suppressed opposition [in Belarus], which had hoped for effective measures from the EU.
The liberal opposition party NEOS criticised Austria's ambiguity, in the voide of its spokesman for foreign policy in the National Council, Helmut Brandstätter:
Austria has been demanding clear consequences for Belarus for a long time. But apparently Kurz and [Foreign Minister] Schallenberg only call for sanctions when it doesn't affect their own people.
Brandstätter linked the preference of the People' s Party for ‘patronage politics’ over ‘human rights’ to the strong presence of Raiffeisen Bank on the Belarusian market, which will be explained below. According to Brandstätter, there should be no exceptions to the Lukashenko sanctions for the banking sector ‘just because the People''s Party has a personal interest in it’. According to Brandstätter, banks are significantly involved in financing the regime in Minsk, and her thus demanded that the sanctions be enforced without any ifs or buts. Otherwise, Austria would ‘oppose the EU and side with a dictator who tramples on the citizens' rights’.
The ‘Belarus policy’ of two Austrian parties that could not be more different – the Freedom Party and the Communist Party – shows peculiar (because common) features. In debates in the National Council, Freedom Party representatives always spoke out emphatically against any sanctions against Lukashenko and his regime. MP Axel Kassegger distinguished himself with enigmatic statements such as: ‘In any case, the use of a diplomatic format would be more effective [than sanctions], since the problems are far trickier.’ Further support for Lukashenko, at times, had come from the Communist Party of Austria. Because of the smallness and minor relevance of this party at the Austrian federal level (it has not been represented in the National Council since 1959), this would not have been discussed here if it had not surprisingly won the municipal elections in Graz, the capital of the province of Styria and Austria's second largest city, on September the 26th, 2021. A functionary of the Communists and elected representative in Graz, Werner Murgg, had travelled to Belarus (officially on holiday) and appeared on state television to praise the country’s order and stability. He also spread the conspiracy theories so cherished by the regime that an hybrid war is being waged by the west against Belarus and ‘that's why terrible and horrible things are being shown in Western media’. In a written statement to the Viennese daily Der Standard, which reported on it, Murgg justified his trip and also reiterated these statements. He again rejected the EU sanctions ‘because they only ever affect the poorest in the country’. A little later, however, Murgg – apparently after being disciplined by the party’s leadership – added that he ‘clearly distance[ed] myself from the regime in Belarus’.
According to Murgg, he had been in Belarus for a few days under the mediation of the Austrian-Belarusian Society (Österreichisch-Weißrussische Gesellschaft, ÖWG). This is a rather peculiar association, which – despite its name – cares less about Belarus than about its ruler, whose line is always followed without reservation. To no one’s surprise, it consistently opposed all EU sanctions.
As for the Austrian Economic Chamber, traditionally close to the People' s Party, it shows no inclination to distance itself from Lukashenko either. Its Moscow-based representative, Rudolf Lukavsky, who is also responsible for Belarus, said: "The decision on sanctions is, of course, a matter for politics. We think it is important to keep channels of communication open even in difficult times and with difficult trading partners."
It is however worth remembering that Moscow views those who call for such a dialogue as ultimately unworthy of one. In the words of Anton Shekhovtsov (University of Vienna):
Putin’s Russia does not define itself in relation to the EU. It is considered weak, indecisive and on the verge of collapse — a development that Moscow is happily trying to advance through support of anti-EU parties [like the Austrian Freedom Party, M.M.]. Putin looks at Europe with disdain.
And all efforts at dialogue with Moscow and Minsk will not change the fact that Lukashenko has recognised Crimea as part of Russia on November the 30th, 2021: ‘We all understood that de-facto Crimea is Russia's Crimea. After a referendum Crimea has become Russia de-jure as well’. In the EU – and also in Austria – this far-reaching declaration gathered little attention despite its support for one of already several violent border changes within Europe (Moldova, Ukraine, Georgia) led by Russia.
In mid-December 2021, the Austrian Government decided to replace the Ambassador to Belarus, Aloisia Wörgetter, who had been in office there since 2018. Latushko (himself a former Ambassador of Belarus) drew attention to the fact that a new Austrian Ambassador would have to present Lukashenko his credentials, which would mean official. The Austrian minister of foreign affairs retreated to the formal position that ambassadorial changes ‘generally have a lead time of several months’. Apparently, official Vienna hopes that this problem will somehow solve itself, even if it is completely unclear how exactly this could look like. But if precedent experience means anything, a new Austrian Ambassador will likely solemnly present their credentials to Lukashenko – in order to ‘build bridges’, ‘keep channels of dialogue open’, ‘contribute to de-escalation’, etc. The fact that Lukashenko had a nuclear power plant built by Russian companies, which went into operation in 2020, has gone completely unnoticed in an usually extremely anti-nuclear Austria. Lukashenko's goal is to export the electricity produced there to Ukraine, Poland and the Baltic countries, which would again bring him an additional rent and facilitate the survival of his regime.
Austrian media coverage on these issues has been severely lacking. Austria's most popular newspaper would simply comment that Lukashenko ‘actually won elections with almost 90 percent of the votes – without having to falsify them’, or that he had already been diagnosed with a severe personality disorder in 1976, a diagnosis confirmed by a Soviet military psychiatrist in 1982.
Martin Malek is an independent Austrian political scientist and contributor to the IWM’s Chronicle from Belarus.
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