Economic Consequences of the Protests in Belarus

By Lisa May, Alumna of The Fletcher School at Tufts University

Key Takeaways

• In 6 months of protests in Belarus, over 33 thousand people have been detained, and 269 persons are currently designated as political prisoners.
• Estimates place the loss from the ongoing unrest in Belarus at $500 million.
• Belarusian IT professionals are being offered fast-track visas by several neighboring countries, including Ukraine, Poland, Latvia, and Lithuania.
• Strikes have taken place even at large state-owned enterprises, historically considered as the existing regime’s electoral base.
• In January 2021, the International Ice Hockey Federation announced that Belarus will not be co-hosting IIHF World Championship scheduled to take place May 21 – June 6, 2021.
• Belarusian protesters have not achieved Lukashenka’s resignation and new elections yet, however, they did achieve non-recognition of the election results by the EU and the U.S. as well as imposition of several rounds of sanctions against high-level officials responsible for the human rights violations.

Introduction

Discontent with the results of the presidential election of August 9, 2020, Belarusians have been organizing peaceful demonstrations for over six months now. Despite the freezing winter temperatures, ongoing COVID-19 pandemic, and state repressions, Belarusian people have continued to protest, albeit in smaller numbers. According to the Human Rights Center Viasna, as of March 7, 2021, 269 people are considered political prisoners.[1] Additionally, within six months of protests, about 33 thousand people have been detained.[2] On February 16, 2021, Belarusian law enforcement officers raided homes and offices of human rights activists and journalists nationwide, arresting at least 40 people.[3] According to Human Rights Watch, the majority of the people targeted by raids have reported on the ongoing protests, documented   human rights violations committed by the police, or helped people in custody on politically motivated charges.[4] In November 2020, the Organization for Security and Co-operation in Europe (OSCE) Office for Democratic Institutions and Human Rights issued a report, in which it concludes that human rights abuses committed by the Belarusian authorities “were found to be massive and systematic and proven beyond doubt.”[5] The document also expressed concern about absence of fair trials in political cases as well as general impunity in the country.[6]

The political crisis in Belarus is taking toll on the country’s economy as well. According to estimates, the political turmoil has cost around $500 million for the economy of Belarus, which is worth about $60 billion in total.[7] The demand for currency exchange has increased significantly after the election of August 9, and the national bank had to spend its foreign reserves to meet it.[8] Even despite these efforts by the national bank, the Belarusian ruble still depreciated by 9% in August 2020.[9] International credit ratings agency Fitch Ratings downgraded its outlook on the Belarus’s Long-Term Foreign-Currency Issuer Default Rating to Negative from Stable in November 2020 commenting that the revision “reflects the impact of the political crisis following the August presidential elections on international reserves and banks.”[10] This article examines some of the consequences of the ongoing protests in Belarus.

IT Industry

Belarus is known for its booming IT industry, and the country is often being labeled a Silicon Valley of Eastern Europe. Well-known software engineering companies, such as EPAM and Wargaming, were founded by Belarusians.[11] The country is also known for its High Technology Park (HTP), which is a special tax and legal regime created to boost development of the IT sphere.[12] HTP is used by more than 800 companies throughout Belarus employing about 1% of the country’s labor force and accounting for about 10% of its exports.[13] The IT sector was responsible for 6% of Belarusian GDP back in 2018, and the share was predicted to grow to 10% by 2022.[14][15]

The IT companies operating from Belarus have suffered a tremendous reputational damage due to the Internet blackout in the country on August 9-12, 2020, in a state-sanctioned attempt to stop the protesters from mobilizing. Belarusian economy as a whole suffered about $170 million in losses in 61 hours of Internet blackout, according to NetBlocks.[16] Additionally, the offices of some IT companies were subjected to searches amid accusations from the authorities that they had been providing protesters with technological and financial support.[17]

Back in August 2020, the representatives of the IT industry signed an open letter, in which they expressed their doubt in election results, demanded to release the protesters as well as to stop detentions and end violence.[18] Some companies threatened to relocate to neighboring countries.[19] Since the beginning of protests back in August, close to 2,000 Belarusian IT company employees have relocated to Ukraine alone.[20] This number will only increase, with various neighboring countries competing for Belarusian talent and simplifying the visa processes for Belarusian IT professionals. Latvia, for instance, announced a fast-track visa system for Belarusian entrepreneurs to relocate their businesses to Latvia, according to the Latvian Investment and Development Agency (LIAA).[21] Other countries promising fast-track visas to Belarusian IT professionals include Poland, Lithuania, and Kazakhstan.[22]

The negative impacts on the Belarusian tech sector will extend far beyond a drop in the country’s GDP. The Belarusian economy is dominated by state-owned enterprises (SOEs), and IT sector currently represents a rare example of private industry and opportunity for young Belarusians to develop professionally and build their future in Belarus.

Factory Strikes

Workers of major Belarusian state-owned enterprises, including the BelAZ truck plant, the Minsk Tractor Works, and the Minsk Automobile Plant announced strikes back in August 2020.[23] Additionally, strikes took place at OJSC Belaruskali, a producer of potash fertilizer as well as OJSC Grodno Azot, a Belarusian nitrogen producer.[24] The authorities have been using various tactics to thwart the protests: they intimidated and arrested some organizers, as well as threatened the workers with layoffs.[25]

Although the major factories’ strikes are a mixed record so far, the mere fact that the workers from the state-owned enterprises have been organizing and going on strikes is significant for several reasons. These factories are the backbone of the Belarusian economy, as they generated over “$10bn in revenues, $7bn in export proceeds, and 12% of total budget revenues in 2019.”[26] Should the strikes persist and grow, the country’s economic growth will slow down even further. Additionally, Belarusian state-owned enterprise workers have long been believed to be Lukashenka’s loyal electoral base, and the strikes at the large factories illustrate that Belarusian people are ready to continue to fight for their rights and demonstrate solidarity among the protesters of different occupations.

IIHF World Championship 2021

Belarus and Latvia were originally selected to co-host the 2021 IIHF World Championship, which is scheduled to take place from May 21 to June 6, 2021. However, back in January, the sponsors of the tournament started threatening to withdraw their support should Belarus remain a co-host. For instance, Nivea released the following statement: “At the same time, Nivea Men always focuses on sport, because we believe that sport connects people. Nivea Men supports the IIFH values of fair play and respect and rejects all forms of discrimination and violence.”[27] The company effectively announced its withdrawal as a sponsor should the tournament take place in Minsk.

Later, German oil company LIQUI MOLY followed suit. “The current situation in Belarus and the policies of the government there – above all the treatment of demonstrators and obvious violations of human rights in Belarus – are deeply at odds with LIQUI MOLY’s convictions and values. For this reason, LIQUI MOLY has announced its withdrawal from sponsoring the Ice Hockey World Championship if the IIHF committee persists in holding the competition in Belarus,” read the company’s statement.[28]

Main sponsor Skoda also announced its intention to withdraw if Belarus were allowed to remain co-host of the event. The company tweeted: “We have been a proud partner of the @IIHFHockey World Championship for 28 years. But we also respect and promote human rights. Therefore, #SKODA will withdraw from sponsoring the 2021 IIHF Ice Hockey World Championship if #Belarus is confirmed to be co-hosting the event.”[29]

Following the sponsors’ threats and multiple appeals by Belarusian civil society, the IIHF Council made a decision to move the 2021 IIHF Ice Hockey World Championship from Minsk, citing safety and security issues as the reason.[30] This decision by the International Ice Hockey Federation is a big blow to the Lukashenka regime as it deprives Belarus of a global stage to host a prestigious international event.

Conclusion

Even though Belarusian protesters have not achieved Lukashenka’s resignation and new elections yet, they did achieve a significant level of delegitimization of the Lukashenka regime. They accomplished the non-recognition of the election results by the EU and the U.S. as well as imposition of several rounds of sanctions against high-level Belarusian officials responsible for the human rights abuses in the country.[31] In addition, all EU aid programs to Belarus have been canceled, and several European countries provided support to the Belarusian civil society as well as repressed protesters.[32] The protesters also actively advocated for moving the 2021 IIHF World Championship from Belarus, and the International Ice Hockey Federation’s eventual decision to strip the country of hockey tournament co-hosting rights further delegitimizes Lukashenka’s regime and attracts international attention to the events in the Eastern European country. Most importantly, in the past six months, the protesters have achieved unprecedented levels of mobilization and strengthening of Belarusian civil society.

This piece is republished from the ERA Institute.

References

[1] “Homepage.” Viasna, accessed March 7, 2021. https://prisoners.spring96.org/en.

[2] «Полгода протестов в Беларуси: победа или поражение противников Лукашенко?» DW, February 9, 2021. https://www.dw.com/ru/polgoda-protestov-v-belarusi-pobeda-ili-porazhenie-protivnikov-lukashenko/a-56496743.

[3] “Belarus: Crackdown Escalates.” Human Rights Watch, February 17, 2021. https://www.hrw.org/news/2021/02/17/belarus-crackdown-escalates.

[4] “Belarus: Crackdown Escalates.” Human Rights Watch.

[5] Benedek, Wolfgang. “OSCE Rapporteur’s Report under the Moscow Mechanism on Alleged Human Rights Violations related to the Presidential Elections of 9 August 2020 in Belarus.” Organization for Security and Co-operation in Europe, November 5, 2020. https://www.osce.org/files/f/documents/2/b/469539.pdf.

[6] Benedek, Wolfgang. “OSCE Rapporteur’s Report under the Moscow Mechanism on Alleged Human Rights Violations related to the Presidential Elections of 9 August 2020 in Belarus.”

[7] Harper, Jo. “Lukashenko, Belarus Brace for Economic Winter of Discontent.” DW, November 17, 2020. https://www.dw.com/en/lukashenko-belarus-brace-for-economic-winter-of-discontent/a-55612753.

[8] Bornukova, Kateryna. “Post-Election Turmoil Is Taking a Toll on the Belarusian Economy.” Belarus Digest, September 2, 2020. https://belarusdigest.com/story/post-election-turmoil-is-taking-a-toll-on-the-belarusian-economy/.

[9] Bornukova, Kateryna. “Post-Election Turmoil Is Taking a Toll on the Belarusian Economy.” Belarus Digest.

[10] “Belarus’s Political Crisis Weighs on Ratings.” Fitch Ratings, December 15, 2020. https://www.fitchratings.com/research/sovereigns/belarus-political-crisis-weighs-on-ratings-15-12-2020.

[11] Murphy, Alexandra St John. “Repercussions of the Internet Shutdown on the Belarusian IT Sector.” The Jamestown Foundation, August 14, 2020. https://jamestown.org/repercussions-of-the-internet-shutdown-on-the-belarusian-it-sector/.

[12] Guriev, Sergei. “The Political Economy of the Belarusian Crisis.” Intereconomics, Vol. 55, No. 5, September/October 2020, p. 274. https://www.intereconomics.eu/contents/year/2020/number/5/article/the-political-economy-of-the-belarusian-crisis.html.

[13] Guriev, Sergei. “The Political Economy of the Belarusian Crisis.” Intereconomics, p. 274.

[14] Dickinson, Peter. “Belarus Protest Crackdown Sparks IT Industry Exodus.” Atlantic Council, October 4, 2020. https://www.atlanticcouncil.org/blogs/ukrainealert/belarus-protest-crackdown-sparks-it-industry-exodus/.

[15] Murphy, Alexandra St John. “Repercussions of the Internet Shutdown on the Belarusian IT Sector.” The Jamestown Foundation.

[16] “Internet Disruption Hits Belarus on Election Day.” NetBlocks, August 9, 2020. https://netblocks.org/reports/internet-disruption-hits-belarus-on-election-day-YAE2jKB3.

[17] Lapienytė, Jurgita. “Are Tech Companies Leaving Belarus?” Cybernews, August 26, 2020. https://cybernews.com/news/are-tech-companies-leaving-belarus/.

[18] Harper, Jo. “Lukashenko, Belarus Brace for Economic Winter of Discontent.” DW.

[19] Harper, Jo. “Lukashenko, Belarus Brace for Economic Winter of Discontent.”

[20] Dickinson, Peter. “Belarus Protest Crackdown Sparks IT Industry Exodus.” Atlantic Council.

[21] Wright, Helen. “Latvia, Lithuania Race Ahead in Bid to Attract Belarusian IT Companies.” ERR News, September 15, 2020. https://news.err.ee/1134859/latvia-lithuania-race-ahead-in-bid-to-attract-belarusian-it-companies.

[22] Dickinson, Peter. “Belarus Protest Crackdown Sparks IT Industry Exodus.” Atlantic Council.

[23] May, Lisa. “Will Europe’s Last Dictator Stay in Power?” ERA Institute, August 16, 2020. https://erainstitute.org/will-europes-last-dictator-stay-in-power/.

[24] Harper, Jo. “Lukashenko, Belarus Brace for Economic Winter of Discontent.” DW.

[25] Harper, Jo. “Lukashenko, Belarus Brace for Economic Winter of Discontent.” DW.

[26] Aris, Ben. “Losses to the Belarus Economy Already $500mn, Protests Cut Minsk off from Capital Markets with $3bn to Finance This Year.” BNE Intellinews, August 21, 2020. https://www.intellinews.com/losses-to-the-belarus-economy-already-500mn-protests-cut-minsk-off-from-capital-markets-with-3bn-to-finance-this-year-190210/.

[27] Kreuzer, Piet. “Sponsors Threaten to Withdraw from World Cup in Belarus.” Around the Rings, January 18, 2021. http://aroundtherings.com/site/A__102193/Title__Sponsors-Threaten-to-Withdraw-from-World-Cup-in-Belarus/292/Articles.

[28] Kreuzer, Piet. “Sponsors Threaten to Withdraw from World Cup in Belarus.” Around the Rings.

[29] Kreuzer, Piet. “Sponsors Threaten to Withdraw from World Cup in Belarus.” Around the Rings.

[30] Steiss, Adam. “IIHF to Move 2021 World Championship.” International Ice Hockey Federation, January 18, 2021. https://www.iihf.com/en/events/2021/wm/news/24134/iihf_to_move_2021_world_championship.

[31] «Полгода протестов в Беларуси: победа или поражение противников Лукашенко?» DW.

[32] «Полгода протестов в Беларуси: победа или поражение противников Лукашенко?» DW.