Russia has no means to oust Lukashenka from power

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January 09, 2017 10:00

Russia’s influence on Lukashenka is huge, but still not enough to prompt him to leave his post. Thanks to the domestic policy carried out by the Belarusian leader, Moscow no longer can stranglehold the Belarusian authorities. Statements about the alleged plans of the Kremlin to overthrow Lukashenka are insinuations aiming to put their respective owners in the spotlight.

During all 22 years of his rule, Lukashenka’s main goal was to strengthen and preserve his power. He created an efficient system preventing any challenge to his leadership inside the country.

Since coming to power in 1994, Lukashenka has held several purges among senior officials and the power block. Currently, the people, whose status roots in the existing political system with Lukashenka at the core of it, lead the country. Those who had the imprudence to demonstrate own ambitions, or dissent, or the support from the outside of the state apparatus, were promptly stripped of the real power. Including through the appointment to honorary positions, which seem important, but lack real levers of influence.

Both, the state apparatus and the law enforcement, including the security services, were reorganised. Belarus has incorporated a comprehensive monitoring system to control senior officials and directors of large enterprises. Loyalty of the law enforcement is ensured through internal institutional control and security and due to inter-departmental competition. The system has proved its efficiency, inasmuch as in the past 22 years not a single document leaked from the government system proving policy-relevant information.

In addition, time did its part: 25 years after the collapse of the Soviet Union there was a generational change in the government leadership. Those having close ties with Russia have sharply decreased in number.

Statements about the alleged plans of the Kremlin to overthrow Lukashenka are insinuations aiming to put their respective owners in the spotlight. The objective reality is that over the years of Lukashenka’s rule, Russia’s abilities to influence the power landscape in Belarus have been reset to zero. In order to oust Lukashenka from power, Moscow would have to step into an open and sharp confrontation or even to use force. And the result would hardly be predetermined.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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