Belarus On The Brink

MINSK -- Svyatlana Antanyuk, an elderly pensioner in Minsk, pours a cup of tea, opens a jam jar and fusses about the kitchen.

Like many in Belarus, Svyatlana and her 81-year-old husband Ivan have been hit hard by the price hikes for staples and basic services that have hit the country over the past five months.

With a hospital building looming ominously outside the couple's eight-floor window, Svyatlana explains that she can no longer afford imported medicine for her gallstones and heart condition. She is allergic to the more affordable domestically manufactured equivalent.

Ivan, a former soldier, is angry. "Essentially, we are not living -- we are surviving," he says. "The government is solving its own economic problems by robbing their people. The prices at the moment are unbelievable. They've gone through the roof. It's suffocating us."

And it's going to get worse -- possibly a lot worse. While many of the countries of the former Soviet Union and Eastern Europe initiated painful reforms in the 1990s, retooling their command economies for a globalized free market, Belarus largely stood still.

Upon coming to power in 1994, the country's authoritarian president, Alyaksandr Lukashenka, maintained a Soviet-style economy providing basic goods and services to the public at low prices. He was able to do this because Russia was prepared to subsidize Belarus in exchange for Minsk's political fealty to Moscow.

Not Economic, But Political

But Russia has increasingly made it clear that those days are over. Lukashenka, meanwhile, has shown little appetite for the kind of structural reforms that would bring the Western aid, investment, and credits necessary to turn the teetering economy around.

Meanwhile, the Belarusian ruble has fallen a staggering 36 percent against the dollar and fears abound that a further devaluation is in the offing. Imported goods are scarce and prices on basic consumer products rise daily under soaring inflation that is projected to reach between 55 and 75 percent in 2011.

The crisis has led to the most serious challenge to Lukashenka's 17-year rule, sparking antigovernment protests that are routinely put down by police.

Stanislau Shushkevich, Belarus' first post-Soviet leader, pursued market reforms during his brief stint in power from 1991 to 1994. Now, he says, regime change is the only way out of the current crisis.

"There is still nothing stimulating the development of the economy. There has been no liberalization and this produces terrible conditions," Shushkevich says. "Today in Minsk you cannot obtain currency that is freely convertible, it's difficult to go abroad. Instead of the Iron Curtain, there is a de facto economic curtain. Without political changes, there cannot be any decent development in Belarus."

Currency Crash

Signs of the crisis are everywhere in Minsk.

Basic staples like meat have disappeared from the shelves as producers opt to sell their products in neighboring Russia, where the currency is stable and retains its value.

When hard currency was available, lines at exchange booths stretched for hundreds of meters. They have seldom become unruly, although Interfax reported on August 16 that three masked men forced their way to the front of a line of 400, saying that "important people" needed currency.

But with the dollars, euros, and Russian rubles drying up, Minsk's currency exchange points have become mostly deserted, with only the most desperate people lingering in hopes of coming across a tourist trying to change money.

With each passing day, the pain consumers are feeling becomes more and more acute, Shushkevich says. "Not all crises are avoidable," he notes, "but the degree that it is being felt here when some food items have doubled in price in the space of only 20 days, this truly is a crisis for people."

Many Belarusians have taken to hoarding goods such as sugar and cooking oil, stocking up amid fears that the early onset of fall will also mean an early winter. Traditionally low gasoline prices continue to spiral, triggering grassroots protesters to drive in convoy through central Minsk, blockading Independence Street, to the applause and cheers of onlookers.

On August 22, police blocked traffic into the center of Minsk in an effort to prevent drivers from staging the latest in a series of demonstrations against rising gas prices.

'Could Still Get Worse'

But despite the new assertiveness among protesters, for many, the old fears remain. Sanya, a taxi driver and father of two, told RFE/RL he never expected the protests to take place, adding that he would not participate, fearing that he could face "a big fine or worse."

Yaraslau Ramanchuk, an economist at the Minsk-based Mises think tank and the vice president of the opposition United Civic Party, warns that Belarus's crisis is only in its initial stages, and that it's moving from a currency crisis to one that is more "systemic."

Ramanchuk says that the situation "looks like the beginning of the crisis in the Soviet Union when the Soviet Union didn't get a lot of hard currency from selling oil."

In September, he adds, Belarusians can expect to see a serious drop in their incomes and further price hikes on utilities and transportation. Construction, meanwhile, has been frozen.

Price Of Reelection

Belarus's economic crisis was exacerbated by Lukashenka's lavish spending on populist measures like raising pensions and increasing salaries for government workers in advance of the December 2010 presidential election, in which he won nearly 80 percent of the vote amid widespread allegations of irregularities.

In the election's aftermath, presidential candidates, opposition figures, and those protesting the results were brutally beaten and jailed.

The United States and European Union responded with sanctions. Minsk, which prior to the election had been tentatively courting the West, then turned to Russia for assistance.

But although Moscow did agree to provide gas at a relatively low price, it has balked at a large financial bailout unless Belarus privatizes large chunks of its energy infrastructure, presumably so it could be purchased by Russian companies. Such a development would severely undermine Belarus's sovereignty.

Russian Prime Minister Vladimir Putin may have revealed his intentions regarding Belarus on August 1 when he said the unification of the two countries was "possible and very desirable."

Fear Of Needed Reforms

But if accepting a bailout from Russia looks like a Faustian pact from Lukashenka's perspective, turning to the International Monetary Fund (IMF) for a loan doesn't look much better.

The IMF is due to discuss Belarus on August 29, but economists say any bailout will be contingent on the kind of deep structural reforms that Lukashenka has been reluctant to make.

Syarhey Chaly, an independent economist who worked for the Lukashenka team in the mid-1990s, is skeptical that any reforms will be implemented. "It's clear that the IMF would like to see some kind of advance" on economic reforms, he says. "I think the authorities in the next week therefore have to undertake some kind of reform if on the one hand they want to save the economic situation, and on the other if they are counting on partnership with the IMF."

Jana Kobzova, a Belarus analyst at the European Council for Foreign Affairs, says some members of the government understand the need for reform but that they are unable to act due to Lukashenka's resistance. She says that the president "got so scared. He basically thinks that whatever reform happens is going to restrict and limit his own power."

Protests On Hold...For Now

And as the economy teeters on the brink, the authorities -- already spooked by the uprisings in the Middle East and North Africa -- are bracing for more unrest.

Throughout the summer, grassroots "silent protests" organized on social-media websites, in which demonstrators would assemble and engage in innocuous activities like clapping before being rounded up by police, took place every Wednesday.

They have temporarily been put on hold until September 14, when the country's traditional opposition figures are expected to join.

Ramanchuk says he expects more unrest in the fall. "The risk of mass action and protests after utility bills go up, real prices go up, and incomes fall is very high," he says. "That's why I predict more social protests."

But Chaly, who claims to be the founding ideologist of the protest movement mobilized through social networks, played down the possibility of simmering public discontent boiling over.

"Of course there will be discontent and people will complain, but they will try and get by. It's unlikely there is a threat to the authorities, from these quarters at least," Chaly says.

"Of course it could happen that discontent within groups of authorities leads to a palace revolution, but I cannot see any other way of there being a change in power."