Minsk’s Defense Against Russian Tycoon Takeovers

The Belarusian parliament has selectively revived the so-called “golden share” rule that applied between 1997 and 2008. According to that rule, the state’s representatives on the board of directors of any privately owned enterprise could block various decisions made by its management team. The existence of this rule discouraged foreign investment; hence its revocation back in 2008 was welcomed by the World Bank. The present revival of the golden share rule is selective in a sense that it now applies only to businesses that used to be state-run and to those that are partially owned by the state. To be sure, the state possesses the shares in as many as 80 percent of all registered economic (production and service) units existing in Belarus. Units whose shares are at least partially owned by the state account for 60 percent of net revenues generated in Belarus. Moreover, in roughly 1,500 units (out of the total of about 1,700 units) state shareholding accounts for more than 50 percent (https://naviny.by/rubrics/economic/2013/07/15/ic_articles_113_182345/). This means that the golden share rule revived by the parliament is going to be truly influential.

Why would the Belarusian state even contemplate the restoration of a rule that might discourage foreign investment yet again and at a time when it is needed so much? The only reason, claims Stas Ivashkevich, an economic expert writing for Belorusskie Novosti, is that this rule is intended to scare away not just foreign investors in general but Russian tycoons in particular. The move in question is reportedly used as a means of last resort to hinder this seemingly unstoppable Russian economic expansion into Belarus’s economy (https://naviny.by/rubrics/economic/2013/07/21/ic_articles_113_182414/).

One of the directions of that expansion has been the domestic production of mineral fertilizers. For example, export of potash is now regulated through a joint Russian-Belarusian trader, the Belarusian Potash Company. This company coordinates Belarusian exports with those from Uralkalii, Russia’s largest producer of potash, owned by Suleiman Kerimov, an oligarch who visited Minsk twice in 2013. From January to May 2013, Belarus’s potash export revenue was 11 percent lower than one year ago due to lower world prices. But due to a Russia-Belarus potash export coordination protocol, Belarus was not allowed to compensate for that decline by the expansion of the physical volume of its exports. Instead, Belarus managed to increase its export of carbamide (commonly used in fertilizers) by 4.3 times, despite the fact that carbamide’s output, by the Grodno-based Azot company, increased by only 3.1 percent. Most of carbamide produced in Grodno went to the countries of the European Union and to Brazil. In the recent past, Brazil was the largest buyer of Belarus’s potash, but in 2013, Belarus’s potash export to this Latin American country declined almost by half. Ivashkevich speculates that the replacement of Belarus’s potash by carbamide on the Brazilian market may be a ruse, much like how solvents and paint thinners were officially used as a cover for the alleged re-export of Russian crude oil (https://naviny.by/rubrics/economic/2013/07/24/ic_articles_113_182448/).

Belarus’s eastern neighbor—Russia—remains the country’s principal economic lifeline, but the relationship is tainted by the threat of Russia’s ultimate economic expansion. Whereas, Belarus’s western flank—the European Union—is preoccupied with loftier issues that relatively few Belarusians are particularly concerned with. Thus, according to the June 2013 national survey by the Independent Institute for Socio-Economic and Political Studies, only 18 percent of Belarusians named development of democracy as a way to modernize Belarusian society (iiseps.org/analitica/538). Still, in July, two notable members of the opposition, Irina Khalip (a journalist and the wife of 2010 presidential hopeful Andrei Sannikov) and Uladzimer Neklyaev (a poet and also a presidential candidate), both of whom spent several months in jail following the December 2010 election and then received conditional sentences, were relieved from restrictions on their mobility as a result of those sentences (naviny.by/rubrics/society/2013/07/25/ic_media_video_116_7914/; https://news.tut.by/society/358106.html).

The corresponding court decisions, which fall short of the EU’s demand that these political prisoners be fully rehabilitated, were still interpreted as concessions to the EU, if not to Belarusian public opinion. Consequently, Belarus’s Foreign Minister Vladimir Makei visited Brussels where he took part in a meeting of foreign ministers of the countries participating in the EU’s Eastern Partnership (naviny.by/rubrics/eu/2013/07/22/ic_articles627_182426/). The meeting was a step toward the Partnership’s summit to be conducted in November in Vilnius. According to sources in Lithuania’s Ministry of Foreign Affairs, the issue of the release of the remaining political prisoners was discussed in Brussels. Moreover, the Lithuanians noticed that the attitude of the Belarusian delegation was more constructive than before and that it showed more desire to rebuild the relationship with the EU (news.tut.by/politics/358954.html). Lithuania, which is serving as the rotating presidency of the Council of Ministers since July 1, has traditionally evinced more desire than other EU members to normalize Europe’s ties with Belarus.

It remains to be seen whether or not Belarus’s president will receive an invitation to participate in the Vilnius summit. Be that as it may, geopolitics remains the principal lens through which to watch Belarus’s most important developments.