The stake is made on the destabilisation of the economic underpinnings of the existing political system. For Russia, the potential destabilisation of Belarus poses a security challenge that could exacerbate its already difficult relationship with the West, writes Valdai Club Programme Director Ivan Timofeev.
The incident with the arrested Ryanair flight in Belarus has led to a serious escalation of Western sanctions. The USA, Britain, Canada, and, in particular, the European Union have introduced new restrictive measures, fraught with significant economic damage to the Republic of Belarus. The intensification of the sanctions policy against Minsk took place back in 2020 against the backdrop of public protests and a criticism of the presidential election results. A number of Belarusian officials and security officials, considered in the West to be involved in suppressing protests and undermining democracy, were subject to the sanctions. At the same time, for a long time, the initiators of the sanctions avoided restrictive measures against the Belarusian companies and sectors which serve as the backbone of the economy. The Ryanair flight incident, however, triggered a radical change in the sanctions paradigm against Minsk.
The European Union is clearly in the lead in terms of the number of measures taken so far. On June 4, the EU Council banned Belarusian air carriers from accessing their airspace, as well as their airports. On June 21, financial (blocking) and visa sanctions were introduced against 78 individuals — officials and businessmen, who, according to the EU, are associated with the current president of Belarus. There were also eight companies in the list. These include an exporter of petroleum products, large car manufacturers, an exporter of industrial and defence products, and even exporters of flowers. Their assets in the EU are frozen, and the individuals and legal entities of the EU are actually prohibited from engaging in transactions with persons under sanctions. Finally, on June 24, Brussels announced sectoral sanctions against Minsk. They include a ban on the import of petroleum products from Belarus, on the supply of products to the country for the production of tobacco products, on the import of potash fertilizers, on the provision of investments and loans with a term exceeding 90 days in relation to three banks, on the provision of insurance services to the Belarusian government and persons related to it, as well as bans on the supply of dual-use goods for the military-industrial complex and goods that can be used to spy on citizens.
The United States also took action. There was less information noise regarding what they did, but the damage done could prove to be tangible. Washington did not renew the general license, which provided exclusion from the list of blocked entities, for nine large Belarusian enterprises. Now these companies are again subject to financial sanctions that prohibit citizens and organisations in the United States from entering into economic relations with them. In essence, this means that it is impossible for them to settle contracts in US dollars. In addition, under the threat of secondary US sanctions, other foreign counterparties, including Russian ones, may be refused transactions with blocked companies. On top of that, the United States continued the practice of sanctions against officials and security forces. The sanctions of Canada and Britain do not make a big difference, but they add to the overall picture.
In terms of damage to the economy, the new restrictions could prove to be painful. Petroleum products and fertilizers are important exports. Restrictions on access to EU capital are fraught with lower investment levels. Schemes for the supply of export goods through third countries are not obvious. In particular, Ukraine is unlikely to refuse to buy Belarusian oil products, but there will be difficulties pursuing their legal resale in the EU. In addition, Ukraine often takes part in EU sanctions regimes. The threat of fines and criminal prosecution from American regulators for circumventing the US sanctions is also fraught with excessive enforcement by both American and foreign businesses (overcompliance). In other words, the damage can be both direct (due to the loss of markets, partnerships, investments and transaction opportunities in dollars and euros for a number of companies), and indirect (due to the “toxicity” of jurisdictions amid the threat of actions of foreign regulators) ... All these risks also apply to Russian business. However, they are softened by the fact that the share of the ruble in mutual trade is already high. The new sanctions will only stimulate the closer integration of national payment systems and will force the use of reliable and independent channels for financial transactions.
The question is how exactly the situation will develop. In all likelihood, the US and EU are unlikely to abandon the hard line. Even if the detained oppositionists are released, the lifting of the sanctions may simply not take place. Washington and Brussels may demand more concessions and reforms, threatening an even more massive bombing of the economy. Russian aid will mitigate the situation, but is unlikely to lead to radical improvements. Living standards under sanctions are likely to decline, and it is extremely difficult to predict the correlation of such a decline and political stability. In some cases, the situation gets out of control at the slightest deterioration, in others the political system can withstand pressure for decades.
In any case, the EU, the United States, and a number of other Western countries have switched to a policy of tough pressure on Minsk, while no such tendency was observed before. Apparently, the West believed that the incumbent president of Belarus would not be too close to Moscow for fear of losing independence. Last year’s pre-election manoeuvres in Belarus could also serve as a basis for such a point of view. However, now, most likely, the stake is made on the destabilisation of the economic underpinnings of the existing political system. For Russia, the potential destabilisation of Belarus poses a security challenge that could exacerbate its already difficult relationship with the West.