Conclusions of the expert discussion “How can the EU use sanctions on Belarus as an effective policy tool?”

The Research Center of Sviatlana Tsikhanouskaya's Office holds weekly online discussions with international and Belarusian experts on Belarus’ pressing matters. On November 2, 2021, we discussed the topic “How can the EU use sanctions on Belarus as an effective policy tool?”.

Aleś Alachnovič, Sviatlana Tsikhanouskaya’s Representative on Economic Reforms,  Anders Åslund, Senior Fellow at the Stockholm Free World Forum, and Jan Hagemejer, Vice-President of CASE Management Board, shared their visions on the Western sanctions policy towards Belarus and its different aspects with a special focus on its geopolitical and economic outcomes. Hanna Liubakova, a nonresident fellow at the Atlantic Council, moderated the discussion.

The discussion on the topic of sanctions was very timely. From the external perspective, the EU leadership, on numerous occasions, condemned the Belarusian regime’s contribution to the organization of irregular border crossing to Lithuania, Poland, and Latvia. The EU is preparing the fifth package of sanctions. From the internal perspective, Belarusian authorities attempt to instrumentalize migration for political purposes. Lukashenka, who is hanging on to power because of his continued grasp on the security forces and Russia’s support, still hopes to survive the political crisis. 

Does the EU have effective tools to contribute to changing the situation in Belarus? What are the lessons from the past episodes of using sanctions policy towards Belarus? What are the most effective tools the EU has? Do the sanctions bring Belarus closer to Russia? These questions were discussed during the expert discussion held by the OST Research Center. 

During the discussion, experts came to the following conclusions:

• Sanctions might be an effective policy tool, and they might be effective with Belarus. However, the regime’s propaganda can manipulate this agenda against democratic forces or Western countries. 
• Belarus is already in a bad economic situation, and it is one of the poorest economies of Eastern Europe. The biggest problem of the Belarusian economy is Lukashenka, not the sanctions. Other factors behind the economy’s poor performance are a high share of the public sector and the lack of reforms, dependence on financial support from abroad (mainly from Russia). 
• Belarus is not going to escape from the difficult economic situation without some external help. And even if to consider the cost of economic sanctions, the public sector in Belarus is a big chunk of the overall GDP, so there will be some social cost, but this would be relatively short-termed, with a prospect of improving the economic situation in the future. 
• The EU sanctions do not target Belarus as a country but the regime. It should be clear that if Belarus takes the path of democratic reforms, the EU is open to cooperating and supporting it. The sectors where there are no doubts that they are not occupied by the cronies of Lukashenka or by the Russian oligarchs. 
• The EU’s sanctions have not been harsh because of the loopholes found in the export section. And they should have been introduced in a more of a shock therapy fashion. Its’ message should be that the Belarusian regime is toxic not only to the Belarusian society but also to the Kremlin. That’s important because the oil and gas subsidies from Russia given to Belarus for several years are the main factors keeping the Belarusian economy afloat. 
• The sanction structure on Belarus’ regime should be going forward and apply a maximum of pressure now. 
• In Belarus, there is a kind of a dual economic system with the public sector and private Russian oligarchs located in very few and very defined sectors. It is relatively easy to sanction these sectors and the primary source of the income of Lukashenka’s regime. 
• An important focus is on financial sanctions on the Belarusian regime and its cronies, but also Russian state finances should be sanctioned. All the five Belarusian state banks which subsidize Belarusian state companies and the four Russian state banks that have their subsidiaries in Belarus should be under sanctions. In addition, Russian cronies involved in business with Lukashenka should be in the focus of sanctions. The last point is that the primary bond issue and the secondary trade in Belarusian sovereign bonds bought by Russian businessmen should be sanctioned. 
• When it comes to Russia, sanctions do not put Belarus closer to Russia. Firstly, because there is no space for further economic integration, also, there would be consequences for Russia when it comes to credit risks, reputation risks, secondary sanctions.
• Diplomatic sanctions are essential. Venezuela, Myanmar, and Afghanistan now have regimes that the West does not recognize, and it should be the same towards Lukashenka. The situation like providing Lukashenka with $910 million of IMF funds should not be repeated. 
• In order to make its sanctions effective, the EU should tighten anti-money laundering control. The cronies that have been sanctioned now by both the EU and the US keep money in Dubai, and there are all reasons to believe that Lukashenka’s family also keeps their money there. 
• Speaking about the positive agenda for Belarus, there should be liberalization of trade with the EU for private businesses, private companies, and services in the first place. 
• The policy of sanctions might include several key points:

1. Currently, the economic pressure is among the few legal tools that remain to stop the political repressions in Belarus and release political prisoners. The internal mechanisms – appealing to Belarusian courts, protesting inside the country – are already impossible, while some other international tools, like personal sanctions, are simply not so effective. So, economic pressure remains one of the last legal instruments. 

2. The economic pressure will deteriorate the situation in Belarus and the financial situation of ordinary people. However, even without economic pressure, the regime had brought Belarus to the situation when Belarusians are among the poorest nations in Europe. Without economic pressure, Lukashenka will still bring Belarus to misery. 

3. Economic pressure should make the regime so toxic that Belarusians, including the political elite and the regime’s cronies, will leave the dictator and his international partners, particularly the last one, Russia. 

4. Diplomats have at least two effective tools on how to counteract the activities of Lukashenka. The first is to sanction five state-owned banks in Belarus. Even the threat of such sanctions might force Lukashenka to change his behavior. The second tool is the embargo on exports and imports from and to Belarus, transit to and from Belarus of goods and services. The embargo might last for one or two weeks only, and during this period, Russia and China will find a way to solve the problem with Lukashenka in Belarus. 

5. There should also be a positive agenda for Belarus, which includes the possibility of liberalization of imports from the country to the EU of services. Democratic forces also worked closely with the European Commission to prepare the so-called EU Сomprehensive Plan of Economic Support for Democratic Belarus worth 3 billion euros. The next day after Lukashenka is gone and the political crisis is solved, there will be financial resources, technical assistance, and political support for the Belarusian economy to revive quickly. 

Summing up, the targets of the Western sanctions towards Belarus should be multiple: Lukashenka, his family and cronies; culprits of human rights violations; Belarusian state financial institutions; big Belarusian state companies; Russian state banks in Belarus; big Kremlin-related companies in Belarus; Russian businessmen assisting the Kremlin in Belarus; and the Belarusian arms trade. International financial institutions should not be allowed to assist the Belarusian state. At the same time, bona fide Belarusian private enterprises and their trade should not be sanctioned.

For more information on the topic of the effectiveness of the EU sanctions, see the paper “EU sanctions on Belarus as an effective policy tool” (Anders Åslund and Jan Hagemejer).

For questions about the discussion, contact researchcenter@tsikhanouskaya.org.

For the OST position on sanctions contact:

• Franak Viacorka, Senior Advisor to Sviatlana Tsikhanouskaya, Head of the Foreign Policy Department: franak@tsikhanouskaya.org. 
• Aleś Alachnovič, Sviatlana Tsikhanouskaya’s Representative on Economic Reforms: economy@tsikhanouskaya.org.