Belarus should follow Russia's Path

Raisa  Sorokko,  April 2002





Russia and Belarus were both part of the former Soviet Union. When Soviet Union fell apart in August of 1991, Belarus gained independence. Russia’s independence day from USSR is August 24, 1991, which was the day that B. Yeltsin proclaimed himself president. Belarus’ independence day is August 25, 1991, when the prime minister of Belarus, V. Kebich, finally got in touch with B. Yeltsin and received approval of independence. Kebich also proclaimed himself president, without any elections. Yeltsin struggled with Russia’s problems, both political and economic. Yelstin was able to overcome most of the political problems, organizing a strong, and somewhat democratic government structure. It is very unfortunate that this government structure was not very effective. A very sophisticated criminal structure also emerged during this time in Russia. The constitution of the Russian federation leaves too much room for interpretation and when the privatization of state owned factories, firms, and houses occurred, many people stole a lot. But Russia did not privatize everything, the most productive institutions were kept by the government, which kept Russia strong and powerful in the international community. Kebich and the Belarussian parliament did not know what to do. For several decades, the government officials did not have to come up with ideas for reforms, all they had to do was follow Moscow’s orders. So, when Belarus gained independence, they were left with horrible economic problems as well as Russia, and incapable leadership as well. They had no choice, so they asked Russia for economic “unity”. Kebich hoped that this would slow their hyperinflation because their currencies would be the same. He also hoped that Russia would postpone Belarus’ debt, sell oil and gas cheaper to them, and give them other economic privileges. This did not happen. The only thing Russia did was postpone their debt. The inflation rate kept climbing because the Russian economy was in the same exact condition as Belarus’. By 1994 almost all of the population of Belarus opposed Kebich. So, the first presidential elections were held in June of 1994. Lukashenko, former director of a collective farm, won and became the first president of Belarus. That is why only in 1994, Belarus wrote its own constitution.

Cultural Comparison

Very typical for the cultural and national identity of Russia are the wooden nesting dolls (matreshka). It is a big wooden container, painted on the outside as a doll. It is hollow on the inside, and contains a smaller version of itself. That smaller doll contains another on the inside. This can go on for a long time, until you get to the smallest one that is too small to open. This is a very old tradition that originated during the Tsarist regime at big feasts before the Great Russian Fast (Maslenitsa). Very typical for the cultural and national identity of Belarus are the flax dolls. The Russian translation for Belarus is White Russia. Flax is the plant from which linen is made. During the Tsarist regime, out of this linen, they made white clothes, and that is how Belarus got its name. All of the cultural symbols were heavily oppressed during the Soviet regime, and only now these dolls became a symbol of Belarus. They are all completely hand made with a lot of details: braids, hats, shoes, and even socks. These dolls are dressed in traditional Russian clothes, which symbolize the Russian influence on Belarus for a long time.

Comparison of Economies

President Lukashenko of Belarus did not fulfill his promises. When he came to power, he moved the country onto the path of market socialism. He reintroduced administrative controls over prices and currency exchange rates. He also expanded government right to intervene with private enterprises. He keeps changing legality of practices of private businesses. The government also keeps imposing new regulations and restrictions on businesses, making it difficult for these businesses to survive and therefore, reducing demand of foreign investors.
Belarus has an extremely high inflation rate of 200% estimated for the year 2000. GDP with purchasing power parity is about $78.8 billion. Real GDP growth is estimated to be 4%, GDP per capita with purchasing power parity is $7500. The labor force is only 4.8 million. Belarus continues to have economic relations with Russia even though these two countries are no longer unified. Russia is Belarus’ export partner of 66% and an import partner of 54%. Belarus’ external debt is very small compared to other developing countries, it is only $1 billion. The currency exchange rate keeps climbing even though it is kept in the exchange rate corridor by the government. It is about 1180 Belarussian rubles to 1 US dollar, and this is after the denomination in 2000 where 1 new ruble went for 2000 old Belarussian rubles. (CIA Factbook of Belarus) Russia, on the other hand is doing much better.

Yeltsin was the president for 9 years. In August of 1998, Russia experienced a huge economic crisis, which had worldwide impact. The crisis happened because of the sharp depreciation of the ruble. (CIA Factbook of Russia) This depreciation happened because the Russian government needed investments. So they offered government bonds with a pretty high interest rate. A lot of people invested, and the government, in turn invested that money, and lost. When people tried to sell these government bonds back, and receive their money, the government could not pay them. Everyone panicked and quickly started to sell the ruble understanding that since the government could not pay, the ruble wasn’t going to be worth anything, so everyone wanted to keep whatever money they had left, in more stable currency. After that happened, Yeltsin did not know what to do, so he could not bring the long overdue economic reforms, so on December 31, 1999 at 11:55 pm, he resigned, and gave the post of presidency to Vladimir Putin

This came as a big shock to the public. Putin was always a shadow, so no one knew him or his ideas. He is also a former KGB officer, so many people were skeptical. They thought that he might bring the old communist regime back, or at least parts of it. During the 5 months before the presidential elections, Putin managed to gain the trust of the people. He imposed very radical, but necessary economic reforms, and managed to end the crisis. What also helped the country get out of the crisis was the rise in world oil prices which fueled a trade surplus. The structural reforms of Putin have raised business and foreign investor confidence in Russia in the last 2 years.

To compare Russia to Belarus, we need to look at some numbers. GDP with purchasing power parity is $1.12 trillion. The GDP real growth rate is 6.3%. The GDP per capita with purchasing power parity is $7700. The inflation rate is 20.6%. The labor force is 66 million. The external debt of Russia is much higher than Belarus’ it is $163 billion. The currency exchange rate has been pretty stable, in 2 years it is fluctuating between 28 and 30 rubles for 1 US dollar.

Comparison of imports and exports

Belarus exports $7.4 billion worth of products. Its exports commodities are: machinery and equipment, chemicals, metals, textiles, foodstuffs. Belarus imports $8.3 billion worth of products. Its import commodities are: mineral products, machinery and equipment, metals, chemicals, foodstuffs. (CIA Factbook of Belarus) It is running a trade deficit, which is holding back the economy.

Russia exports $105.1 billion worth of products. Its exports commodities are: petroleum and petroleum products, natural gas, wood and wood products, metals, chemicals, and a wide variety of civilian and military manufactures. Russia imports $44.2 billion of products. Its imports commodities are: machinery and equipment, consumer goods, medicines, meat, grain, sugar, semi-finished metal products. A lot of Russia’s income is from trade surplus, which is expanding the economy greatly. It is also making the economy stable.

Belarus needs to follow Russia’s path. Russia is kind of like a big brother country to Belarus. Lukashenko still has the Marxist ideology in him. He believes that the free market economy is doomed, so that is why he is imposing a market socialism and keeping Belarus out of the world trade. As the CIA Factbook states, “Belarus remains self-isolated from the West and its open-market economies.” Belarus could be very involved in the international trade because it has great resources, not depreciated factories that are now state owned once again, cheap labor force, etc. It is a very attractive country to the West, if only the politics of this country were different. Belarus also has very low import taxes, which does not give the government as much as it could.

Russia has extremely high import taxes for cars, for example. If you are importing a new car, you have to pay a 38% tax from the price of the car. This is a protection of the domestic industry, which is does not produce such good or luxurious cars. It is also a way for the government to collect revenue. Belarus has a 15% tax on importing new cars. This goes for Russian cars, and all Western, and Japanese cars. Belarus should collect revenue from imports. It should raise the prices on imports, and start producing Belarussian cars. They already produce heavy-duty trucks, called BelAz. While Russia is on its way to economic recovery, Belarus is stuck behind. Russia’s path hasn’t been easy, but Belarus isn’t even trying. If Likashenko can get beyond his ideological block, and try to get Belarus out, Belarus has a lot of potential to become a very important player on the world market.


CIA Factbook for Belarus

CIA Factbook for Russia

Belarussian Online Newspaper

Belarus's Economists Opinions (in Russian)

Another Belarussian Opinion Newspaper

Article by Ahien Reshatau (political economist, historian) (Current Situation Part)

Russian website article archive

Interview: Mr. Fedor Petrovich Malkovskii -- close personal friend of Vladimir Kasyanov (the Russian Premier)
Mr. Leonid Sorokko -- my father, an economist living in Russia.
He is now very supportive of the economic reforms in Russia,
but usually very critical.


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