“Lukashenomics” and the “Union State”

Maksim Vilisov,
Leading Researcher, PhD,
Moscow, Russia

Moscow, September 9, 2021. During a joint press-conference, the presidents of Belarus and Russia announced that they have approved the 28 “Union Programs” that will lead the countries towards deeper integration within the framework of the Union State. They have emphasized that this fact has no connection to the current political situation in either of the countries.

Although the related media headlines were promising, intriguing or sometimes threatening, the experts were in no hurry to draw any conclusions. Some of them were sharing on the social media a short stand-up video in Russian: “Say something in Belarusian! – Please give us another 20 billion! – No, I expected you to make a joke! – We will give you the money back”. This is a sharp and witty description of the essence of the Union State – almost 22-year-old project, established by presidents Yeltsin and Lukashenko at the very end of 1999. The Program of integration, signed in 1999, contained a detailed plan of cooperation in 19 spheres, with the deadlines mainly in 2002-2003. Only round 30% of those plans were fulfilled by 2015, while Belarus had received, according to some estimations, 120-150 billion dollars from Russia as indirect support, which was never expected to be returned to Russian economy. That situation could not satisfy Russian leadership that faced a huge set of economic challenges by 2015. The idea of the reconsideration of the Union State was in the air, but all attempts to do something in 2018-2019 were effectively blocked by the Belarusian president. His skillful approach is worth examining.

The current Belarusian economic model can be called “Lukashenomics” after the name of Belarusian leader. Although he was not the person who invented and designed it, he contributed a lot to its tuning and development. Generally it is a bright example of Soviet legacy that managed to survive. Briefly, the essence of “Lukashenomics” may be described in five points:

  1. Centralization of political power. This was quite easy to maintain in a country that had little experience of the post-Soviet transitions and consciously avoided massive privatization. The Belarusian state remained the main owner of the country’s assets, and the elite – mostly former Soviet “nomenklatura” – took over the “burden” of the central (Union, or Moscow) governance and enjoyed full power in a sovereign state.
  2. Relatively high level of social guarantees to avoid public unrest and protests
  3. “Soviet” way of economic development: high level of protectionism, low prices on energy resources and the larger part of former Soviet Union as the market for the Belarusian industrial products. Russia had to provide low energy prices and full access to its domestic market without any mutual obligations. That meant that Russia continued functioning as Soviet central authority in terms of resource and demand provision for Belarusian economy, but without any political power over the national political elite. The latter lead to the next core feature.
  4. Political rent” extraction. Russia and Russian political elite had become the source of “political rent” for Lukashenko: financial support and privileges in exchange for endless talks about union commitments. This rent covered everything: from total inefficiency of Belarusian economy to strengthening the political regime.
  5. Statehood over stateness”. Another core feature, inextricably linked to the previous one. The statehood and full national sovereignty is the only guarantee for the political rent extraction, even if this is against the interests of the country’s development and improvement of stateness.

It is obvious that this model is totally incompatible with any firm international obligations, strong supranational institutions and transparent financial procedures, i.e. with the core idea of the “Union State”. Thus, the answer to the reasons of the Union State’s 22-year story of failure lies at the surface. To be close to the partner, but not to be tightly caught; use your opponent’s power against him – those aikido principles were successfully implemented in Belarusian policy towards Russia throughout the years of the Union State’s existence. The Union State and its weak (and empty) institutions served as a facade for this policy.

“Lukashenomics” is totally incompatible not only with the Union State, but with the “Putinomics” as well. This creates challenges for both countries. Obviously, the “Putinomics” is more viable and Russia’s potential in all aspects is incomparable with Belarusian. The new 28 Union Programs and the way they were designed and discussed provide subtle signals of huge changes in Russian approach towards Belarus. Most of them are focused on the routine but fundamental processes of financial management, taxation and related fields of public administration and are aimed at making those processes more transparent and compatible in both countries. This leaves little space for the last three features of the “Lukashenomics”. The first two usually considered the similarities of the two countries.

Expert article 3077

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