No easy answer on Belarus sanctions

The hijacking of a Ryanair flight and the arrest of Belarusian journalist Roman Protasevich on May 23 brought the Belarus crisis back to the front pages of the world.

The brazen act rekindled international outrage that first erupted after last August. fraudulent elections, and landslides across the country they triggered – protests which has failed to calm down despite the regime’s violent repression and mass repression.

The EU has since imposed three batches of punishments in response to the “brutality of the Belarusian authorities and support for the democratic rights of the Belarusian people”. Some 88 people and 7 entities were sanctioned, but the measures never extended to systemically important economic objectives.

A fourth round of sanctions, already in the works before the incident, was slated to include major Belarusian companies, but Brussels was lukewarm about the idea. The presumption was that the EU does not have effective levers to influence the situation in the country and that broader economic sanctions would only harm ordinary citizens.

The illegal hijacking of the Ryanair plane forced the EU to rethink its calculation.

Within 24 hours, European leaders agreed adopt new targeted economic sanctions against entities supporting and financing the regime of Alexander Lukashenko. New measures could ban trade with the country’s petroleum, petrochemical and potash fertilizer industries. EU leaders also called for a ban on Belarusian airlines from flying over EU territory and urged EU-based airlines to avoid Belarusian airspace.

The new measures will put pressure on the regime’s vulnerabilities – primarily its dependence on the export of petrochemicals and fertilizers, which provide much-needed hard currency. Exports of petrochemicals and potassium fertilizers to the EU only bring Belarus has more than $ 1 billion and $ 200 million in revenue last year, respectively. The call to avoid Belarusian airspace could cost an additional $ 50-70 million per year in lost overflight costs.

Urgent response

The next challenge for the EU is to agree on the economic sanctions it will impose on Belarus.

Forging unanimity among the 27 EU governments has been problematic. reNational security concerns and emerging economic interests have repeatedly slowed down EU decision-making, resulting in belated and watered-down action.

Notoriously, the third package of sanctions against Belarus delayed because of Cyprus who blocked the measures, trying to get a quid pro quo in the form of sanctions against Turkey for Ankara’s energy exploration in the disputed waters.

So far, no member state has yet raised opposition to further economic sanctions against Minsk. But it may only be a matter of time before countries like Hungary or Cyprus endanger the unity of the EU again.

The EU will obviously have to gather evidence to justify putting new companies on sanctions lists, in order to withstand any potential legal challenges – but prolonged delays will be damaging. Reports from Brussels suggest that the adoption of sectoral sanctions should not take place until June 21, the next scheduled meeting of foreign ministers of the bloc.

Postponing the decision on sanctions in Belarus until July or later would kill any sense of urgency and likely lead to half-baked measures and weakened deterrence.

Kiev and Washington

To make sectoral sanctions more effective, the EU needs to cooperate with Ukraine, a key trade partner of Belarus.

Ukraine is Belarus’ top petrochemical, oil and fertilizer destination and without coordination with Kiev, the impact of sanctions will be weakened. So far, Kiev, which has pledged to coordinate its sanctions policy with its Western allies, has aligned itself with the EU’s personal sanctions against Belarus, but has remained cautious about adhering to the restrictions. sectoral. Last year Ukraine’s Foreign Minister Dmytro Kuleba mentionned that it is inappropriate for Ukraine to join the economic sanctions.

Coordinating measures with the United States should be the next step. President Joe Biden has joined calls for the EU to launch an international investigation into the “scandalous” incident and mentionned that the administration “will develop appropriate options to make those responsible accountable”.

The US has even fewer leverage than the EU to influence the situation in Belarus, but the hegemony of the US dollar can certainly have spillover effects on the heavily dollarized Belarus economy. On April 19, the United States ad that it will revoke the general license of nine Belarusian companies, including some of the major Belarusian companies such as Naftan, Grodno Azot and Belneftekhim – meaning that US citizens and entities have 45 days to terminate any dealings with them. This deadline expires on June 3.

Although the US sanctions have no extraterritorial reach, their deterrent effect was already evident even before Protasevich’s brazen detention. In early May, Belarus experienced problems with exports of petrochemicals, as European banks began to refuse dollar-denominated transactions for the country’s largest oil refinery, Naftan.

Sending a signal

Sanctions alone will not force Lukashenko to free Protasevich and his girlfriend Sofia Sapega.

The kidnapping is a personal vendetta of an autocrat struggling to retain power. But as autocrats around the world monitor the EU’s reaction, tough sanctions will send a strong signal to deter such incidents in the future.

This is a case where the signaling function of sanctions is not only symbolic. The sanctions will also put additional pressure on a regime already under pressure from the economic recession and rapidly rising public debt. Even without EU and US sanctions, the World Bank has estimated Belarus’s GDP will decline by 2.7% this year.

New measures will force the regime to resort to adjustment and bypass programs that are never free. Sanctions should be accompanied by support for Belarusian citizens, such as humanitarian visas for those fleeing the regime, legal assistance for detainees, and financial support for international media and civil society.

Lukashenko’s resilience will depend to a large extent on Russia’s willingness and ability to support the regime.

Acts as showing solidarity with Belarus by refusing Air France and Austrian Airlines’ requests to approve a rerouting on their flights to Moscow to avoid Belarusian airspace come at a low price. But maintaining the Lukashenka regime over the long term can cripple financially.

In past sanctions episodes, Russia has helped soften the impact of sanctions by providing generous energy subsidies and political refuge. But since 2007, the value of Russia’s energy subsidies has gradually declined, providing less of a cushion for the increasingly inefficient Belarusian economy.

Russia’s new hydrocarbon tax system will have significant negative implications for Belarus, depriving the country of lucrative exemptions from export duties. And with Russia’s fiscal maneuver, relations between Moscow and Minsk became strained and the issue remained unresolved.

Previously, disagreements with Moscow were central to forcing Belarus to comply with EU demands – Brussels should again seek to exploit existing frictions.

Sectoral sanctions will force Lukashenko to turn to Russia, but there is a limit to how much sanctions can push Minsk into Moscow’s arms. The loss of sovereignty to Russia will render Lukashenko’s struggle for power pointless.