Have a carrot

In addition to keeping the private-sector competition at bay, the state offers public enterprises a variety of direct and indirect benefits, and encourages them to do the same for each other. If, for example, a company hopes to distribute consumer goods in the country, it will likely have to deal with state-owned wholesalers or retailers, or vice-versa. State firms may make their private customers pay in advance, but extend generous payment terms to other state-owned firms. The preferences continue down to the street level. Favored retailers and others can count on lower rents for municipally owned property. The GUM department on Minsk ’s main shopping thoroughfare, for example, reportedly pays a tenth of that other retailers are charged.
For some favored firms and sectors, the benefits are even more direct.
Close observes of Lukashenka and his rule say the state continues to directly subsidize enterprises ideologically or personally close to the president and his most powerful lieutenants.
“Lukashenka views the economy as 40-50 enterprises, and 300 koholzes,” says one western official who has dealt closely with the government.
Among the favored industrial enterprises are the country’s most famous Soviet-era names, including the Minsk Tractor Factory, the Minsk Auto Plant (MAZ) and the Horizont TV works.
These and other state industrial concerns also have a strong ally in Mikhail Myasnikovich, the current head of the Presidential Administration, and a former first secretary of the Central Committee of the Belarusian Communist Party. Meanwhile, a lobby boosting the construction industry is lead by National Bank chairman (and former construction worker) Piotr Prokopovich. Lukashenka himself is said to be most concerned with the fate of the country’s state and collective farms.
Help comes in the form of direct budget support, as well as a number of off-budget vehicles; according to some estimates, the official budget captures only 40% of the money spent by the state.
One key avenue for subsidies is energy. While natural gas is reportedly provided to monopoly operator BelTransGaz from Russia at approximately $30 per 1,000 cubic meters – roughly a third of the price charged other customers in the region – it is passed on to most Belarusian enterprises at a price closer to $70. Favored firms, however, receive it at a discount or are allowed to accumulate arrears.
Until recently, the forced surrendering of foreign exchange also allowed the authorities to channel precious forex to favored firms, while exemptions on such rules limited the amount of hard currency certain exporters were obliged to hand over to the National Bank.
Meanwhile, the Presidential Administration itself reportedly helps finance enterprises favored by Lukashenka and his close associates.
As with all things connected to Lukashenka, the so-called Presidential Fund is the subject of much fevered speculation in Belarus . While it has an official annual budget of just $20 million, most analysts believe it controls, and disburses, a large multiple of that figure. Millions are said to come from arbitrage on energy trading, kickbacks for customs clearance, as well as a portfolio of property and operating companies, some with profitable monopolies. And then there are the arms deals.
“It’s a known fact that we were selling MiG 29s to Peru ,” says Sasnow. “But where is the money? Nobody knows.”
Alexander Mikhenevich, the deputy minister of foreign affairs, calls the issues of arms sales and the Presidential Fund “delicate questions,” but says such transactions are not nearly as lucrative as assumed. “It has never been a big component of our foreign trade. Maybe this is a pity, because it’s a profitable business.”
(Naturally, there is also a rich debate over to what extent Lukashenka has helped himself to the financial perks of absolute power. While few believe he has the kleptocratic instincts of a Mobutu or Suharto, most assume his personal income and wealth go far beyond the salary of $2,640 he revealed in a declaration made last month in advance of the elections. And his inner circle, including son Viktar, are believed to have interests in numerous local enterprises and rackets.)
While local analysts put the Presidential Fund’s resources at $500 million to $1 billion, one senior official at a multilateral financial institution with high-level access to the government says he believes the figure is no more than $200 million.
In any case, it is assumed that funds equaling several percentage points of GDP are being diverted to targeted enterprises.