New government of Belarus: first steps

The prime minister, three vice-premiers, three ministers and the chairman of the State Military-Industrial Committee of the Republic of Belarus resigned as a result of Alexander Lukashenko’s trip to the eastern regions of the country. While commenting on the government reshaping, the President stated that it was not a spontaneous decision and the pity situation in Orsha district served as only one of many reasons. Appointing new people and assigning responsibilities in the new government are rather indicative given the looming presidential and parliamentary campaigns.

The Belarusian leader focused his attention on certain discrepancies and inconsistencies within the country’s course of development, as well as on the low level of executive and labor discipline. According to the comments he made, these discrepancies and inconsistencies are not only connected to the ways of interpreting the course of economic development, but also to the geopolitical position of the Belarusian state.

Council of Ministers Agenda

Almost immediately after being appointed the new members of the Council of Ministers of the Republic of Belarus made statements which allowed to unambiguously define the features of both the agenda and the political role of the new government. The public political role of the cabinet headed by Sergei Rumas is to act as a technical and technocratic government aiming to increase the economy efficiency, modernize it and improve the well-being of the population. Since this role provides for the continued implementation of unpopular and sensitive reforms (even given its “manageable” regime) it will also allow Alexander Lukashenko to sometimes act as a follower of “softer” reforms himself.

As for the program, the new cabinet will continue with the previously adopted plans including a five-year plan that will be rather difficult to implement. Based upon the earlier developed principle of “two economies”, the government will aim to facilitate the development of the “new economy” (private sector — small and medium-sized businesses, information technologies, Green Field investment attraction) and yet to support and partially “reform” the “old economy” — mostly inefficient state sector. Implementing such an approach will allow to keep under control employment growth rates (with step-by-step and “partial” cuts held at inefficient enterprises due to their privatization, state modernization or bankruptcy), however, with “sterilizing” the toxic state sector and avoiding making the country’s entire economy a victim of its inefficiency.

This very policy of “sterilizing” bad assets, however, taking into account current conditions can only be implemented given there are lucky coincidences involved. And even provided with the best-case scenario, it poses serious threat to macroeconomic stability of Belarusian economy. In particular, the mechanism created by the authorities involving the transit of debts of agricultural enterprises to creditors and budget can result in dramatic deterioration of financial state, not to say collapse, of regional budgets and state banks with the biggest amount of “bad assets”. Furthermore, the debts of industrial giants, many of which will not be able to make any profit for a long time, can be added to this as well. Therefore, avoiding banking and currency crises that would deteriorate the conditions for the work of the “new economy” is the main task for the authorities when implementing such measures. Taking into consideration the fact that the corresponding measures have already been taken, the Belarusian authorities have decided to go through the most dangerous stage of such transformation before the start of large-scale parliamentary and presidential campaigns 2019-2020. However, in order to do this they are going to need an additional source of external financing, which is in many ways related to the negative dynamic of relations between Belarus and Russia.

Who was fired and on what grounds?

Given the absence of new meaningful elements in the new government’s program, it is only natural to question the reasons for changing the previous one. An important reason for such a step was Alexander Lukashenko’s intention to have a much-needed effect of mobilizing the state apparatus and his support in the society. Dismissing vice premier Vasily Zharko was connected to the corruption scandals in the healthcare sector supervised by him. Another vice premier Vladimir Semashko was fired due to the state of his health and his multiple requests to resign. The first vice premier Vasily Matyushevsky was dismissed due to the lack of work suitable for him (he was invited to work for the government in the first place as a coordinator, personally responsible for IMF cooperation). What is more, his style does not really “fit in” when it comes to Belarusian establishment, with many representatives of nomenclature holding a grudge against him due to his fervent position on the issue of market reforms. Finally, firing prime minister Andrei Kobyakov was brought about by the wish to change the role of the government by achieving its more active public position in promoting reforms while keeping hardline reporting to Alexander Lukashenko. Andrei Kobyakov, while being a complete administrator without any personal agenda, did not fulfill this role. Moreover, the Belarusian leader decided to act on principle and change an ethnic Russian Andrei Kobyakov for a “real Belarusian” Sergei Rumas, in this case.

Roman Golovchenko, who served as Belarusian ambassador to UAE for many years and is a specialist in the key for Belarus arms markets and military equipment, was appointed as the head of the State Military-Industrial Committee of the Republic of Belarus. In 2009-2013 he was the first deputy head of the State Military-Industrial Committee of the Republic of Belarus. In late August Alexander Lukashenko also appointed Maxim Ermolovich as the new minister of finance (before that he was the first deputy of the minister of finance) and Victor Karankevich as the energy minister (he was also the first deputy of the energy minister prior to his appointment).

It is interesting that the comments made by Alexander Lukashenko relating to the changes in the government ?made by him? and other taken decisions constantly refer to “hard times” Belarus is facing now. Moreover, it is not a secret that one of the most important factors making these times “hard” is Russia’s unfriendly policy regarding Belarus. Therefore, when reshaping the government the leader of Belarus was rather close to publicly define Russia as the main challenge to the independence and security of Belarus.

Assigning responsibilities

First of all, reformatting the government is significant due to the return to the apparatus vertical of one of the most famous and consistent followers of market reforms Sergei Rumas, who was appointed as the new prime-minister, as well as the rise of the new first vice-premier Alexander Turchin, whose views are similar to those of Rumas. Earlier Rumas had already been appointed to the vice premier position during 2011-2012 economic crisis, after which he was appointed the position of “Development Bank of the Republic of Belarus” Head. He is believed to be a serious negotiator who knows the way to international financial institutions. Rumas as well can find a common language with Russian counteragents. Therefore, the biggest bet when appointing a new premier is for him to be able to efficiently solve trade and economic problems, as well as to continue IMF talks regarding the new stabilization program.

Following his appointment Sergei Rumas assigned responsibilities among the new vice premiers. This information can be supplemented by him assigning unofficial responsibilities, fulfilling which will be instrumental when evaluating the work of corresponding authorities. The first vice premier Alexander Turchin will be responsible for implementing “progressive” measures defined in presidential decrees on entrepreneurship and development of information and communication technologies. Correspondingly, the main counteragents for him will be the following: the Ministry of Economy (with its new head Dmitry Krutoy) and the Ministry of Communication and Informatization (with its new head Konstantin Shulgan). Alexander Turchin has already made two program statements on these two issues. As for communication and information technologies (ICT), he made it clear that the Ministry of Communication and Informatization headed by Konstantin Shulgan will become instrumental for implementing the IT-country project and will possibly become a base for creating the Ministry of Digital Economy. Moreover, top level authorities request the implementation of information and communication technologies in industry and other sectors of economy, and in order to do this, active interaction with the Ministry of Industry (and its new head Pavel Utyupin) will be much needed.

Vice premier Vladimir Kukharev will curate a quite problematic and requiring reforms public housing and utilities sector ( as well as construction, transport and the Ministry of Emergency Situations). Taking into account his background of controlling utilities in Minsk, his main mission will consist of a further search for reserves to cut costs in public housing and utilities sector aiming to increase the part paid by population without a sudden dramatic increase in tariffs. Provided there is the same rate of macroeconomic stability and the current rate of tariff growth (around $5 annually), it is possible to reach a 100% break-even point by 2023. Vladimir Kukharev’s task will be to do it 2-3 years faster while not speeding up public housing and utilities growth rate. Solving this issue along with reforming the state sector is the main IMF loan condition to be fulfilled by Belarus. Moreover, it is quite probable that Vladimir Kukharev will have to lobby Belarusian companies when it comes to finishing the construction of Belarusian nuclear power plant. At any rate Alexander Lukashenko stated that he raised the issue of costs involved in constructing the nuclear power plant during his talks with Vladimir Putin in Sochi.

Igor Lyashenko (former head of “Belneftekhim” concern) took over Vladimir Semashko as the new vice premier; he will supervise both oil and energy sector as well as the industrial sector in general. His main concern in the short-term perspective will be “improving” relations with the Russian Federation, the stability of which is of critical importance also for diversifying the Belarusian economy and lowering its grade of dependence on Russia. What’s more, Igor Lyashenko will have to not only face tense communication with Russian counterparts but also fight with Belarusian companies making more profit on, in fact, illegal oil re-export under the disguise of oil products (it is quite probable that some of these companies stayed in good graces of Vladimir Semashko, former vice premier supervising FEC). It is rather ironic that heightened tensions on oil and gas “front” almost eliminate the possibility for Igor Lyashenko to personally deal with industrial issues, including the situation in Orsha, which was the reason behind the former minister of industry resignation.

Finally, vice premier Igor Petrishenko took over from Vasily Sharko as a supervisor of the social sector and found himself in the most difficult situation, first of all, due to the fact that this is a completely new field of work for him (not taking into account the representative functions of the Government on the Union State, Eurasian Economic Union and CIS that he will be fulfilling). Secondly, the situation in healthcare due to the recent corruption scandals is now almost completely under control of security officials, while the situation in sport sector is under the supervision of the President’s Administration (due to the European games coming soon). What’s more, minister Igor Karpenko, who is ideologically quite close to Igor Petrishenko, is quite active in the education sector, however he decided upon a confrontation course when interacting with the civil society. Moreover, Igor Petrishenko will need to supervise the work on the new version of “anti-parasite” decree, which may also lead to conflicts. Therefore, the main task for this official in the nearest future is simply to survive and carry on with his new position.

As for the vice premier Mikhail Rusoi, who kept his post and continues to supervise the work of the agrarian and industrial sectors, his mission remains the same: improve export diversification, fight for the Russian market and for better efficiency of subordinate enterprises. The necessity to solve the issue regarding the uncollectable debts of agrarian-industrial complex in the near future without a doubt casts a shadow both on this official as well as on the entire government policy in this field; yet, it will hardly influence his position in any considerable way. However, in case he resigns, his position may be harmlessly taken by the incumbent minister of agriculture and food Leonid Zayats, who is well-known for being a professional and a tough negotiator with Russia.

Is economy a prerogative of economists or security officials?

The beginning of work of the new government was marked by an article that appeared in the Administration of President’s newspaper “Soviet Belorussia” and had been written by the head of the State Control Committee Leonid Anfimov. The article revealed him as a follower of planned economy and opponent of wide privatization and deregulation of economy. The article was written in such an obscurant tone that some observers suspect it was a sign of a new government PR move alleging that Leonid Anfimov will embody “reactionary” forces and will attempt to limit the reforming passion of young government leaders. As for Alexander Lukashenko, he will act in this scenario as a wise judge who only makes correct decisions and leads the country avoiding “extremes”. However, it is hardly possible to suspect Leonid Anfimov of affiliation with staged conflicts. It is more likely that his actions were related to the fight between government and security officials regarding the new edition of act # 488 on the fight with shell companies.

Leonid Anfimov’s article was followed by a reply: at the end of the week a TV channel “Belarus 1” released what later became a “sensational” interview of the first vice premier Alexander Turchin, in which he de facto advocated to eliminate the practice of detaining entrepreneurs that are being criminally prosecuted on economic grounds. Moreover, he stated that in the near future amendments to act # 488 should be made and that both security officials and economic institutions have come to agree on its norms. What’s more, Alexander Turchin supported the radical revision of the program supporting entrepreneurship and stated that it is necessary to abide by the principle of equal forms of ownership and announced the state’s active policy on developing information technologies sector. It is possible that the appearance of new information regarding the text of amendments made to act # 488 in the near future will allow to evaluate the correlation between the potential influence of security officials and economists on the issues of the country’s economic development.

The long-lasting quality of the starting positions of economic technocrats is supported by the statements made by the new minister of economy Dmitry Krutoi. Having defined obtaining a “new quality of economic growth” as his mission, he openly stated his task to decrease the dependence of Belarusian economy on Russia at the same time. Moreover, resolving the situation with public sector debts was also named among the main tasks.

Therefore, reshaping the government and putting the stakes high for young technocrats is yet another attempt of mobilizing the state apparatus and drawing a harder line for demands, yet without offering any new solutions and strategic moves. This mobilization is a counter act for growing tensions coming from the Russian Federation preceding parliamentary and presidential campaigns in 2019-2020.