Belarus's Economy Struggles Under Western Sanctions, Faces Future Vulnerabilities

Belarus's economy has faced significant challenges in recent years as a result of Western sanctions, suffering a 12% loss in 2022 and a further 6% loss in 2023. Despite attempts to adapt, the cumulative loss over these two years amounts to nearly 12%.

The country's heavy reliance on Russia for trade and finance exacerbates its economic vulnerabilities. This dependence makes Belarus susceptible to future economic and political pressures, particularly in the context of the ongoing Russia-Ukraine conflict and increased EU sanctions against Russia.

Belarus's economic challenges are compounded by its membership in the Eurasian Economic Union (EAEU), established in 2014 by Belarus, Kazakhstan, and Russia, with Armenia and Kyrgyzstan joining later. While the EAEU aims to create a common market, it has yet to implement key projects, including a regulated financial system and an efficient electricity market.

Why this matters: The economic struggles of Belarus have significant implications for global trade and politics, particularly in the context of the ongoing Russia-Ukraine conflict. If Belarus's economy continues to decline, it could lead to further instability in the region and have a ripple effect on the global economy.

Trade wars within the EAEU have also posed challenges. Belarus, alongside Russia, has been accused of dumping prices on dairy products, eggs, and chicken in Kazakhstan, threatening local industries. Additionally, Russia's frequent bans on the export of goods like wheat and sugar have adversely affected Kazakhstan's agricultural sector.

Belarus's economic ties with Russia remain strong. In a meeting between Belarusian President Alyaksandr Lukashenka and Russian President Vladimir Putin on May 23-24, they discussed security measures and economic integration. Lukashenka emphasized their commitment to mutual support, stating, "Against all odds Minsk and Moscow preserve the policy in favor of stronger integration. We support each other and will support in all areas."

Belarus continues to buy Russia's hydrocarbons at preferential prices, although a single energy market has not yet been achieved. The trade exchange between Belarus and Russia is substantial, valued at $46.5 billion, with 90% of transactions conducted in national currencies to avoid third-country influences.

In addition to its relationship with Russia, Belarus has sought to strengthen ties with other countries. Lukashenka's visit to Azerbaijan on May 15-16 aimed to boost mutual trade and cooperation, particularly using the North-South transportation corridor to export industrial goods. Azerbaijan, not bound by EU sanctions, is a vital trade partner for Belarus.

Despite these efforts, Belarus's economy remains vulnerable to future pressures. The country's reliance on Russia for trade and finance, coupled with the ongoing challenges within the EAEU and external sanctions, highlights the precariousness of its economic stability.

Belarus's adaptation to Western sanctions has come at a significant cost, with a cumulative loss of almost 12% over two years. The future of its economy remains uncertain as it traverses these complex economic and political environments.

Key Takeaways

• Belarus's economy suffered 12% loss in 2022 and 6% in 2023 due to Western sanctions.
• Country's heavy reliance on Russia for trade and finance exacerbates economic vulnerabilities.
• Membership in Eurasian Economic Union (EAEU) has yet to yield key benefits, including a regulated financial system.
• Belarus's economic struggles have implications for global trade and politics, particularly in the Russia-Ukraine conflict.
• Country's economy remains vulnerable to future pressures due to reliance on Russia and external sanctions.