Persistent Anti-Government Protests in Belarus Pose Long-Term Threats to Domestic and Regional Supply ChainsEverstream Team
For the past four months, anti-government protests have been occurring across Belarus at least once a week to pressure President Alexander Lukashenko into stepping down after he won what was perceived as a rigged re-election for a sixth term on August 10, 2020. The ongoing protests are regarded as the longest and largest anti-government protests in the country’s history.
Mass protests on the streets have taken place across all of Belarus’s major cities, most notably its capital city Minsk, where they have regularly disrupted ground transportation and business activities in the affected areas. Two general strikes that temporarily disrupted manufacturing operations in the country in August and October have taken place so far. Government measures implemented to curb the protests, such as an increased police presence or temporary border closures, have also negatively impacted logistics and business operations.
As of early December, the protests have diminished in intensity but the situation remains volatile as neither the protesters nor the government intend to back down. As such, the danger of a sudden escalation from either side will continue to pose a threat to domestic as well as regional supply chains in the medium and long term as it remains unknown when the political stalemate between protesters and the government will be resolved.
Protests disrupt domestic logistics and manufacturing activities in Belarus
Shortly after the election results were announced, large scale industrial actions and walkouts, including at some of the country’s largest manufacturers, broke out across Belarus. The strikes lasted from August 13 to August 18, and affected companies including vehicle manufacturer BelAZ, construction materials manufacturer Keramin, fertilizer producer Grodno Azot, car maker MAZ, semiconductor manufacturer Integral, and PVC and aluminum window and door supplier Terrazit. However, workers returned to work after the government threatened to layoff striking workers or close participating production sites completely. Although the industrial actions have only temporarily disrupted manufacturing operations so far, any long-term walkout at the country’s major production sites could have a detrimental effect on Belarus’s economy, which is already under strain due to a temporary oil blockage by Russia at the beginning of the year and the global COVID-19 outbreak.
Additionally, one of the defining features of the anti-government protests have been large scale marches in all of the country’s major cities that began in the run up to the election and continue to take place regularly as of early December. Protestors have marched in cities such as Minsk, Brest, Viciebsk, Grodno, Mogilev, Navapolatsk, Baranovichi, Zhodzina, and Gomel, where blockades and subsequent violent confrontations with security forces disrupted roadway traffic in the surrounding areas as well as local businesses operations. To evade these violent crackdowns, protesters in Minsk started using a different approach by the end of November that saw hundreds attend smaller rallies spread out across the city instead. If this method continues to be used in the weeks to come, protests and associated roadway disruptions could quicky spread beyond city centers and disrupt areas that had been spared so far.
Risk to cross-border trade in Eastern Europe
Ripple effects of the protests could also quickly spread beyond the country’s borders, and disrupt supply chains in other parts of Eastern Europe if the situation escalates further.
Situated at the heart of Eastern Europe, landlocked Belarus borders Russia, Ukraine, Poland, Lithuania, and Latvia. As a member of the former Soviet Union, the country has a developed manufacturing base, while Russia remains its largest trading partner as of 2020. According to estimates, around 46 percent of Belarusian goods are exported to Russia, compared with around 24 percent to members of the European Union (EU). At the same time, imports from the EU total roughly 20 percent, while more than 50 per cent of all goods and services that enter Belarus per year come from Russia. Domestically, central economic sectors include the manufacturing of goods such as agricultural equipment, machine tools, motor vehicle parts, and household appliances as well as chemicals, petroleum, fertilizers, textiles, and food products.
At the end of October, the government announced the partial closure of its borders with Poland, Lithuania, Latvia, and Ukraine. Officially, the government announced the closure as an attempt to curb the cross-border spread of COVID-19 but some observers suspect that the closures may have been politically motived to shield the country from foreign involvement amid the ongoing protests. Although freight traffic was allowed to continue, delays and truck queues could become an issue in the future if restrictions are tightened on short notice or if border points see a sudden uptick in security force presence to secure the crossings.
A protracted conflict could jeopardize Belarus’s economic position in Eastern Europe
The ongoing internal crisis in Belarus has left the EU concerned over potential rising tensions in Eastern Europe that could destabilize political and economic ties in the region. While Russia acknowledged the election results, many EU countries have rejected the outcome and criticized the government for its violent oppressions, demanding immediate release of detainees and political prisoners. The EU, backed by the United States, has recently rolled out a fresh set of sanctions against political leaders in Belarus creating further tensions with Western Europe. Prior to the elections, the European council had extended restrictive measures, which includes an arms embargo, a ban on the export of goods, asset freezes, and travel bans against certain individuals in Belarus until 2021. Both its internal economic growth as well as economic and political ties with Western Europe could be damaged for the foreseeable future if the United States and the EU continue to tighten these existing measures or implement even more severe restrictions in an attempt to put pressure on President Lukashenko.
The political turmoil in Belarus has also regressed an expansion of economic development with the support of China, its fourth largest trade partner after Russia, the EU, and Ukraine. Belarus’s central geographical location near the EU as well as political stability in the pre-election era had appealed to China as a way to expand its Belt and Road Initiative (BRI) plan. The plan had been a win-win situation for both countries, as President Lukashenko wanted to take the opportunity to reduce dependence on Russia. While China has not called off the BRI plan amid the current situation in Belarus, further prolonged political crisis could jeopardize Belarus’s long term economic development and hamper efforts to become more economically independent from Russia in the future.
Belarus’s economy had been struggling even before the global COVID-19 outbreak. Prolonged political protests, instability in the country, and outside attempts from Russia and the EU to steer the conflict may further exacerbate these trends. As economic and political developments need to work in tandem, the lack of political stability could spill over into the country’s economic sphere, and destabilize business activities and trade routes in Belarus if the unrest persists in the months to come.
Everstream Analytics customers with shipments and suppliers in Belarus should keep abreast of the local developments by using risk monitoring tools that can help companies reduce their response times and avoid costly supply delays. Those doing business in the region are encouraged to liaise with logistics providers on the ground, as precedents indicate that road blockades have been one of the defining features of the protests, and adjust delivery schedules where necessary. Factories participating in the protests have also been threatened to be shut down; thus, understanding if your suppliers have been affected by walk outs will help to anticipate and mitigate future disruptions. Lastly, in light of possible further political deterioration, companies should ensure that they have contingency plans in place.