The EU policy of sanctions against Belarus

Abstract
On 31 October 2012 the current sanctions against Belarus will expire and the EU foreign ministers will have to discuss their extension and expansion. Travel bans and the freezing of accounts have proven largely ineffective. Brussels' sharpest weapon would be economic sanctions involving the embargo of whole sectors, as well as individual companies and middle men. The question is who would suffer more under the former: the ruling elite or the population?

Introduction
A few hundred teddy bears tossed out of a Swedish PR airplane last July jolted Europe's attention back to Belarus and, with that, Belarus back onto the political agenda in Brussels. The diplomatic clash between Stockholm and Minsk, which culminated in the expulsion of ambassadors, made it clear that none of the problems relating to dealing with the authoritarian President Alyaksandr Lukashenka have been defused, and no concessions in the area of democracy and human rights have been made.

Current EU policy
The policy of rapprochement and dialogue that the EU had in place, which reached its pinnacle in the acceptance of Belarus in the Eastern Partnership initiative in May of 2009 and the joint visit of the German and Polish foreign ministers to Minsk in November of 2010, was dealt a serious blow with the suppression of protests that followed the falsified presidential elections of December 2010. The EU opted for a multi-track political response: the restrictive measures against the government were renewed, while technical cooperation was continued and support for civil society was increased. Bans on EU entry, suspended since 2008, were reactivated at the start of 2011 and have since been gradually tightened in the face of continuing acts of repression targeting civil society and the opposition. Currently an entry ban bars 227 Belarusian officials from entering the EU and a freeze has been placed on the EU-based assets of 243 individuals and 32 Belarusian companies. There is also an arms embargo in effect which includes material that can be used for internal repression. The Partnership and Cooperation Agreement, ready for conclusion and ratification since 1996, remains on ice. Belarus is still not allowed to take part in the Eastern Partnership's bilateral programme, with the primary result that no Association Agreement with a deeper free trade area can be negotiated. In addition, at the initiative of the European Parliament, the Euronest Parliamentary Assembly of the Eastern Partnership decided to exclude the Belarusian representatives from their activities for the present. Political contacts with the regime have been restricted to the ambassadorial level, with just a few exceptions. Though one such exception involved Belarus' long-serving foreign minister Syarhei Martynau, the same does not apply to the new foreign minister, appointed in August of 2012, Uladzimir Makei, who remains, for now at least, subject to the EU travel ban due to his previous activities as head of the presidential administration. The EU has made restarting the dialogue with Lukashenka contingent on the release of all political prisoners and their rehabilitation, as well as an immediate end to all repressive measures.

At the same time, Brussels has been trying to build up its contacts with the Belarusian civil society and political opposition. The relevant financial support for the 2011–13 period was quadrupled, rising to 19.3 million euros; Belarusian NGOs are regularly consulted about how those funds should be distributed. In March of 2012, Štefan Füle, the EU commissioner responsible for the European Neighbourhood Policy, also launched what is called a "modernization partnership" with NGOs and political actors, a forum for the discussion of specific initiatives. Belarusian activists also play a significant role within the Civil Society Forum of the Eastern Partnership, which was set up to promote NGO networking within national platforms and among the partner countries and the EU. Some EU member states have unilaterally begun easing their visa policy towards the Belarusian population. Germany and Poland, for instance, no longer require a visa fee from certain groups of people, e.g., students. Attempts are underway in the Council to come up with a consistent solution for all people entering the EU. Minsk has declined an EU offer to start negotiations for a visa facilitation agreement, which remained on the table after December 2010.

Criticism of EU action and calls for stronger measures
The release of two political prisoners, Andrei Sannikau and Dzmitry Bandarenka, in April of this year was seen by many observers, including some Belarusians, as a first concession on Lukashenka's part and a success for the EU's strict policy. However, there had been indications of a release for some time and it occurred only after both prisoners had issued a plea for clemency under duress. As the two did receive an 8-year suspended sentence, no one could that claim they have been politically rehabilitated. Jailed opposition activists warned the EU not to read too much into the release. Nevertheless, the pressure from Brussels and the other capitals eased considerably in the spring and summer. If not before, by the time of the attacks on bloggers and the online scene a few weeks before the parliamentary elections, which involved police searches, summonses and spying, it was clear that Lukashenka had deviated from his repressive course.

As welcome as the Council's actions are, the entry bans have proven to be largely unproductive and easily circumvented. They were not able, for example, to prevent Anatol Kulyashov, then the Belarusian interior minister, from attending an Interpol conference in Lyon in January of 2012. And membership in the National Olympic Committee, which Lukashenka and his two oldest sons both enjoy, offers a cover for getting around the entry ban. The freezing of bank accounts in the EU is also an act more symbolic than effective: the Council has no information whatsoever from the member states as to where or how much money has been frozen. The member states are alone responsible for implementing the freezes and use a variety of procedures with their national banks to do so. They provide no data to one another nor do they report back to Brussels. There is no coordination or monitoring of the measures' efficiency. Certain private companies, such as Belgium's SWIFT, which handles inner-European wire transfers, are not bound by the freezes on accounts. The scandals surrounding the release of data, as in the case of Ales Byalyatski, the supply of equipment for monitoring the Internet by the Swedish-Finnish state-owned enterprise Teliasonera or the longstanding cooperation between the German and Belarusian police forces also testify to a situation in which Brussels has no overview of what manner of cooperation is going on at the national level in which sensitive sectors. The episodes themselves have tainted the EUs efforts in the eyes of civil society in Belarus.

Targeted economic sanctions
For these reasons, nearly all opposition forces and civil-society actors advocate targeted economic sanctions aimed at individual middlemen and private companies that serve the regime. About a dozen "front-men" are known to procure foreign currency and arrange exports and foreign investments for Lukashenka via private and dummy companies, the revenues from which flow directly to his inner circle of supporters. For their part, the companies profit from state-granted licenses in strategic sectors and preferential treatment in the award of public contracts. So far the EU has placed Yuri Chyzh (Triple Group), Anatol Ternavski (Univest) and Uladzimir Pevtsiyeu (Beltech Holding) on the sanctions list, along with a long list of companies and subsidiaries. Estimates suggest that there are around 40 middlemen and oligarchs, most of whom are former KGB agents, who are important for the regime. Restricting their scope of action within the EU and their economic activities would adversely impact both them and the regime, while sparing the population. Targeted measures of this kind can be effectively communicated to the population and implemented efficiently. Within the EU, increased public pressure on the regime's economic partners, such as the European banks involved in issuing the so-called Belarusian Eurobonds, has proven to be effective. Three major banks (Royal Bank of Scotland, PNB Paribas, Deutsche Bank) stopped working with the government in Minsk last year.
Many experts believe that simply adding more firms and middlemen to the sanctions list would not go far enough. There are many ways to circumvent such measures: setting up new companies, using offshore firms, transfer of ownership, as in the case of Peftsiyeu's Beltechexport, or bypassing the sanctions via the customs union with Russia. Moreover, it is not clear whether the listing of companies and middlemen will survive the scrutiny of the European Court of Justice in Luxembourg, since several complaints from Peftsiyeu and Ternavski are pending there. For those reasons, many NGOs and members of the political opposition are calling for an embargo targeting certain sections, while some are even advocating a general economic embargo.

Sectoral sanctions, of the type already introduced in the USA, would probably largely affect the refining and oil processing industry, fertilizer manufacturers, steel production and the textile industry, all of which are substantially dependent on exports to the EU. With 38%, the EU is Belarus' largest trading partner, still ahead of Russia (34%). Minsk's foreign trade with EU member states increased by 221% in 2011 over the previous year, and then again by 260%. Minsk recorded a trade balance surplus of 6 billion US dollars with the EU in 2011 – against the backdrop of an overall trade balance deficit of 9.6 billion US dollars; another increase is expected for the current year. In addition, EU banks arranged 1.8 billion euros worth of transactions, loans and bond issues in 2010 and 2011.
The EU's credibility is on the line when it engages in extensive trade, above all with large state-owned enterprises, thereby contributing indirectly to the stabilization of the status quo, while ostracizing the regime through symbolic sanctions with no apparent impact. A ban on exports in the sectors important to Minsk would hit the regime where it hurts: such exports supply around a third of the state budget, and the EU is the largest customer for them by far, to the tune of 12.5 billion US dollars in the case of oil products (84%) in 2011 for instance. Acquiring new customers, such as China for example, would take a long time.

The pros and cons of economic sanctions
It is unclear what impacts the extension of sanctions to individual sectors or branches of industry would have. The greatest concern is that the population might suffer unnecessarily should their living conditions deteriorate as a result of sanctions. Conglomerates and state-owned enterprises, like the oil producer Belneftekhim, employ more than 120 000 people and perform social functions as well, such as running kindergartens and welfare facilities. The sceptics believe that social services are likely to be the first things cut in the event of a dramatic drop in economic activity. The ruling elite around Lukashenka would shift the effects onto more vulnerable sections of society, while the elite remained nearly untouched. If another economic crisis hit, the wave of young, well-education people emigrating, primarily to Russia, would increase rapidly. Due to its sanctions, the EU itself might be responsible for accelerating the brain drain that is already underway. Renewed economic decline, combined with unemployment and decreasing incomes, could actually play into Lukashenka's hands, providing him with the excuse of Western sanctions to cover up his own mismanagement and poor economic policies. The EU would serve as the scapegoat and its standing among the population would sink dramatically. Moreover, it would be difficult to communicate why sanctions were stifling the economy while technical modernization and the raising of standards in business and industry were being promoted within the Eastern Partnership. Furthermore, if the sanctions were severe, involving the financial system and capital flows, Russian credit institutions would be poised to step in; as a case in point see the very recent example of Belaruskali, which obtained a loan of more than 1 billion US dollars from the state-owned Russian bank Sberbank. For their part, those in favour of extensive sanctions argue that the public is already suffering due to the consequences of grave mismanagement, the planned economy and the corrupt elite. Belarusians' standard of life, they point out, has already deteriorated significantly and in late 2011 the inflation rate rose to 108%.
For the critics of more extensive sanctions, the greatest danger lies in the influence Russia may wield in the future. Following the complete takeover of Beltransgaz and with it the entire pipeline system, Russia is expecting more privatizations to come. Loans from Russia and the Eurasian Economic Community are linked to such privatizations. This would ultimately present an opportunity for Russian companies and oligarchs to step in; an example might be at the joint holding company controlling the truck manufacturers MAZ and KAMAZ. Russia has strategic interests in the banking sector as well: seven of the 32 Belarusian banks are already controlled by Russians, as are parts of the insurance industry, media companies and other important sectors, including the dairy, construction and entertainment industries. The aggravation of relations with the EU would push down the costs of acquiring companies, allowing Russians come in more quickly and less expensively.
The advocates of harsher sanctions say that the privatizations needed will only be feasible if European investors are on board, because the expertise which the Europeans can provide in many areas is necessary for urgently required modernization, considerably improving the chances of success. Thus, in their view, it is only a matter of time before Lukashenka is forced to open up more to the West. Particularly as new loans from the European Bank for Reconstruction and Development, the European Investment Bank or the IMF would only be available after lengthy negotiations. The country's economic recovery must have absolute priority for Lukashenka though, if he is to come through on his extensive campaign promises and continue financing his social model of the "all-providing state". Moreover, direct influence on the Belarusian economy by Russia is one of the greatest threats for the Minsk regime. This, because unlike the EU, which poses no challenge to the country's status or autonomy, Russia does intend to bind its closest neighbours both economically and politically for the long term and, ultimately, to dominate them. The decision to incorporate Belarus in the Eurasian economic zone and, as of 2016, in the Eurasian Union is a fait accompli. It cannot be in Lukashenka's interests to completely relinquish economic self-determination, because to do so would jeopardize his own unrestricted power.

Role of the EU and its member states and other measures
Additional mild sanctions, including measures targeting specific individuals and companies as well as visa restrictions and asset freezes, are fairly uncontroversial both among the member states and in expert circles; the European Parliament, too, has advocated them on more than one occasion. Such sanctions are regarded as sending a clear message to the responsible elite that the EU is still paying attention and prepared to take further action. Moreover if the situation does escalate further, one could consider other concerted diplomatic actions, such as the long-term withdrawal of EU ambassadors or the expulsion of Belarusian ambassadors – who are after all important mouthpieces and lobbyists for Lukashenka. Most experts and NGOs tend to reject the idea of a freeze on technical cooperation on alignment with EU standards within the framework of the European Partnership.
Highly controversial though is the subject of the possible impact of harsher economic sanctions, which has seldom been discussed in the Council. At the last session of the Committee of Ministers, which addressed the topic of Belarus in March 2012, the foreign ministers were able to decide on a few targeted economic sanctions and a binding list of 32 companies only after complicated negotiations. Sundry national interests had to be taken into account and certain important subsidiaries of the three oligarchs were left off of the list entirely. Slovenia and Latvia, above all, lobbied vigorously to keep several of Peftsiyeu's companies off of the sanctions list – companies whose activities include various joint construction projects with Slovenia's Riko Group. Latvia supported Slovenia's efforts in part because its own economy has close ties with the Belarusian oligarchs, particularly Yuri Chyzh. Even Germany showed little zeal and, in fact, argued in favour of another exception.

The foreign ministers will discuss the extension and expansion of the sanctions against the regime of Alyaksandr Lukashenka in October. The discussion about adding the names of other oligarchs and companies to the sanctions list will cause intense debate among the member states. At this time, a complete embargo of certain sectors, such as the oil and gas sectors, is highly improbable. A glaring weakness of the EU is revealed here. The Union decides whether to impose sanctions not on the basis of fixed, mainly technical criteria, but instead on the basis of primarily short-term and politically opportune considerations. The European Parliament has criticized this failing, and early this year, it submitted specific recommendations as to how consistent and coherent guild lines and clear criteria should be defined.
Another opinion which is fairly uncontroversial is that the EU should continue using and developing its multi-track approach, consisting of sanctions against the regime, technical dialogue with officials and support of the population. The EU will attempt to keep the pressure on the regime as high as possible in the international arena, through the UN Human Rights Council and the OSCE, for instance, but also through the IMF and the World Bank. Unfortunately, given recent developments in Russia, the repression of the opposition and civil society and Russia's stance on the Syrian question, Moscow is out of the running as a potential partner of the EU and important wielder of influence on Belarus.

Still, below the level of the inner circle around the president are large numbers of experienced people in important positions who are interested in Europe/the West, and it is important that contacts with them not be broken. To strengthen ties with the general population, though, the EU must use other channels. Forums, like the Civil Society Forum of the Eastern Partnership and the modernization dialogue – the latter, regrettably, not yet fully formed – need to be continued. Financial support needs to be intensified: by way of the Human Rights instrument, the newly created democracy fund or the Civil Society Facility within the framework of the Neighbourhood Policy. Improving the flow of information into the country is also important, to allow a more effective communication of the EU's values and offering, so that the people in Belarus can gain a better understanding of the motivations behind the EU's actions. Such communication encompasses educational offerings, seminars, training programmes and exchange among and with Belarusians. One extremely important signal could be sent by unilaterally introducing harmonised measures facilitating the issuing of visas, dispensing with fees and offering multiple-entry visas or special exemptions for certain groups.
Despite the threat of harsh sanctions, concessions and reforms cannot be expected in the near future. In the late summer of 2012, Lukashenka has a firm grasp on the reins and has learned to cope with the difficult economic situation and rigorously suppress political unrest. International pressure and aide from outside the country can have a limited effect at best. They are no more than a helping hand, a catalyst that might support change from within. The fragmentation of the political opposition and large numbers of different views within civil society are not a good basis for such change though.

Suggested reading:
• Korosteleva, Julia: Impact of targeted sanctions on Belarus, Brussels 2012, http://www.europarl.europa.eu/committees/fr/studiesdownload.html?languageDocument=EN&file=73753
• Committee on International Control over the Human Rights Situation in Belarus: International support for the democratic future of Belarus, 2011, http://hrwatch-by.org/sites/default/files/CIC_new_Belarus_report_Jan%202012_eng.pdf
• European Council: COUNCIL IMPLEMENTING DECISION 2012/171/CSFP of 23 March 2012 implementing Decision 2010/639/ CSFP concerning restrictive measures against Belarus, Brussels 2012, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:087:0095:0102:EN:PDF
• European Parliament: Report with a proposal for a European Parliament recommendation to the Council on a consistent policy towards regimes against which the EU applies restrictive measures, when their leaders exercise their personal and commercial interests within EU borders, Strasbourg/Brussels 2012, http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A7-2012-0007+0+DOC+XML+V0//EN
• External Action Service: What the European Union could bring to Belarus, 2006, http://eeas.europa.eu/delegations/belarus/documents/eu_belarus/non_paper_1106.pdf
• Schulz, Werner / Vogel, Thomas: European Neighbourhood Policy: Readjusting the relationship between the EU and its Eastern Neighbours, November 2011, http://www.werner-schulz-europa.eu/images/2012/pdf/European_Neighbourhood_Policy_2011.pdf

About the author:
Thomas Vogel M.A. is a parliamentary assistant to Werner Schulz MEP, member of the Committee on Foreign Affairs and the EURONEST Parliamentary Assembly

The article was published first on 27 september 12 in german language in BELARUS-ANALYSEN Nr. 8