Neil Barnett reports from Belarus
Minsk is not a mecca for entrepreneurs or foreign investors, but it seems that the perpetual leader of Belarus, Aleksander Lukashenko, has decided to change that. The kolkhoz (collective farms) are not about to be broken up, and nor is the KGB ready to give up its paternalistic interest in business. But Lukashenko, Europe's answer to Kim Jong-Il, needs cash and he needs it yesterday. The reason is that the cheap Russian gas that used to subsidise the economy is getting a lot more expensive: Gazprom has pushed the price up from a trifling $47 per 1,000 cubic metres in 2006 to $119 today. It's still cheap compared to the European market price of roughly $370, but for a subsidised Brezhnev-type economy, it's cold turkey. Worse still, if they hadn't agreed to sell their pipeline operator to Gazprom, the tariff would have gone up much more, and in any case will climb to market levels in the coming years. True, Moscow still gives Lukashenko cheap crude that he can refine and flog to EU countries, but things are getting tighter. Now some of Belarus's largest banks are on the auction block and a scheme to build a new nuclear reactor is also reportedly open to foreign investors. Minsk needs money, yes, but it also wants to be a little bit friendlier with the West.
With its labour camps, occasional purges and general cabbage aroma, Belarus has an image problem. Lukashenko, very sensibly, has approached Lord Bell to fix it. 'They asked us to make a proposal, we made it, and we have not yet had a response,' says the PR guru. If the pitch is accepted, Belarus will make a slightly incongruous addition to Lord Bell's client list, which has included Margaret Thatcher, Boris Berezovsky and the late Aleksander Litvinenko. He says, 'Lukashenko told me that he hasn't paid attention to external relations for years, and that it's about time he did. He wants to have foreign investment and he wants to have better relations with the West.' At the risk of sounding old-fashioned, it may be that Belarus faces a problem of substance rather than image.
If Lukashenko wants Western money to reduce his reliance on Moscow, that's not to say he's about to come over all democratic. He knows that acting like an oriental despot is not a recipe for popularity in the democratic world, Bell Pottinger's skills notwithstanding, and that his best friend is a Russia that is almost as oppressive. The aim is to keep the embrace with the Russian bear from becoming a crushing ursine hug. As Lord Bell puts it, 'He doesn't want to be friends with someone if that means not being friends with someone else.' In the Cold War, two very different commies, Tito and Ceausescu, followed a similar path. Tito sent his people to be Gastarbeiter, Ceausescu made a joint venture in aircraft manufacturing with British Aerospace (the Rombac 111), and both gorged on cheap debt from a Western world keen to prise them away from Moscow. Of the two, Lukashenko is far more like Ceausescu; let us hope that this commercial rapprochement will never result in him making a state visit to London. In 1978 the delightful Ceausescu couple stayed at Buckingham Palace, Nicolae received an honorary knighthood and Elena put herself forward for membership of the Royal Society in recognition of her work as a chemist. Sadly, the British embassy in Bucharest could find evidence of no qualifications beyond a Romanian O-level in needlework, and her endeavours went unrecognised.
First movers, as so often in the old Ostblock, are the Austrians. Last year the state sold a GSM operator, Velkom, to Telekom Austria (via a mysterious Syrian-Cypriot entity). And Raiffeisen Bank, whose engagement with colourful rogues to the east is legendary, took over Priorbank in 2002. Aside from once having the splendid name 'Minsk Innovation Bank', Priorbank is nothing special. But the market leader Belarusbank and three more are coming up for privatisation in the next year or so. Middle European banks such as Erste of Austria, Commerzbank of Germany and Hungary's OTP, as well as the Greeks and Italians, are liable to make a scrum for these assets; whatever the country's eccentricities, banks from mature markets cannot ignore a virgin market of ten million people. So the hobgoblins of international capital are coming, and the locals are apprehensive. Lukashenko has undeniably shielded his population from the excesses of post-Soviet, pre-Putin Russia. Salaries and pensions have always been paid, and they have been spared gangsters firing rocket-propelled grenades into restaurants. The problem is, they have been mostly spared the restaurants too: theirs is a grey, self-censoring world. Next to Minsk, Kiev is like New York; with its flamboyance, bouts of chaos, inequality and squabbling, it has the shortcomings of freedom. With no political turns in sight, Belarus will change through trade and investment, like China. In fact, a liberalised economy tied to an authoritarian political system is rather futuristic: perhaps Lukashenko is a visionary after all.
Getting into Belarus was not so easy. The pie-faced man behind the visa-collection window in Minsk airport was not impressed with my passport or visa forms. As other visitors wafted through the bureaucracy, I was kept waiting for two hours with no explanation as a series of functionaries scurried back and forth clutching my passport as if it was a primed hand grenade. When I politely asked why I was being detained and when I might be released, the oaf emerged from his cubbyhole and bawled, 'Get over there and sit down!' Either I was on a database of enemies of the people, or perhaps, with their suspicious habit of mind, they had decided I was a journalist. After a little sulking on my part and some derisory threats to call the embassy, the furious man told me there was no problem with my visa and that I could enter the country. Some businessmen report that doing business in Belarus is remarkably easy, indeed they speak in golden terms. No doubt this is true. But the point is that they are enjoying the largesse of a capricious tyrant whose long-term moods are unreadable. And if things do go wrong, neither the courts nor Nigel from the embassy will be of much use. The other odd thing is that from leaving the airport and throughout my visit I had the impression that I was being followed, although this may have been a paranoid delusion.