Sale of Beltechexport Creates a Dangerous Precedent

It has become known that on 30 May, a controlling stake in Beltechexport company owned by Vladimir Peftiev was sold to a Russian businessman, Dmitry Gurinovich. Beltechexport exports arms and special equipment.

Comment

Sale of the company which remains under EU sanctions to a Russian customer creates a dangerous precedent for the Belarusian business elite. It also demonstrates failure of the Belarusian authorities to defend the interests of the national business abroad. However, there are no reasons to expect an increase in protests against the authorities.

Sale of Beltechexport and Peftiev’s quitting the company signal that the Belarusian side is powerless to defend interests of those Belarusian companies that have fallen under the economic sanctions imposed by the EU (30 April 2012, Switzerland joined the EU policy on sanctions).

The news on the final sale of the company indicates, firstly, that Peftiev’s attempts to appeal against the sanctions imposed on his assets failed.

In June 2011, the EU Council of Foreign Ministers included Beltechexport in the list of companies that were banned from working in the EU. Over the past 11 months, Peftiev tried to challenge the sanctions in court. He is rumored to have been actively lobbying this decision at an informal level, through some European organisations and NGOs.

Secondly, sale of the company demonstrates that the Belarusian authorities are either incapable or unwilling to improve the current situation.

Primarily, it is necessary to mention the two government bodies responsible for the foreign policy who have been attempting to normalise relations with the EU during this period of time, namely, Ministry of the Foreign Affairs and the President’s Administration.

At the same time, the rumors that call the sale of Beltechexport a “cunning military plan” and an attempt to get away from the European Union’s sanctions “offshore” to Russia, are not consistent. According to some sources, Gurinovich is a nephew of the current head of the National Bank of Belarus Nadezhda Ermakova and a former employee of Vladimir Peftiev. Even if it is true, the real benefits of the sale of the Belarusian company to a Russian investor outweigh the conspiracy arguments.

The danger of this precedent lies in the fact that the Belarusian company which had fallen under the international economic sanctions did not receive protection from the Belarusian authorities. Thus, it had to be sold to a Russian businessman and is now under the Russian jurisdiction. Apart from Beltechexport, the European sanctions have been imposed on other thirty one Belarusian companies which operate in the fields of petroleum refining, construction and telecommunications.

Within the framework of the credit cooperation between Belarus and the EurAsEC Anti-Crisis Fund, which provides for the gradual privatization of Belarusian assets, these fields are extremely attractive for Russian businesses. However, no counteraction against the Belarusian authorities is to be expected from business elites and the management of the state-owned enterprises. One of the reasons is that the Belarusian business has not developed an effective mechanism and tools to defend their interests from the government. The second reason is that President Lukashenko has accumulated enough resources at his disposal, both force and information (compromising materials), to suppress any counteractions. A final and, and an extremely significant reason is that after Russian President Putin’s visit to Belarus, it became evident that the Kremlin will continue to provide financial and political support.

This means that in the medium term, the legitimacy of President Lukashenko as a guarantor of economic stability in Belarus will be extremely difficult to challenge.