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A week after a powerful bomb killed 13 people in a Minsk subway station, and President Alexander Lukashenko warned of stiff punishment for anyone who spreads "panic," Belarus's state-guided economy appears to be unraveling. Now, worried Belarussians are emptying shop shelves of durable goods and line up outside banks in hopes of converting their rubles into dollars or euros.
Promises of financial aid from the European Union disappeared after Lukashenko launched a brutal – ongoing – crackdown against the independent media and his political opposition over allegations that he rigged the December polls in which he was re-elected to a fourth term with an improbable 80 percent of the votes.
But it was probably the remarkable speech delivered on TV by Lukashenko last week that sent Belarussians into the streets to unload their rubles in favor of foreign currencies and dry goods.
"After the terrorist act and Lukashenko's reaction, we see huge lines forming at banks and people grabbing everything durable from market shelves, especially sugar, vegetable oil, and electronic appliances," says Yaroslav Romanchuk, an economist and former opposition presidential candidate.
Belarusians are on edge like no other time since President Aleksandr Lukashenko came to power in the former Soviet Republic in 1994. Last month a bomb in the Minsk subway left 14 people dead and almost 200 injured. Speculation is now increasing that a faltering economy will force a devaluation of the ruble.
Lukashenko declared a crisis and called the attack and the currency shortage “links in the same chain” that are designed to destabilize his government. At the same time, the former collective farm boss, described by the U.S. government in 2005 as running “Europe’s last dictatorship,” remains under sanctions from the U.S. and European Union.
He may also be at risk of the kind of unrest that toppled leaders in Tunisia and Egypt, said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.
“This is more serious for Lukashenko than anything he’s faced since the collapse of the Soviet Union,” said Weafer. “As an authoritarian leader of a weak economy, he knows all the factors are there for Middle East-style instability. It is chickens coming home to roost in Belarus.”
When it comes to currency warfare, one can be polite and gentlemanly about it, like Brazil for instance, which every day, and sometimes on several occasions during the day, will proceed to buy dollars in an attempt to keep one's own currency lower. Or one can do what the Belarus central bank just did, and officially devalue one's currency, in this case the Belarus ruble, by 56% overnight, against every currency out there.
"A ‘91-style meltdown is almost inevitable." So says Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, discussing the imminent economic catastrophe that is sure to engulf Belarus following the surprise devaluation of the country's currency by over 50%, which we announced on Monday. "Unless Belarus heeds Russia’s call for mass privatization of state assets, it is .ed for “hyperinflation, massive un- and under-employment, and a shutdown of production" Moiseev concludes.
Who said that only Germany is allowed to annex Greece (and soon Ireland and Portugal)? (and if Der Spiegel has anything to say about it, again, Bailout #2 is far from certain... more on that shortly). In a surprising move, Russia has decided to remind everyone just how irrelevant the IMF is now that Russia and China run the "sovereign rescue" show, and that it too can play the imperialist game just as well as the Troica. Following the recent hyperdevaluation of the Belarus Ruble as discussed on Zero Hedge, and the country's collapse into a hyperinflationary hell, Reuters has just reported that Putin, that "White Knight" of former USSR imperialist dominance, has decided to "bailout" Belarus. From Reuters: "Cash-strapped Belarus will receive a three-year $3 billion loan from a Russia-led regional bailout fund as it seeks to stabilize its economy, Prime Minister Vladimir Putin's spokesman Dmitry Peskov said on Saturday. The former Soviet republic on Friday unveiled a series of measures to end the crisis, including a vow to cut its budget deficit in half, after its currency lost 36 percent of its value in May and inflation reached 20.2 percent." It is unclear just how many billions in funds will need to be derived from forced "privatization" of Belarus assets for the benefit of the old KGB guard, or what the interest rate on the rescue loans will be.
Originally posted by Vitchilo
I wonder what Russia will do if Belarus dictatorship falls (which it should) and a pro-NATO regime ends up in power... Russia is probably gonna be pissed.