SIFMANet Report On Belarus

In November 2024, RUSI’s Centre for Finance and Security (CFS) and RUSI Europe, together with the Stockholm Centre for Eastern European Studies (SCEEUS) and with the support of the Konrad Adenauer Stiftung, organised a roundtable discussion about strategies for effective sanctions on Belarus. The discussion took place at the premises of the European Endowment for Democracy in Brussels. It gathered public officials from the European Commission and the UK, as well as experts from Belarus and Central and Eastern Europe. The event was held as part of the Sanctions and Illicit Finance Monitoring and Analysis Network (SIFMANet), led by CFS and supported by the National Endowment for Democracy. This report is based on the unattributable contributions of the roundtable participants.

Background: Belarus Sanctions to Date

The sanctions against Belarus adopted by Western countries include both designations of individuals and restrictive economic measures. While the sanctions on Belarus are closely intertwined with Russian sanctions regimes, both politically and from the perspective of enforcement, they must be examined separately, especially since their aims and targets are distinct; the initial wave of sanctions on Belarus predated Russia’s full-scale invasion of Ukraine.

The first extensive Western sanctions on Belarus were adopted in 2020, following the Belarusian elections of August 2020, which were characterised by widespread fraud and violent action by the government. Western powers did not recognise the results announced by the authorities and condemned the falsification of the results and violence against peaceful protesters. The first package targeted individuals responsible for repression and election falsification; this was followed by additional designations, with a strong focus on human rights violations. Another round of EU sanctions was adopted in 2021 when a scheduled Athens–Vilnius Ryanair flight was diverted to Minsk airport in order to capture and imprison Belarusian dissident Roman Protasevich and his partner Sofia Sapega. Additional EU designations in December 2021 included individuals and entities responsible for the instrumentalisation of migrants for political purposes at the EU’s external border.

Following Russia’s full-scale invasion of Ukraine in February 2022, Western powers extended their restrictive measures against Belarus. The regime supported Russia’s illegal invasion in a number of ways: Belarus’ territory and airspace were used by Russian troops and for rocket launches, and many Belarusian companies supply the Russian military industrial sector. Western powers have designated several entities for their involvement in Russia’s war effort.

Since February 2022, the scope of economic restrictions has been gradually broadened, adopted in a series of separate decisions. Similarly to the situation for Russian sanctions, while there is a broad alignment on the policy goals of “likeminded” countries and there is strong coordination, specific measures and the list of designated individuals differ between Western nations. Also, Russian and Belarusian sectoral sanctions have not been fully aligned, which has resulted in loopholes. Since there is a customs union between Belarus and Russia and both countries have made significant efforts to circumvent Western sanctions, operators and authorities have had limited success in enforcing trade restrictions, including of dual-use goods. In the summer of 2024, new measures were adopted by the EU in an attempt to align Russian and Belarusian sanctions to curb such circumvention routes.

Countries bordering Belarus (Latvia, Lithuania and Poland) have also adopted some specific national measures, often adopted before and going beyond the scope of EU-wide decisions. There is also extended cooperation between customs authorities of the Baltic states, Poland and Finland. Measures include specific restrictions on the import of agricultural products, even those for personal consumption. The situation on the border has often been a contentious topic. Belarus has reacted with a number of countermeasures, including certain agricultural import bans from the EU.

While official cooperation with Belarus has been scaled down, Western powers and governments continue to support the Belarusian people, including by providing financial and other supports for Belarusian civil society and members of the democratic opposition. Western powers have signalled their continuous support for victims of the repression, through both direct and indirect channels.

The Goals of the Sanctions

Participants at the roundtable discussed the potential goals of and theory of change behind sanctions on Belarus. Both European public officials and experts from Belarus mentioned that some of the “traditional” end goals of sanctions policies, such as a regime change or behavioural change, are not realistic in the case of Belarus at this stage. It is no longer possible, as it might have been 10–15 years ago, to expect less repression from the regime or a weakening of its ties to Russia as a consequence of sanctions. The regime has decided to tie itself increasingly to Russia and acts, participants agreed, as its client state. One participant doubted whether Belarus could distance itself from Russia “even if [Belarusian leader Alexander] Lukashenka dies tomorrow”. Another point made was that Minsk’s role should be treated as more than just a regional problem: Belarus’s actions are also supporting the interests of China, North Korea and Iran.

Constraining the regime is a more realistic goal. Participants agreed that some of the constraints, particularly on the economy, are visible in Belarus, unlike the situation in 2014, when sanctions were adopted by Western countries following Russia’s illegal annexation of Crimea; one participant said those sanctions were so ineffective that they were “almost forgotten”.

A public official at the roundtable explained that sanctions have traditionally had an important signalling role towards various audiences, even if the economic impact was limited. Sanctions designations are not only messages aimed at the targeted individuals and elites, but also messages of support to opposition groups from that country (regardless of whether they are inside or outside the country). Third countries are also part of the target audience, as sanctions constitute an important signal about norms and values; they also serve as a stigmatising tool, another participant added. There has been, however, a shift in the public perception of sanctions since Russia’s full-scale invasion, and the Western public expects to see some concrete results. A public official emphasised that the question of whether sanctions work does not have a yes-or-no answer. “Sanctions are a marathon, not a sprint”, they explained, adding that the longer-term consequences of sanctions on both Belarus and Russia are, arguably, only now starting to be visible.

One participant emphasised that sanctions are inflicting extra costs on Belarus and Russia: Russia spends resources to limit the sanctions’ effect on Belarus by direct financial support, and costs are also rising for sanctioned entities and sectors. This means the two countries have less to spend on the war effort. Another participant stated that to measure the effectiveness of sanctions, it is important to ask whether the actions limit the regime’s ability to continue its aggressive and repressive behaviour. Points were also raised by participants regarding the lack of consistency of enforcement, which hinders the effectiveness of the sanctions.

The Impact of Sanctions on the Economy of Belarus

Some participants remarked that their economic modelling showed that the effect of sanctions on Belarus could have been up to 10% of GDP loss; in real terms, the effect was a loss of around 4.5% of GDP. Multiple participants explained that Russia has been compensating for these losses, through direct compensations, the opening of the Russian market, and more extensive use of infrastructure and logistics for Belarusian companies, which may be the reason for an effect lower than expected. Exports from Belarus in certain sectors now reach the global markets via Russia. Railways, ports and other Russian infrastructure are necessary to this end, but this raises the costs and lowers the profit margins. A participant from Belarus called the situation “an economic war of attrition”.

Participants cited other economic estimates showing that, without sanctions, the Belarusian economy would have grown approximately 1.5% annually, which translates into an accumulated loss of 12% by 2024. However, they pointed out that Russia has been able to compensate for part of this loss, potentially accounting for 3–5% of GDP. Participants agreed that Belarus is also increasingly dependent on Russia in terms of energy and the financial sector: the economy of Belarus is not competitive without cheap Russian energy. Some participants from Belarus questioned the possibility of Belarus distancing itself from Russia even if it wanted to. They pointed out that Belarus earns significant revenues by supporting Russia’s war machine with its industrial production capacity, with some factories working three shifts a day to serve the Russian army’s needs. Points were raised about the difference between official economic data, which may have been manipulated, and the reality of the shadow economy, about which we have no available information.

Some participants noted that sanctions have unintended adverse consequences, such as eroding the economic base of the pro-democracy middle class and benefiting those who are closer to the regime. According to participants, certain groups and individuals can also enrich themselves by providing logistical, financial or other services in the sectors impacted by sanctions. Artificial government trade monopolies have also emerged to provide access to certain goods or services, including those which cannot be imported to Belarus due to their counter-sanctions.

Participants also mentioned that many citizens in Belarus feel the negative consequences of the sanctions and counter-sanctions. While specific national measures by the Baltic states or Poland might be popular in those countries – one participant called some of the restrictions “populist policies” – in practice, they may alienate those Belarusians who oppose Lukashenka’s regime. The ban by the Baltic states on using cars with Belarusian number plates was cited as an example. A Belarusian participant added that food export restrictions cause frustration for citizens at the border who only possess food for personal use, while the restrictions have no impact on the regime’s financial and political means. Also discussed were the regime’s strategic communications and how they frame sanctions and counter-sanctions in the same way, leading citizens to attribute the negative consequences of both to Western powers.

Financial Sanctions

There was no clear agreement at the roundtable about the impact of sanctions on the Belarusian financial sector. However, several participants highlighted that it is almost impossible to make financial settlements or any transfers between the EU and Belarus, which has a negative effect on citizens, including dissidents, and as such may even strengthen Lukashenka’s regime. Several participants argued that allowing capital outflow could actually weaken the regime’s financial opportunities, whereas restrictions keep the capital available for the regime. While the source of such capital might be “dirty”, which is why Western countries wish to avoid contact with it, the capital leaving the country would be a significant loss for the regime, according to one participant from Belarus.

Participants recalled that there had been a time lag between the announcement of sanctions on banks from Belarus – including the Central Bank – and the implementation of the measures. This allowed Belarus to prepare for restrictive measures and build up the necessary alternative channels through Russia. Similarly, the closing of access for some Belarusian banks to the SWIFT messaging system was widely anticipated, according to one participant, and banks prepared for such a step well in advance. Since financial connections to European countries were not particularly extensive before the sanctions, and Belarus’ financial system was not dependent on Western European institutions, it was able to reconfigure such links. Despite these restrictions, participants pointed out that the financial system of Belarus is not entirely closed to global networks today, with Russia and China offering international financial access. Furthermore, other countries, such as Georgia, Kazakhstan and Kyrgyzstan, have emerged as financial intermediaries, according to some participants. Targeted measures against such intermediaries and extraterritorial sanctions were proposed as potential responses, but they were not supported by all participants, given that such measures would have an impact on dissidents and pro-democracy forces, as well as on beneficiaries and supporters of the regime. The ban on supplying euro banknotes to Belarus was mentioned as a particular measure with serious unintended consequences: the ban had made it harder for Belarusian citizens to access their funds. The fact that possessing euro banknotes was illegal also gave the regime another route to crack down on some individuals of its choosing.

The role of Lukashenka’s personal wealth and the so-called presidential funds is significant, according to multiple participants. Given their nature, there is limited information about these resources, particularly as parts of them are held in offshore jurisdictions. Some participants mentioned the role of countries in the Middle East as depositories for the regime. Lukashenka’s presidential funds are also used, according to a participant from Belarus, to directly pay for Lukashenka’s security apparatus. One participant added that the entire state apparatus is mobilised when the regime needs to react to new sanctions. There were diverging opinions regarding the impact of designations of individuals. Some participants stated that such action had limited impact, while others mentioned that the surprise element of some designations had been effective. Some participants called for sanctions on more individuals who are part of the Belarus business elite.

Participants asserted that enforcement of individual sanction designations can be improved; one suggestion was that the entire chain of transactions should be investigated. However, the EU lacks, one participant explained, “investigative muscles”. As noted above, assets registered in offshore locations or in certain third countries are important for the regime and for its power. Since Russian sanctions are larger by an order of magnitude, investigations are focusing on Russian individuals and networks, while funds of the Belarusian elite can stay under the radar and “in Russia’s shadow”, as one participant put it. The recent legal changes to criminalise sanction violations at the EU level was mentioned as a step in the right direction, as criminal enforcement could make sanctions implementation more effective.

Trade Sanctions

One participant estimated that 70–80% of pre-sanctions trade between Belarus and the EU is now under some form of restriction. The largest impact has been achieved in those sectors which were not expected to fall under sanctions. According to one participant, Lukashenka “was caught off guard” when Lithuania banned potash imports. Multiple participants mentioned the impact of this ban on mining and fertiliser production, which was a major source of revenue for the Belarusian economy, prior to sanctions. One participant recalled how salaries of miners went down by 30–40%, and it took time to reorganise export routes. Following the initial shock in 2022, the export of potash went down to 60% of pre-sanction levels. Now it is back to pre-war production levels, according to estimates cited by participants.

Russia’s role in stepping in and helping Belarus after sanctions by Western powers was noted. For example, fertiliser exports still reach China via Russian railway connections, and important export destinations such as India and Brazil are reached through Russian ports. However, according to one participant, the World Bank estimates that the revenues for Belarus from potash dropped by 50%, and producers – most importantly, the leading potash producer, Belaruskali – cannot receive the full market price, due to Belaruskali’s weakened negotiating position and the rising costs for intermediaries and transportation. One participant said that Belaruskali used to be one of the most important Belarusian taxpayers, but the impact of sanctions means that it now requires subsidies from the state budget, including exemptions from export duties. Another participant recalled that before 2020, there was a global price cartel for potash, with Russia and Belarus maintaining higher prices. Together, they represented about a third of global production. While Belarus would probably like to see the return of this cartel, this was not viewed as likely in the current environment.

It was noted, however, that these restrictive measures are based on product designations, not on sectors, so certain categories of fertilisers can still be exported from Belarus, and a modification of products could make trade possible. A Belarusian expert said that there is currently almost no import of Belarusian fertiliser to the EU. By contrast, participants mentioned that Belarusian oil export still provides revenues for the regime, with such export providing a good example of Belarus taking advantage of – and thus becoming increasingly reliant on – Russia’s infrastructure.

Participants, both European public officials and experts from Belarus, recalled that restrictive measures concerning fertiliser exports had not been seen to have any impact on global food security. While there was an initial spike in the price of potash, prices were back to pre-sanctions levels at the time the roundtable was held. One participant recalled that shortly before Russia’s full-scale invasion of Ukraine, restrictions were announced on potash being exported via Lithuanian ports, a move that led to substitute plans being made to use the Odesa port instead.

According to participants, this has not stopped Putin and Lukashenka making claims that restrictions on fertiliser exports have weakened global food security; according to some participants, this propaganda has been echoed by the UN leadership multiple times. A European Commission official underlined that the threats to food security are caused not by the decrease of Belarusian fertiliser exports, but by war against Ukraine, particularly the decrease in grain export from Ukraine as a result of Russia’s full-scale invasion. They also noted that the EU has stepped up its effort to help Ukraine by facilitating grain exports through Poland and Romania. Even if experts in the field and certain countries are aware of the real causes of global food insecurity, the Russian narrative is stronger globally, and its communication more active and effective, according to participants. By contrast, the EU has not been successful enough in its strategic communication to counter this narrative.

Border Closure

The situation on the Polish border was also discussed at the roundtable. There was a disagreement about how the situation has changed since 2021, when the Belarus regime first organised the arrival at the Belarusian–Polish border of refugees from the Middle East. One participant said that the number of migrants significantly reduced after a meeting between Polish President Andrzej Duda and Chinese President Xi Jinping, and suggested that currently, arrivals at the border are less organised. Another participant claimed that migrants now arrive at the border with Russian visas, not with the help of the Belarusian regime, and mentioned the porous Russia–Belarus border and low-level corruption as enabling factors in the continuation of this migratory flow. A researcher said they had evidence to the contrary: more Belarus state actors are now involved in the process and the infrastructure used by migrants is organised by the Belarusian state, with migrants still a tool the regime uses in its foreign policy.

Several participants noted that while the complete closure of the Belarusian–Polish border would be politically popular in Poland, this would not solve the problem of the instrumentalisation of migration. Moreover, participants also noted that this border is an important trade corridor between China and the EU, and thus the closure of the railway that crosses from Belarus into the EU via Poland would have significant negative consequences for the EU, due to the disturbance of Chinese imports and reciprocal EU exports. By contrast, given the increasing integration of the Belarus economy with Russia, the effect on the regime in Belarus would not be as significant.

Conclusions

The roundtable on the effectiveness of sanctions on Belarus highlighted that the restrictive measures should aim at constraining the regime’s actions, including its actions of domestic oppression, the personal wealth of key state actors and the Belarusian elite, and its contribution to the aggression against Ukraine. While the effects of the current sanctions on the economy of Belarus are significant, Russia has helped to mitigate this impact, integrating Belarus more tightly into its own economy and taking advantage of Belarus’s industrial capacity to support its war in Ukraine. The export of fertilisers, most importantly potash, has had a serious impact on Belarus, but the discourse on the effect on global food security has been hijacked effectively by the strategic communications campaign of Belarus and Russia, despite not being factually correct. Several restrictions, such as the ban on financial transactions and the ban on cars entering the EU with Belarusian number plates, have serious unintended consequences for Belarusian citizens, including those who oppose the current regime. Participants proposed some potential further steps, such as: sanctions on oil exports; further designations of the Belarusian business elite, targeting the growing military–industrial links between Belarus and Russia; and better awareness raising and enforcement of existing Belarus sanctions.

In sum, as one participant noted, sanctions on Belarus require much greater thought. They were originally designed to respond to the anti-democratic activity of the Lukashenka regime, but have now morphed into an appendage of the sanctions regime on Russia, engendered by its invasion of Ukraine. More thought needs to be given to the objectives – and theory of change – related to sanctions on Belarus, and how sanctions can be used to both support opposition activists and put pressure on the regime, while avoiding unintended consequences or driving Belarus even further into reliance on and the orbit of Russia.

Roland Papp is a journalist and independent researcher based in Brussels. He studied International Relations and Slavic Studies in Budapest, and Central and Eastern European Studies in London and Krakow. He has been working on anti-corruption, sanctions and anti-money laundering policies in the European Parliament and in NGOs.