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Can the Economy of Belarus Respond to the Sudden Gas Subsidy Cutoff?

Interesting Forbes piece today addressing the “free market stimulus” being administered to Belarus via Moscow’s decision to muscle through a big price hike.

Belarus May Face Problems From Russia Gas Deal Parmy Olson Belarus has long propped itself on heavily subsidized raw materials from Russia, but today its former Soviet sugar daddy is dishing out a cold, harsh lesson in market economics. … Mechislav Grib, a former head of the country’s parliament, told the AFP news agency that, “after Moscow’s latest decisions, Belarus’ so-called economic miracle will break down.” Denis Maslov, an analyst for Europe and Eurasia at Eurasia Group, told Forbes.com that the deal would make things difficult for Belarus’ economy, but in the long run it could help make its industry more competitive. “The phasing out of Russia’s subsidies on energy might give Belarus’ leadership more ideas to help reform the economy,” Maslov said. The problem is, Belarus doesn’t have the domestic economic mechanisms to respond to changes in the market, and its president may not be willing to push through changes. Global Insight analyst Andrew Neff predicted the Belarussian government would probably step up its ideological work to avoid any social unrest, and start painting itself as a victim of Russian oppression. “Throughout the negotiations with Gazprom, the state officials and the media put the blame for the upcoming economic difficulties squarely on the Russian side,” said Neff. “Just as the Belarusian government turned its back on Western pressure to democratize, it will now face away from Russia, closing down the country altogether.”