It's Fiasco: Lukashenka Makes Mess Of All His Mega-Projects

• ANDREI BRANISHEUSKI
• 16.10.2024, 11:51

A story of failure.

Pharaohs used to build pyramids, Eastern kings - mausoleums, and Roman emperors - palaces. Aliaksandr Lukashenka also wants to leave a trace in history. And at the same time to solve all Belarusian economic problems with a magic stroke of the pen. Therefore, megaprojects have become an idea-fix of the Belarusian authorities.

This is the fifth publication in the series about myths created by the Belarusian authorities. Today we will tell about what's wrong with the BelNPP, Belarusian National Biotechnology Corporation (BNBC), cement plants and wood processing. And about how Lukashenka made a mess of all the megaprojects he was undertaking.

‘All the investment projects, which are undertaken by the government, work dreadfully. It has become the rule to make promises and then ask for an extension of the deadline for a year or even years,' Aliaksandr Lukashenka said at a meeting with the government in 2018.

We Have This Electricity... For Days

The Belarusian authorities have a very special relationship with the Belarusian nuclear power plant. In the imagination of the Belarusian propaganda, the nuclear plant is a pearl in the collection of state megaprojects. Advanced nuclear technologies, new competences, a great nuclear power and cheap electricity. And it looks impressive in pictures. It is even somewhat comparable to the pyramids in terms of scale.

When the Belarusian authorities were planning the construction of the BelNPP, they had a great plan. Belarus was supposed to become an irreplaceable regional exporter of electricity thanks to the nuclear power plant. Especially irreplaceable for Lithuania, which, on the contrary, closed its nuclear power plant. As a matter of fact, they were building the nuclear power plant for the sake of selling electricity.

And this great plan even had some chances of success. If the Belarusian authorities had not decided to play a dirty trick on their neighbours at the same time. On the very same Lithuania, to which they were going to sell electricity.

Since there is nothing more logical than to play a dirty trick first and then to propose pragmatic and constructive economic relations. Therefore, choosing the construction site fifty kilometres away from Vilnius put the kibosh on all the export plans.

‘I'm not talking about the nuclear power plant, you offer to think for another year, and then to start considering something and planning, where you will sell the energy, six months before its launch. This policy is beyond comprehension,’ Lukashenka said at the very meeting with the government from which I took the epigraph.

Six years have passed since then, but for some reason the problem of excessive electricity has not disappeared. All neighbours, except Russia, have refused to buy Belarusian electricity. Russia might have agreed, but Russia has plenty of its own electricity. And the main problem of Belarusian electricity now is what to do with it.

This Electricity Cannot Be Sold Anywhere

The two power units of BelNPP produce 18 billion kilowatt-hours of electricity. Belarus consumes 42 billion. At that, long before the NPP construction, electricity production in Belarus was excessive. The nuclear power plant was superfluous in this scheme from the very beginning.

However, the authorities argue that advanced nuclear electricity allows replacing electricity produced by backward old-regime methods. The Belarusian Ministry of Energy says that the launch of the nuclear power plant has already saved 9.3 billion cubic metres of Russian gas.

And indeed it did save gas. However, it seems that this saving has cost us dearly. The construction of the NPP cost $5.36 billion of the Russian loan. The Belarusian authorities spent about half a billion more on this construction from the budget.

And that's not all. Backward Belarusian power grids are not very suitable for advanced nuclear electricity. Upgrading of power grids and creating additional infrastructure cost $700 million last year. So the total cost of the nuclear plant, as of the beginning of this year, is approaching seven billion.

And someone will have to pay these seven billion. The cost of electricity in Belarus is steadily rising. Electricity tariffs have risen by more than 20 per cent since 2020 and until the end of last year. Since the beginning of this year, they have increased by an average of 3 per cent. Although the price of Russian gas has not changed all this time. And the main justification for building the nuclear plant was the promise to flood the country with cheap electricity.

Based on the current price of Russian gas, the BelNPP, according to iSANS experts, will pay for itself in 60 years. At that, the power units of the nuclear power plant are designed for 50 years of operation. That is, it will take another ten years to pay off the BelNPP after it will no longer be able to function very well.

And in these circumstances, when there is nothing that can be done with this electricity, there is, of course, nothing more logical than to build another nuclear power plant in addition to the first one.

‘Today I am gently bringing you to the point that it is not a bad idea to have a second nuclear power plant in the country. It is very, very profitable,’ Lukashenka said a year ago.

About as much profitable as the first Belarusian nuclear power plant. Or the miracle of innovative technologies - the Belarusian National Biotechnology Corporation.

When It's ‘Designed And Produced In Belarus’

‘It has been a year since the grand opening of the unique large-scale production of the Belarusian National Biotechnology Corporation. We were proud of this production in our time, and we are proud of it now,' Lukashenka said at the end of last year.

The Belarusian authorities know how to be proud. They are not very good at what they do, but they are always willing to be proud of it. Lukashenka started to be proud of BNBC well in advance. The BNBC had not yet started to be built, but Lukashenka was already proud of its advanced technologies.

‘BNBC, which has no analogues either in Europe or in the post-Soviet space,’ he said.

Then BNBC was sort of completed. Then it sort of started to work. And it was getting more and more difficult to be proud of it with each passing day. That's why the Belarusian propaganda preferred to be proud, avoiding concrete figures.

Until late last year, when after the meeting with Lukashenka, where the scales fell from Lukashenka's eyes about the object of his pride, BelTA delicately wrote that ‘things were not quite as planned at the enterprise’.

BelTA did not specify what exactly went wrong. Belpol did it for BelTA. According to the investigation, in 2022, BNBC produced half as much product as expected. The revenue was $160 million against the plan of $400 million. BNBC earned $120 million in the first eight months of last year, although it had planned to earn $460 million by the end of the year. At that in 2023, the corporation decided not to push the luck and reduced the annual production plan from 600 to 340 thousand tonnes.

The Belarusian state has spent 30 years of independence not to integrate itself into the world community, but to shut off itself from the world as much as possible. The ‘stable’ authorities helped in this, of course. They tried hard to make sure that a promising country, which could have leapt forward after the collapse of the USSR, remained an outsider. In a series of 30 articles about the myths of the Belarusian authorities, prepared in cooperation with The Free Media Centre, a non-profit media development organisation Berlin, Germany. Plan B. will tell us what is wrong with the parallel reality that the system tries to sell us as true.

Money Is Nothing, Image Is Everything

‘This is an image project, a very important technological project for our country. You know what it cost not only for me, but also for the state,’ Lukashenka said late last year.

It really cost a lot. The cost was 610 million of the Chinese loan, which was taken under the government guarantees, and another 200 million of loans from Belarusian banks.

The loans to the advanced corporation didn't help. The company, which is 75 per cent private, had to be supported by the state. In 2023, the company received $53 million in government subsidies.

It hasn't become any better this year. The authorities had to pay BNBC's debts for light, gas and raw material supplies. The government was supposed to get at least shares in return. However, as of the end of September, the company was still 75 per cent private.

At the beginning of October, however, the director of the corporation was changed. Siarhei Lozhachnik, the former head of Lida District Executive Committee, became the new director. A man of great commercial experience. From 2011 to 2013, he was in charge of the Shchuchyn butter and cheese factory. So now, with a state man at the helm, it will be possible to nationalise BNBC's losses and take it on state maintenance. Just as it happened with the cement factories.

Great Cement Power

The Belarusian authorities started the great modernisation of cement plants twenty years ago. They probably do not even know themselves how much this programme has cost. It has cost a lot. The modernisation of the Krasnaselski Building Materials Plant alone cost $500 million as of 2018.

In 2019, the government gave cement plants $900 million in subsidies. Since the same year, the government has been paying the interest on bank loans for the factories. At the beginning of the year, cement plants' debts to banks totalled 420 million rubles. And cement plants have no chance to pay back these debts. Because instead of profits, the cement plants have only losses.

The loss of Krychautsementnashyfar quadrupled to 120.7 million roubles. The losses of Krasnaselskstroimateryjaly doubled to 55 million rubles. Against this background, the Belarusian cement plant even has something to boast about. Its losses decreased by 16 per cent. Yet, they still remain losses.

And cement plants will not get better. Because cement plants have nowhere to grow. Last year their capacity utilisation was already 98 per cent. Their exports increased by 30 per cent. That is, Belarusian cement plants do sell their cement. They just can't make money out of it.

And since it has been twenty years that the cement plants have not been able to recover from all the past modernisations, the authorities have decided to carry out another one.

‘A major modernisation of the plants will be carried out in the next five years. It will concern three cement plants, six plants producing reinforced concrete products, as well as five plants producing gas-silicate blocks,' said director of the Belarusian Cement Company Aliaksandr Dauhiala.

This is because the main thing in megaprojects is never to stop. So that you don't accidentally have to admit your mistakes. That is why the authorities are going to build a new pulp-and-cardboard mill not having finished the previous one.

Ten-Year Long Road

The construction of the Svetlahorsk Pulp and Paper Mill has cost ten years and a billion dollars. 650 million of them were loans from Chinese banks, which Belarus has not yet repaid. Another 400 million was invested by Belarusian banks.

The plant was supposed to be launched in 2016. Then the deadline was postponed to 2017. Then they quarreled with the Chinese builders, who were building the wrong thing and in the wrong way. In the end, the plant was officially launched in 2020.

‘The epic with the construction of this unique enterprise is over. I guess it's a sort of lesson to us. We have learnt a lot here. How to build and control the builders,’ said Aliaksandr Lukashenka at the opening ceremony.

The enterprise is really unique. Because no matter how hard they were trying to launch the plant, they have failed to launch it for more than 70 per cent. In 2023, the Svetlahorsk PPM produced 280 thousand tonnes of products at an annual capacity of 400 thousand tonnes.

And the problem is not only that they cannot finish building the plant. The problem is the one as with the electricity - there's nowhere to sell its products. Out of all external markets, Belarus has only Russia. And Russia has plenty of such goods itself.

It's not possible to finish the plant, and there's nothing to do with the products. That's why the authorities want to build a new one. Exactly the same, but different.

‘It is planned to create a new pulp mill with a capacity not less than the existing production capacity (that is, about 400-500, maybe even more tonnes per year),’ said Deputy Head of Bellesbumpram Concern Siarhei Kas'yanau. ‘It will be a completely unique plant’.

...And Wood Processing

The construction of the Svetlahorsk Pulp and Paper Mill is a specific case of the wood processing modernisation programme. The Belarusian authorities have been enthusiastically engaged in modernisation of the woodworking industry since 2006.

And why shouldn't they do it? Wood processing seemed to be an ideal project. Because we have everything of our own. There is a permanent renewable resource, which, if used properly, could become for the Belarusian economy oil, gas and potash fertilisers taken together. We have lots of forests.

Austrian ‘Kronospan’ has proved that wood processing in the Belarusian conditions is a gold mine. Since 2010, the Austrian company has invested a billion euros in its Belarusian production facilities. The company became the largest exporter of woodworking products in Belarus five years after its arrival in the country. Lithuanian VMG has done approximately the same thing in Belarus.

In general, you just need to roll up your sleeves and get things started. And the Belarusian authorities started them in such a way that only splinters flew in different directions. It was in connection with the woodworking modernisation project that Lukashenka first got the idea to restore the advanced traditions of serfdom in the country.

In 2012, Lukashenka banned by decree the possibility of firing woodworking workers until the modernisation programme was completed. The madness of the law, however, was quickly redeemed by the non-binding nature of its implementation. It seems that the decree was never applied in practice.

However, all other ideas were implemented with great enthusiasm. As of 2015, $1.5 billion was spent on modernising the industry. By 2020, the amount rose to 4 billion. At that time, it was assumed that the invested money would pay off by 2030. Now no one remembers about the payback period. The government has been paying and continues to pay debts of woodworking enterprises.

The reason is that the main thing in Belarusian megaprojects is not the result, but the process. Not to have built, but to have learnt.

Closed Cycle

All Belarusian megaprojects go through the same life cycle. Everything starts with an idea that has no analogues. A lot of money is invested in the idea and some time they are proud of the achievements. Because each project is unique, innovative and has dizzying life prospects. It is just that when implementing it, the authorities did not take into account a couple of small, absolutely insignificant details. Lack of sales markets, problems with raw materials or lack of financing. Or all of them.

And then it turns out that it is necessary to count losses instead of profits. But you can't close the project. To close means to admit a mistake. Therefore, in order to revitalise the project, more money is invested in it. And the more money, the more losses. As a result, the megaproject, which has no analogues, comes to the full state maintenance.

And the authorities find a new idea to start a new cycle. The world's largest Belarusian microchips and not the smallest, but not a very big aeroplane. Nuclear icebreakers in the Arctic Ocean and a Belarusian port in Murmansk. A new MAZ bus factory and a new ‘giant refrigerator factory’.

The Belarusian authorities have a lot of new ideas. And so far they have money.

Andrei Branisheuski, planbmedia.io