“I hate Belarus” said the daughter of Vladimir Peftiev in 2011, during a visit to her father's home country. She grew up in Malta, an EU country considered a tax heaven by several international organisations where Mr Peftiev was based in the early 2000's. Then, in 2007, he moved back to Belarus for good, probably at the behest of Mr Lukashenko -- a choice his daughter will likely have regarded with withering resignation (she now lives in the United States). Mr Peftiev was the most powerful of all Belarussian businessmen from the 1990's to the 2000's. He is believed to have amassed over a billion dollars through his various businesses. But unlike Russian oligarchs like Roman Abramovich or the late Boris Berezovsky who were based in London, Mr Peftiev never escaped the orbit of Mr Lukashenko.
His career began in 1993, when he created the joint venture Beltechexport. Its purpose was to export stockpiles of ammunitions from the Soviet era to whomever cared to buy them (Belarus had a major role in the USSR defense industry). After the rise to power of Mr Lukashenko, who campaigned on an anti-corruption platform, Mr Peftiev performed an about-face by switching allegiance from the then-prime minister Vyacheslav Kebich to the Lukashenko camp. In those days, he developed ties to Viktor Bout, the famous arms dealer. Beltechexport supplied weapons and ammunitions to countries such as China and, it is believed, North Korea. It is also linked to the sale of fighter planes to the army of Laurent Gbagbo, then president of Côte d'Ivoire. These very planes were used to bomb a French army base in Bouaké in 2004, killing nine and wounding dozens. As late as 2007, a director of Beltechexport was embroiled in a scandal when parts for Mig-29 fighter jets illegally bound for Bangladesh were discovered in Latvia.
As the stocks of Soviet weapons dried up, Mr Peftiev diversified its portfolio. In 1998, he took part in the creation of Mobile Digital Communications (MDC), a joint-venture that owned Velcom, a mobile phone carrier that grew to become the country's biggest. He also added Aquadiv, a distillery, to Beltech Holding, which he controls. His stroke of genius was to create a betting company, Sport-Pari, together with Dimitri Lukashenko, one of the president's sons. He also hired Lilia Lukashenko, the wife of the president's oldest son as the director of Eastleigh Trading, one of his financial vehicles. With his business intertwined with Mr Lukashenko's direct family, Mr Peftiev ensured that he would not end up in jail. But it did not prevent him from falling out of grace.
Unlike most post-socialist countries, Belarus does not boast an oligarch class that enriched itself through large-scale privatization. There are two main reasons for this. Firstly, Belarus has been reluctant to privatize the state-owned assets left from the Soviet era. Secondly, the idea that the state is the source of everything is still pervasive in Belarus, more than 20 years after the fall of the USSR. Therefore the deeply-ingrained idea amid the population that since Lukashenko controls the state, he can dispose of it as he sees fit and allocate factories and other businesses to his cronies on a whim. This prompted the British scholar Andrew Wilson to craft the term "minigarch" for wealthy Belarussians.
Mr Lukashenko, for instance, recently single-handedly offered a state-owned, 7-million-euro vitamin concentrate plant to the Interservice group, property of Nikolay Vorobey. Now, it should not surprise the reader that Mr Vorobey is a close friend of Mr Lukashenko.
The state takes as much as it gives. Although the details are hard to come by, mostly because many Belarussian deals involve companies based in British tax heavens which do not have to reveal the names of the beneficial owners. These involve several nominally private companies that are widely thought to act for the state. The so-called solvents scheme is a good example.
Under a special agreement, Russia granted Belarus the right to buy its oil free of tax. In exchange, Belarus had to pay any export duty it collected on petroleum products back to Russia. In other words, Russia subsidized the Belarussian oil consumption. Not to lose out from this opportunity, the companies that were dealing with Russian oil started to transform the stuff and exported it as solvent (a different category than petroleum products) so that export taxes didn't have to be transferred to Russia.
It is estimated that Belarussian coffers gained 1.5 billion dollars from this scheme in 2012 alone, accounting for half of the country's GDP growth that year. The companies involved in the scam all belonged to Yury Chizh, a top minigarch, and to Mr Vorobey. It shows how the line between state revenue - such as customs duty - and private property became blurred under Mr Lukashenko.
By making ownership documents utterly unreliable, Mr Lukashenko made sure that the only path to wealth – and retaining it - was unquestioned obedience to him and his sons. To further deter any disloyalty, he regularly jails his "moneymen" and encourages rivalries. Andrey Shirai, for instance, was once the organizer of a smuggling scheme linked to the administration. He went to prison nevertheless. Among the arms dealers, Belarus' flagship trade, all CEOs but Mr Peftiev were arrested and sentenced in the 2000's. Some claim that even Mr Chizh, who currently has the favors of the regime, was arrested and put in prison for a short period of time in 2010.