Flash Report / Belarus

Belarus hijack shock: Initial thoughts and implications

  • A commercial flight from Greece to Lithuania has landed in Minsk after being forcibly redirected by the Belarus military
  • The hijack and arrest of a passenger, an exiled opposition activist, has provoked international condemnation
  • The immediate impact will be sanctions risk on Belarus, but we see some wider implications for emerging market investors
Belarus hijack shock: Initial thoughts and implications

The Belarus military forcibly redirected to Minsk a Ryanair commercial flight from Greece to Lithuania yesterday and, on landing, arrested one of its passengers, Roman Protasevich, an independent journalist who covered the mass protests in Belarus after the disputed election in 2020. The plane was redirected under the false pretence of a bomb threat, amid reports that President Lukashenko personally gave the order to land the plane. The Lukashenko government put Protasevich on a terrorist watchlist in November.

The interception of a flight, between two EU and NATO member states, has drawn international criticism, including from US Secretary of State Antony Blinken, EU Commission President Ursula von der Leyen, and the leaders of Lithuania and Poland, among others. Von der Leyen called for Protasevich’s immediate release. The actions – and further sanctions on the Lukashenko government – are sure to be discussed at a special meeting of the European Council that was already scheduled for today and tomorrow. Sanctions might include the suspension of overflights and other travel restrictions.


At first glance, the immediate impact will be on Belarus, but we draw the following implications, and pose the following questions, for investors in emerging and frontier markets.

  1. Although additional EU and US sanctions on Belarus appear inevitable, it is not clear they will achieve the desired impact of toppling the Lukashenko government any time soon as it is pushed ever closer to Russia. Since last year’s disputed election, Belarus has become increasingly dependent on geopolitical and financial support from Russia, even though the two have often not seen eye to eye in the past (eg on the price of Russian oil and gas sales, or Belarus’s at times ambiguous public attitude to the Russia-Ukraine conflict).

  2. Any operational link with Russian agents may not be established or proven easily, and while there is no suggestion of Russian involvement as of yet, that will not stop some from assuming it exists. The question is whether this derails the potential Biden-Putin summit and leads to fresh US sanctions on Russia with more bite than the ones introduced by the Biden administration. Just as the pieces of the Russian investment case are falling into place – a commodity price tailwind, quieter domestic politics and international relations, increasing in large emerging market peers and cheap valuation – they could be scattered.

  3. If the prospect of sanctions relief for contractors involved in the Nord Stream II gas pipeline from Russia to Germany (and the EU) are extinguished, then this might improve the prospects of alternative suppliers, such as Qatar or Algeria.

  4. US Secretary of State Blinken’s public rebuke made reference to the Lukashenko government’s “ongoing harassment and arbitrary detention of journalists”. Belarus is ranked 158th in the world in the RSF 2020 Press Freedom Index; this is still higher (ie less restrictive) than US ally and consensus favourite Frontier market, Vietnam (175th) or the largest market in the EM index, China 177th). This should be good food for thought for ESG-minded investors in EM, where China accounts for c40% of the index, and frontier markets, where Vietnam accounts for c30%.

Investment views

We retain our Sell on Belarus US$ bonds, with a yield on the 2031s of 7.16% as of cob 21 May on Bloomberg (mid-price basis). Yields have risen by c40bps this morning, according to Bloomberg opening prices. Our view reflects pre-existing concerns that financing constraints may begin to bite amid limited financing options, even as the Lukashenko government is forced to increase its reliance on Russia. Financing risks will only be amplified by further international sanctions (and sanction risks).

Yield on BELRUS US$ 2031 (%)

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