Belarus turns to Russia for bailout
Tom Washington | Moscow News - themoscownews.com | May 18, 2011 | JRL 2011-88-42 | JRL Home
Alexander Lukashenko, the long standing president of Belarus and dubbed 'Europe's last dictator', is in talks with Russia to save his country's plummeting economy.
Russia is ready to grant Belarus a credit support of more than $6 billion, Lukashenko said at a meeting with his Prime Minister Mikhail Myasnikovich on Tuesday.
"I have just spoken with Russian President Dmitry Medvedev. We are negotiating with Russia on a stabilization loan to support the Belarusian rouble. Russia is ready to react if we need the loan. And that's about 3.1 billion dollars, if we, of course, will sign an agreement with them," he said, the Xinhua news agency reported.
But the line coming from Russia is different.
Russia considers
After suffering earlier slights from Lukashenko Russia is playing hard to get. A Kremlin source told RIA Novosti that Moscow was only prepared to give a $1 billion loan and added that Russian energy giant Gazprom remained highly interested in gaining control over Belarus's transit pipelines leading to Europe, one of Belarus's few bargaining chips.
Russian Finance Minister Alexei Kudrin had said earlier on that Russia would not provide the loan from its own coffers, adding that it would be up to the anti-crisis fund of the Eurasian Economic Community countries (Belarus, Russia and Kazakhstan), Eurasec.
Belarus had applied for a $1 billion loan from Russia and a $2-billion loan from Eurasec to stabilise the currency market suffering from acute foreign currency deficit.
"In total, this will make at least $6 billion, which will be enough this year not only to stabilize but also to gain substantial gold and currency reserves," he said, RIA Novosti reported.
Desperation
Lukashenko's economic model and social contract with the Belarusian people is based on handouts, mostly from Europe and Russia, Tomas Valasek from the Centre for European Reform told The Moscow News, after election violence and brutal police crack downs on opposition protestors put a new crack in Lukashenko's relations with the European Union.
After growing defiance to Moscow until the Belarusian elections, Lukashenko has since encountered an increasingly cold shoulder from Europe and has had to hastily repair his bridges with the Kremlin.
In trouble
In the first quarter of this year, Belarus's gold and currency reserves shrank by 25 per cent after rumors about the possible devaluation of the Belarusian rouble, which caused acute demand for foreign currency.
The black currency market now has the dollar rate at 5,500 Belarusian rubles while the official National Bank rate is about 3,100 Belarusian rubles.
The ongoing currency crisis undermines the country's ability to import foreign goods and has caused Belarusians to hoard basic food stuffs, Terradaily reported.
It's a deal
Kudrin said negotiations on the $3 billion Eurasec loan to Belarus would be completed in the next few days. Lukashenko and President Dmitry Medvedev had a telephone conversation on Tuesday and agreed that Belarus was ready to receive the loan and that terms and conditions had been agreed on, meaning negotiations would be completed in the next few days.
He also said Belarus would sell a number of state companies worth a total of $3 billion.
"A few assets will be privatized to maintain the balance of payments. Belarus will decide itself which assets and when," Kudrin said.
It remains unclear whether Beltransgaz, which owns Belarus's Europe-bound pipelines, will be among these assets.
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