Region: Struggling Belarus gets $3 billion bailout

A Russian-led bailout fund agreed June 4 to give a $3 billion loan to Belarus, pumping much-needed cash into the former Soviet republic's foundering economy.

The loan was approved at a meeting of the Eurasian Economic Community (EurAsEC), comprising the finance ministers of six former members of the Soviet Union. Aside from Belarus and Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan also belong to EurAsEC. The group created a $10 billion anti-crisis fund in 2009 to help ailing former Soviet republics during the financial crisis. Russia, which administers the fund, contributed $7.5 billion when it was created. EurAsEC still has about $8.1 billion left to lend, according to Russian Finance Minister Alexei Kudrin.

Terms of the loan, which will be paid out over three years, require Belarus to privatize state-owned interests worth around $7.5 billion during the term of the loan.

Analysts have estimated Belarus will need as much as $9 billion to sufficiently prop up its economy, which has nose-dived in 2011 as food prices have gone up and the national currency - the ruble - has been devalued more than 35 percent, leaving store shelves empty and longtime President Aleksander Lukashenko's popularity at an all-time low.

Under the terms of the loan agreement, about $800 million will be dispersed to Belarus in the next two weeks, with another $440 million expected by the end of the year, Kudrin told journalists after the EurAsEC meeting in Kyiv. Belarus will not be required to make payments on the loan principal for three years.

The country has been in negotiations with Russia for weeks, and the decision to comply with the terms of the loan was in stark contrast with Lukashenko's early objections to Russia's insistence on selling state assets. In a May 25 interview with a Belarusian news agency, he said Russia was seeking to profit from his country's financial difficulties.

"[We] will not throw down anything to anybody for nothing," he said.

Experts have said Russia is most likely interested in Belarus' energy assets, including the Beltrangas, the country's state-owned natural gas pipeline that supplies domestic homes while serving as a gateway for dispersal throughout Europe. Russia's Gazprom already owns half of Beltrangas, and Belarus has long resisted the country's attempts to buy the remaining 50 percent.

Belarusian officials say the country will also likely be signing a loan agreement for up to $8 billion with the International Monetary Fund (IMF) in the fall. The IMF has already sent a team to Minsk as part of the loan application process.

"Our needs will be defined after the IMF completes its mission," said Belarus Finance Minister Andrei Kharkovets, adding that the size of the loan "will be determined by the country's financing needs and its balance of payments."

IMF representatives will be in Belarus through June 14 to examine the current economic system and discuss with officials measures already taken by the government and the national bank to stabilize the economy, which first began to founder in 2010 when Russia cut its oil and gas subsidies, essentially eliminating the country's largest source of income. Since the collapse of the Soviet Union, Belarus had survived largely because of it was able to import Russian crude oil, refine it and distribute it throughout Europe - an economic luxury the country no longer has.

While some analysts have suggested Belarus will have a harder time getting the IMF to agree to loan it money than it did with EurAsEC, Kharkovets said the two may go hand in hand.

"We proceed from the assumption that the program we have signed with the [anti-crisis fund] is so comprehensive that it should also satisfy the IMF," he said.

Jack Buehrer can be reached at
jbuehrer@praguepost.com