Belarus Economy: In Search of More Loans
Last week Russian Minister of Finance Kudrin warned that Russia would reconsider any further loans if Belarus government continues to preserve multiplicity of exchange rates, restrict import and delay privatization. Over the last months all efforts of Belarus government focused on getting financial aid from Russia through the Eurasian Economic Community or the IMF. Unable to provide effective economic policy the government keeps applying for new loans, as it were the only solution to combat the deepening economic crisis. In the light of Kudrin's comments, even 3bn USD loan, approved by the Eurasian Economic Community in June, can be lost.
While waiting for the decision from Eurasian Economic Community, Belarus also applied to the IMF for another loan. The government expected to receive 3.5-8bn USD from the IMF. But instead of granting the loan,the IMF merely issued a number of recommendations on how to overcome economic and financial crisis following a two weeks visit. According to IMF official statement, Belarus government can count on financial support only when it really proves the readiness for structural reforms. That means that the government should implement concrete measures, instead of merely preparing drafts reforms.
On 4th of June the Summit of the Eurasian Economic Community in Kiev decided to grant Belarus a 3bn USD loan, to be paid over the period of three years. The first installment of 800m USD has been already transferred in late June. And this time Russia is going to be stricter with implementation of its requirements than before – to receive the loan Belarus should privatize its assets on the amount of 7.5bn USD over three years, by 2.5bn USD every year. If the government fails to implement the privatization plan and reduce budget expenditures, the future installments will be reconsidered.
Privatization was also one of the main requirements from IMF, when it granted Belarus a stabilization loan in 2008. But the government had never fully implemented it in spite of all declarations. The privatization agency, on which the IMF insisted, had never been created in Belarus. And only afew companies were privatized from the long list of those intended for privatization.
The price of the loan
Bargaining for the most lucrative Belarusian companies has already started. Beltransgaz, Belaruskali and MAZ remain the most frequently mentioned companies in Belarus and international media.
The negotiations for privatization of Beltransgaz by Gazprom have a long history. This gas transportation company is one of the most strategically important assets of Belarus, even though Russia declares that it is not particularly interested in it. Indeed, after Russia launch the oil and gas pipeline “North stream” onthe bottom of Baltic Sea, Belarus will lose its advantage of a major natural gastransit country. But as writes the columnist of Naviny.by Ivashkevich,without controlling its energy transportation system Belarus would find it difficult to diversify the energy suppliers in future and participate, for example, in BEMIP (Baltic Energy Market Interconnection Plan)financed by European Union.
Over the 2007-2010 Gazprom already purchased 50% of Beltransgaz for 2.5bn USD. Now Belarus tries to sell the rest of its share in the company for another 2.5bn USD in a bundle with the contract for lower prices of gas supplies. Gazprom is strongly opposed to mix these two deals and decrease gas price, which is already the lowest in the region. The average gas price for Belarus this year will be around 250 USD/1m3, while in Ukraine it is 290 USD/m3 and in Poland-401 USD/m3. But Belarus government insists that Belarus should have the same gas prices as Russian consumers. Thus, negotiations continue.
The second very important asset for the country and lucrative for investors is Belaruskali – one of the biggest producers of potash fertilizers in the world. Soon after Belarus received a loan from Eurasian Economic community, Belarus media began to discuss the news that Russian investor and large shareholder of Uralkali Suleyman Kerimov is already negotiating with the government (or more precisely with the Presidential Administration) the terms and price of the controlling stock of Belaruskali. According to Lukashenka’s estimate, the price of the whole company is 30bn USD. But a week later the next news came that Suleyman Kerimov was not going to buy any share in Belaruskali. It seems the negotiation with Belarus government became rather tough. Or Kerimov just realized that even purchase of major stock would not give him necessary control in the company.
The planned merger of Minsk automobile plant – MAZ with Russian automobile giant KamAZ is another deal, actively discussed in media. The negotiations are also postponed due to political reasons, as Belarus government wants to have higher share and bigger influence in joint company than it is suggested by KamAZ management.
Reportedly, Belarus prime Minister Miasnikovich suggested Azerbaijan to take part in privatization of key Belarus enterprises – oil refineries – Mozyr Oil Refinery and Naftan during his recent visit to Baku. What indicates that Belarus tries to weaken the Russian pressure and find other buyers of “family jewelry”.
So the number of companies intended for privatization will only expand. According to the requirements of the loan, received from Eurasian Economic Community, Belarus has to prepare a list of enterprises it is going to privatize until the end of the year. But Lukashenka, who acts as the sole owner of the whole country, will do as much as possible to postpone the privatization. Instinctively he understands, that privatization will inevitably change the structure not only of the economy itself but will also trigger political changes.
The persisting crisis
The June loan from the Eurasian Economic Community was almost unnoticed by Belarus economy. It is still impossible to buy US dollars or Euros in exchanges for the officially declared exchange rate, even though Belarusian rouble was finally devaluated by 50% starting from March. Belarus government refuses to let market itself to define the equilibrium exchange rate, because it simply cannot give up the illusion that this regulation will keep people’s saving from devaluation. Neither it starts interventions on the foreign currency market, as understands that foreign currency reserves are too small. Even with recently received loan the reserves are only 4.15bn USD.From the start of the year it comprised by 28.6% (in January-May).
Even the Ministry of Energy found it hard to buy foreign currency. It was not able to pay off the country's electricity debt to Russian energy company Inter RAO UES, which led to temporary suspension of electricity supply to Belarus.
Financial crisis and government restriction on interbank operations dried out the credit rivers – banks started to curtail their consumer credit programs. The important pillar of Lukashenka’s social program – preferential crediting of housing construction – is about to be canceled altogether. According to this program a large number of Belarusians received preferential housing credits with the interest rate of only 5% for 40 years (that was lower than inflation rate). And finally the government abandoned this program, gradually leaving its model of socially oriented economy, as there are no more sources to support it. For many years the preferential crediting of agriculture, state enterprises and housing construction was undermining the Belarus financial system. That in part caused the present economic crisis.
Belarus government has no strategy how to overcome the crisis. The previous month was marked by return of price regulation and introduction of few absurdist laws, which will have little or no influence on the economic crisis.
The only policy it is capable to make is to ban and restrict. With further worsening of economic situation Belarus government is likely to impose more bans and restrictions. Lukashenka simply tries to restrain the natural economic laws, which work against him.
Digest of Belarusian Analytics: The Logic of Non-Violence
Over the last weeks scholars in Belarus focused primarily on the new forms of street protests, their potential and implications. The fresh public opinion polls demonstrate growing dissatisfaction of Belarusians with the economic crises and how the authorities cope with it. A recent paper also analyzed Poland's efforts to facilitate democratization of Belarus.
The logic of non-violence. Belarusian social researcher Irina Solomatina considers that silent actions are a manifestation of a new type of community that does not fit into the framework of state ideology. An important cornerstone of the Belarusian official ideology is glorification of the Soviet vision of the Second World War, where Belarusians and Russians stood against aggression from the West. The authorities use various public rituals to entrench Soviet values of obedience and deliberately ignore massive repressions and economic stagnation which characterized the Soviet period.
On the other hand, security services violently punish any expression of other values with a particular emphasis on collective actions. The authorities regard the seemingly meaningless act of clapping as a serious challenge. Solomatina predicts development of new forms of non-violent communication of disagreement with the values imposed by the authorities.
Silent revolution in people's minds. Gomel politician Pyotr Kuznetsov believes that authorities were able to bring down the dynamics of "silent protests". However Kuznetsov is confident that the revolutions in people’s minds and in the relations between the government and people havealready taken place.
Can nonviolent methods of protest bring a victory to the Belarusian opposition? Russian Radio Liberty talks with Belarusian experts on the effectiveness of the methods of protest, currently going on in Belarus. Journalist Yuri Drakakhrust draws attention to the important fact that the actions cover not only the capital and also the rest of the country. Pavel Sheremet predicts strong protests of opposition in autumn-winter, before the parliamentary elections, when the economic crisis will become more apparent. Yuri Chavusau, a political analyst, says that government repression can intimidate the participants of the actions, but the demand for a protest in society will remain and could explode at any place at plants, factories, or at border crossings.
Why the political parties do not rebel? Political scientist Yuri Chavusau explains why Belarusian political parties do not participate in street protests. According to his observation, the most efficient and capable parties are “now engaged in internal audit of scarce resources, defining the position in relation to socio-economic crisis, addressing the issue of coalition building up to the upcoming parliamentary elections, or, simply, licking their wounds after a very hard political season 2010”.
Belarusians want reform, not revolution. BISS (Belarusian Institute for Strategic Studies) prepared a briefing paper on the basis of an opinion poll conducted by IISEPS on May 20, 2011. BISS draws attention to the growing number of supporters of market reforms (67%) and high levels of anxiety at the possibility of new terror attacks (70%). Comparative analysis of the data also shows an increasing number of respondents who believe that "go on living like that we can not". However, the number of respondents willing to take part in active protests has not increased. According to the BISS, these results indicate that the Belarusians are ready for reforms, but will not use the revolutionary methods. The paper is launching a new series of BISS regular publications, based on data from the independent opinion research centers.
A new public opinion poll. On June, 2011 the Independent Institutefor Sociological and Political Studies (IISEPS) conducted a survey on the most important issues of Belarusians’ life. Deteriorationof the "economic well-being" of Belarusians can be characterized as a true landslide. Thus, the number of respondents who said their financial situation over the past three months has worsened, increased from 26.9% to 73.4%. 81.5% believe that "the Belarusian economy is in crisis", and lay the blame primarily on the president (44.5%) and government (36.7%), but not to the world crisis (27%) or speculators (16.6%). The number of those who are ready to vote for Lukashenka again in the presidential election for the first time since March 2003 has fallen below 30% and amounted to 29.3% (December 2010 – 53%, March 2011 – 42.9%).
Warsaw will do everything to solve the "Belarusian issue". Since July 1, Poland leads EU. Mikhas Iljinski examines the relationship between Poland and Belarus after the events of December 19 and concludes that "during its EU presidency, Warsaw will continue its efforts that the "Belarusian issue" would not disappear from the range of interests of Brussels".
Iljinski notes that because of the Arab Spring the Medeteranian region is becoming more important for the European Union than its East. However, there is a nearly unanimous position on Belarus in the Polish society and the Poles will keep working on their efforts to promote democracy in Belarus – unilaterally and in cooperation with other EU countries. The author hopes that Poland will be able to cooperate with Belarusians in as many areas as possible to balance Russia's dominance.
Belarus Digest prepared this overview on the basis of materials provided by Pact. This digest attempts to give a richer picture of the recent political and civil society events in Belarus. It often goes beyond the hot stories already available in English-language media.