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Russian loan won’t keep Lukashenko afloat for long

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MOSCOW (Reuters) – A $ 1.5 billion loan from Russia will support Belarusian President Alexander Lukashenko for now as he tries to deal with mass protests, but not for long.

FILE PHOTO: Russian President Vladimir Putin attends a meeting with his Belarusian counterpart Alexander Lukashenko in Sochi, Russia September 14, 2020 in this still from video. Russian Presidential Executive Office / Document via REUTERS

Lukashenko, whose security forces arrested thousands of opposition supporters demanding his resignation, obtained the financial lifeline from Russian President Vladimir Putin at a Black Sea summit on Monday.

But the real money it has – for example, to pay its police force or raise wages to attract strikers – will be much lower than announced.

According to Artyom Shraibman, a political analyst at the Carnegie Moscow Center, only a fraction of the funds will reach Minsk, as it must refinance an additional $ 1 billion in loans, including to Russia, and pay $ 300 million in debt to Russia. energy giant Gazprom by the end of the year.

“In reality, it is money transferred from one Russian pocket to another,” said Pavel Latushko, a prominent member of the Belarusian opposition council.

Sofia Donets, chief economist at Renaissance Capital in Moscow, said: “The loan is basically not new money, but the refinancing of Belarus’ existing debt (to Russia), part of which is repayable. next year.

Almost half of Belarus’ total external public debt is owed to Russia, she said. It faces foreign debt payments of around $ 2.6 billion next year, mostly split between Russia and China.

DEGRADATION OF THE ECONOMY

In addition to facing the most serious political crisis in his 26-year reign, Lukashenko is in the throes of worsening economic difficulties.

Gross domestic product fell 1.3% between January and August, the state-run Belta news agency said on Tuesday. In August alone, the central bank spent $ 1.4 billion, or about a sixth of its gold and currency reserves, as it fought to support the ruble.

Belarusian companies and banks are also at high risk. Russian rating agency ACRA said it had about $ 9 billion in external debt as of July 1 and the government may end up taking on some of it due to their limited rescheduling capacity during the current crisis.

ACRA estimates Belarusian debt to Russia at around $ 7.9 billion, or 12-13 percent of GDP as of April 1 this year.

Lukashenko has relied heavily over the past two decades on Russian financial support for Belarus’ stagnant economy. By some estimates, it received more than $ 100 billion during this period, mostly in the form of oil and gas subsidies.

He took advantage of the fact that Russia needs its little neighbor as a buffer against NATO and as an export route for its oil and gas. And Putin has no desire to see another neighboring leader overthrown by protesters, as happened with the “Maidan” protests in the Ukrainian capital Kiev in 2014.

Putin “must support him, because if he does not do so, this regime will collapse,” said political scientist Dmitri Oreshkin.

“For the Kremlin, this is a very dangerous example of what could be used in Russia,” he added. “People will see that it is possible to change leaders with mass protests.”

For this reason, the destinies of the two presidents are linked, analysts say.

Although Lukashenko would have wanted more funds from Moscow, he and Putin got something important out of Monday’s meeting, said Ryhor Astapenia of the Chatham House think tank in London.

“Lukashenko is saved, economically speaking, for at least a while,” he said. “And Putin is sure that Russian influence will increase in Belarus.”

Additional reporting by Vladimir Soldatkin and Tatiana Voronova; Editing by Mark Trevelyan and Peter Graff

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