Russia has offered Belarus a desperately needed $3 billion loan, with significant conditions attached, amid talks between President Alyaksandr Lukashenka and Russian Prime Minister Vladimir Putin.
Russia's finance minister, Aleksei Kudrin, says a major condition will be attached to a possible three-year, $3 billion loan for Belarus in the form of Minsk selling off certain national assets.
At a meeting of government of former Soviet nations in the Belarusian capital on May 19, Kudrin said his country would decide early next month whether to approve the credit based in part on Minsk's commitment to privatization.
Kudrin made the comments after a meeting of leaders of former Soviet states, also attended by Putin.
Belarus is in a deep economic crisis, stemming largely from lavish public spending before controversial presidential election in December that led to a brutal crackdown on the opposition and further soured relations with the West.
Belarus's central bank has responded by lifting exchange-rate controls, which in turn sent the local currency plummeting.
Officially, the Belarusian ruble's exchange rate remains at roughly 3,000 to the U.S. dollar. On the black market, however, the Belarusian ruble reached a record low on May 19, trading at a reported 8,000-9,000 rubles to the dollar at some exchange booths.
That means the currency has lost a stunning two-thirds of its value over the past 10 days.
The Short And Long Terms
A Russian-backed loan could help stem the ruble's devastating losses, but over the long term, it could also cost Belarus some of its most valuable assets.
Russia is thought to be seeking to capitalize on Belarus's vulnerability by acquiring major stakes in energy assets such as Beltransgaz, the state-owned gas pipeline network that supplies domestic homes and forwards the gas to Europe.
Kudrin said talks on Beltransgaz were imminent, and ominously said that Belarus is in no position to turn Russia down. Kudrin said if Belarus isn't able to raise up to $9 billion through selloffs, it would be forced to turn to the International Monetary Fund (IMF), which has loan conditions that Belarus is ill equipped to meet.
Russia and Belarus have been in talks for weeks, and Lukashenka had high hopes of clinching the badly-needed loan deal during this visit by Putin.
Speaking shortly after a telephone conversation with Russian President Dmitry Medvedev on May 18, he voiced confidence that Moscow would help rescue his nation's economy.
"Judging by all our negotiations, they are ready to react urgently if necessary," Lukashenka said. "This represents about $3.1 billion, provided we sign the relevant agreements with them."
Kudrin had echoed his remarks, saying an agreement was close and could be reached on May 19. But he denied the cash would come directly from Russia, which appears intent on weakening Lukashenka after years of subsidizing Belarus' Soviet-style economy in return for political loyalty and delivery of Russian oil to Europe.
Instead, Kudrin said the $3 billion loan would be issued by the Eurasian Economic Community (Eurasec), a Russia-dominated regional grouping that includes Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan.
He added that the funds would be paid out over a three-year period and not right away, as Lukashenka had hoped.
Belarus's economic woes represent an opportunity for Russia to seize control of strategic Belarusian state firms. Analysts say Moscow has long been eyeing Belarus' two big oil refineries, its gas pipeline system, its main mobile phone provider and Belaruskali, a top potash producer.
Lukashenka does not have the luxury of choice. By jailing political opponents after the peaceful protests over his re-election, the authoritarian leader has perhaps wrecked his chances of receiving further aid from the IMF.