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August 21 – August 27, 2017

Minsk disregards alarming increase in credit dependence on Kremlin

The situation has not changed
Minsk disregards alarming increase in credit dependence on Kremlin

Minsk continues to strengthen its credit and financial dependence on the Kremlin, which could reach critical levels in coming years and cause difficulties in discharging of obligations. The Russian leadership is likely to refrain from dictatorship for the period of the electoral campaign in Russia. However, the weighty credit debt to Moscow would enhance Minsk’s vulnerability to political and economic pressure from the Kremlin after the presidential elections in Russia.

So far, the Russian Government has approved only the draft loan agreement, and its allocation could be delayed and conditioned with concessions from Minsk. An increase in the debt to Moscow up to critical levels could prompt the Belarusian leadership to privatise state enterprises appealing to Russian business (as it was in the case of Beltransgaz in 2007-2011).

The Kremlin has embraced the Chinese experience and is consistently offering to Minsk investment and loans tied to additional commitments. For example, Moscow has granted Minsk a USD 10 billion loan for the construction the Nuclear Power Plant in Ostrovets by Rosatom. In addition, Russian lobbyists insist on changing export routes for Belarusian oil products from Russian raw materials from the ports of Lithuania, Latvia and Ukraine to Russian terminals in Ust-Luga and St. Petersburg.

Until now, Russia has allocated about USD 2.5 billion to the Belarussian government for the construction of the NPP, but by the time the nuclear facility in Ostrovets would be completed in 2020, Belarus’ debt would increase to USD 10 billion. Due to the growing debt on loans, the Kremlin would make Minsk critically dependent on it and create favourable environment for imposing its political and economic interests onto the Belarusian leadership, including the joint exploitation of the NPP or electricity export.

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