Restricted supply of electricity

April 22, 2016 17:55

The company “Inter RAO” has not received funds to pay off the debt of Belarus in due time, i.e. at 8.30 Moscow time on 28 June. As of midnight on 29 June the electricity supply was temporarily cut off for Belarus.

On the following day the May debt amounting to USD 21 million was transferred to Russia, however imports of electricity have not resumed.

Moreover, Belarus owes to Ukraine USD 35 million for electricity supply. Ukraine stopped its supplies in May. First Deputy Prime Minister of Belarus Vladimir Semashko sent a letter to First Deputy Prime Minister Andriy Klyuev with apologies for delay in payment for electricity, promises to pay off debts before 15 July and hopes for the resumption of a reliable supply of electricity from Ukraine.

Comment

Belarus will pay off the debts for the electricity however it is likely that in July-August imports from Russia will not resume. The economic feasibility of such solution is not obvious, due to the following reasons: 1) Russian electricity is cheaper and 2) production of own electricity requires burning more gas, which the country also buys for foreign currency.

The country suffered a tremendous reputational loss: it could not pay regardless of the promises of the Prime Minister, investors and the population received additional evidence that the National Bank has no money. Formally the Minister of Energy was accused of the situation and threatened to be held responsible for being so slow.

This situation is yet another proof of the unfolding crisis of governance and of the lack of a unified governmental policy. The next step within the crisis of management will be leapfrogging with new appointments and dismissals, which has already started.