Bail out requested from Russia will not cover Belarus needs during elections year
In 2015, Belarus has to repay a sizable amount of her public debt; she therefore has requested a loan from Russia. A USD 2.5 billion Russian loan will be insufficient to cover Belarus’ outstanding debt and enable her to ensure financial stability in the election year; meanwhile, Russia currently cannot afford issuing a larger loan for her ally.
In 2015, Belarus’ public debt repayment obligations will constitute circa USD 4 billion. In December 2014, the National Bank managed to raise an additional USD 1 billion loan with repayment due in 2015. As of February 1st, Belarus’ international reserves totalled USD 4.7 billion. Over the past six months, the reserves have reduced by USD 1.5 billion, which indicates that Belarus will be unable to service her public debt without raising additional funds. The ongoing international markets’ situation is not favourable for placing Belarus’ Eurobonds issues and the domestic market simply does not have the required amount.
Belarus has found a partial solution for this problem – she will place a new issue of governmental bonds on the Moscow Stock Exchange to be redeemed by the Russian National Wealth Fund. In 2014, a similar scheme involved Russian VTB Bank, which provided a short-term bridge loan, which was later repaid from the intergovernmental loan. In addition, Belarus might still receive the sixth tranche of the EurAsEC Anti-Crisis Fund totalling USD 440 million.
In 2015, Belarus will keep the export duties on oil products in her budget. Initially, such proceeds were estimated at circa USD 1.5 billion. That said, the potential USD 2.5 billion loan from Russia could solve the problem with servicing public debt in 2015. However, the sharp fall in oil prices in late 2014 – early 2015 might substantially reduce the volume of Belarus’ proceeds from export duties on oil products.
The devaluation of the Belarusian rouble was inadequate to change the international trade situation. International trade deficit will remain regardless of the restrictive import measures. In addition, the situation on the Russian market has not improved for Belarusian goods, excluding any sales growth potential.
The situation on the domestic foreign exchange is challenging too. In January 2015, the population, fearing for their currency deposits withdrew more than USD 150 million from the banking system.
All in all, Belarus requires circa USD 4-5 billion in order to service her international and domestic debts. It is a substantial amount for Russia and she may not consider allocating it on terms acceptable for Belarus.
When the Belarusian authorities requested a bail out from Russia, they have recognised their inability to service the public debt in 2015 independently. The requested amount is not sufficient to address all economic misbalances, however, due to the difficult financial situation Russia will not allocate a larger amount on terms acceptable for Belarus.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.