Putin Brought Money in Exchange for Integration and “Firm Commitments”

During the official visit of the Russian President Vladimir Putin to Belarus on 31 May-1 June, the parties agreed to develop investment, trade and economic bilateral ties and cooperation within international organizations and unions such as the Customs Union, the Single Economic Space and The Eurasian Economic Community (EurAsEC).

Vladimir Putin promised Alexander Lukashenko to provide financial aid in exchange for political support of The Eurasian Economic Community projects and privatization of Belarus’ assets by the Russian companies.

In the evening on May 31, Vladimir Putin announced that Belarus would receive the third credit tranche from the EurAsEC Anti-Crisis Fund in the amount of USD440 million (although it was scheduled in February 2012). Prior to that, in 2011, Belarus received two tranches of the loan (USD800 million and USD440 million). The total sum of the loan amounts to USD 3 billion, the interest rate is about 4% per annum. The fourth credit tranche in the amount of USD440 million is due in October this year.

During the official visit of the Russian delegation, Russia and Belarus Belarus and Russia have initialed the general contract for building the Belarusian nuclear power plant. It is expected to be signed in June in a solemn manner.

A design contract has already been signed. It provides for USD 204 million in finance. Moreover, the parties have signed a second contract worth $285 million which provides for financing of preparation work on site. The financing will be available in June. The total sum of the Russian credit for building the Belarusian nuclear power plant amounts to about USD10 billion, an average interest rate is 3.92%.

Thus, Russia allocates external funding for Belarus in exchange for political support for the integration initiatives of the Russian government (Eurasian Union, Collective Security Treaty Organization (CSTO, etc.) , as well as the privatization of Belarus’ assets to Russian investors.

In the course of negotiations, Presidents of Belarus and Russia discussed the creation of the holding RosBelavto based on KAMAZ and MAZ assets. Russia might agree with MAZ market value estimated by Belarus at a sum of USD 1 billion in exchange for a controlling stake in the newly created automobile holding company.

It could be expected that Belarus will sell state-owned shares of the telecommunications operator “MTS” (51%) to Russian investors. The transaction can amount to USD600-700 million.

In addition, at a at a narrow-format meeting, the parties discussed an increase in transshipment of Belarusian goods via the Baltic ports of Russia, which could lead to a decrease in the export of Belarusian goods via the ports of the Baltic countries (Lithuania, Latvia and Estonia).

Finally, the Belarusian side offered Russia to expand cooperation in trade of potash, nitrogen and phosphate fertilizers within the CJSC “Belarusian Potash Company”. The company’s office can be transferred to Switzerland, which will enhance the ability to attract commercial financing for the implementation of joint investment projects.

For reference. According to the National Statistics Committee, the volume of foreign trade between Belarus and Russia in January-April 2012 increased as compared to the same period the previous year by 27% to USD 15.146 billion. Exports of Belarusian goods to Russia grew by 16, 9% to USD 5.027 billion; imports of Russian goods to Belarus increased by 32.6% up to USD 10.119 billion.