Sberbank loan will help to preserve gold reserves of Belarus after repayment of Eurobonds
Belaruskali has raised EUR 550 million and spent it on Finance Ministry bonds. This transaction was necessary for timely repayment of Eurobonds worth USD 1 billion. As a result, Belarus’ gold reserves have been preserved thereby ensuring stability on the currency market during the election period.
On July 30th, 2015, Belaruskali announced it had managed to raise a EUR 550 million loan for five years.
On July 27th and 28th, 2015, the Belarusian Currency and Stock Exchange listed 156 and 157 bond issues of the Finance Ministry worth EUR 550 million, which were bought by an enterprise residing in Belarus. The interest rate on these bonds with a five years maturity period was 6 months Libor + 6.6%. The only possible buyer of these bonds could be Belaruskali, which has obtained a syndicated loan from the Russian Savings Bank and Sberbank Europe AG for the same amount and on the same terms.
The new loan is linked with the need to repay the debut issue of five-year bonds issued on August 3rd, 2010. On July 28th, 2015 the Finance Ministry paid the coupon yield and USD 1 billion to repay the debut issue of Eurobonds. USD 760 million state loan from Russia was listed in Russian roubles and therefore could not be used promptly to repay due amounts for Eurobonds. As of July 1st, 2015 Belarus’ gold reserves totalled USD 4.6 billion, and reducing it by USD 1 billion could have a very negative impact on the domestic foreign exchange market and boost currency demand by the population and enterprises. The National Bank has rejected this scenario as highly undesirable.
Currently, Belarus is unable to raise funding at such interest rates on the international market. It would be equally impossible to raise the needed amount on the domestic market. One of the forms of disguised support for Belarus by Russia is when Russian state banks provide commercial loans to Belarusian state companies. Belarus, in turn, has provided state guarantees for the repayment of problem commercial loans issued to Belarusian industrial giants by Russian BPS-Sberbank. As a result, Belarus’ gold reserves have been preserved at the same level and people’s devaluation expectations have reduced, thus pre-empting negative consequences in the pre-election period. In addition, Russia has increased her share in Belarus’ public debt and demonstrated willingness to provide financial support for Belarus, even amid expansion of sanctions.
Summing up what has been said, Russia, in a critical moment for Belarus has once again provided financial support in order to preserve stability on the Belarusian currency market and, what is important, not direct support but through Belaruskali. Amid the expansion of sectoral sanctions against Russia, Belarus might be able to receive Russia’s financial assistance in the future, however, its size would be adjusted downwards and would imply conditionality.
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.