VTB Bank issues bridge loan to support Belarus’ international reserves
In early May, President Lukashenko announced that Russia would issue a USD 2 billion loan to Belarus. Until all relevant procedures are harmonised and finalised, Belarus’ ‘safety cushion’ will be a USD 1 billion bridge loan from VTB-Bank. This amount covers Belarus’ needs in servicing public and domestic debt without resorting to Belarus’ international reserves.
On May 30th, the authorities announced that a USD 1 billion bridge loan would be provided to Belarus by Russia’s VTB Bank.
In early May, after a meeting in Moscow, President Lukashenko announced that Russia would allocate a USD 2 billion intergovernmental loan for Belarus. The loan was planned to replenish the gold reserves. The loan was scheduled to be allocated in May 2014. Belarus is in great need for speedy disbursement due to the languishing international reserves. Since early 2014 the international reserves have shrunk by USD 1.17 billion and as of May 1st, amounted to USD 5.5 billion.
The loan has been announced without taking into account the intergovernmental approval procedures in Russia and Belarus. Ten to fourteen days is the minimum possible term for the VTB loan to be allocated after coordinating all technical procedures. The procedures for allocating an intergovernmental loan are even more lengthy due to the need to amend Russia’s state budget. Therefore, the USD 1 billion loan from VTB-Bank was needed until the intergovernmental approval procedures were finalised in Belarus and Russia. In December 2013, Belarus received a USD 450 million loan from VTB Bank for a six-month period. The loan’s repayment term will be prolonged until September 2014, which might also imply the date for allocating the USD 2 billion loan from Russia.
The prolonged loan agreement with the VTB Bank will reduce Belarus’ short-term needs for foreign currency, and the expected USD 1 billion loan will allow her to prepay the IMF loan and other loans in Q3 2014. The USD 2 billion loan from the Russia’s government will be spent on repaying two VTB Bank’s loans (USD 450 million and USD 1 billion), and the remaining part will be deposited in the international reserves.
Yet allocating the remaining portion of the EurAsEC Anti-Crisis Fund’s loan – USD 440 million – has not been resolved. If Belarus fulfils all the requirements for the remaining tranche, the loan will be disbursed. However, to date, she failed to fulfil the main requirement, i.e. to privatise some Belarusian enterprises in favour of Russian companies.
The VTB Bank’s loan is an intermediate technical solution in order to maintain Belarus’ gold reserves until internal procedures for the Russian USD 2 billion state loan are harmonised. If Belarus decides to privatise one or several assets in favour of Russian companies, she may also count on the final tranche from the EurAsEC Anti-Crisis Fund (USD 440 million).
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.