Kremlin strengthens "privatization" pressure on Minsk

Belarus attempts to delay privatization of her large state-owned assets in favour of Russian business, aspiring to buy some time with keeping Russo-Belarusian relations tense. The Belarusian government uses this tactics by playing on contradicting interests of large influential groups in President Putin and Prime Minister Medvedev’s teams. However, Belarus’ growing dependence on the Kremlin significantly limits her abilities to manoeuvre and eventually she will be prompted to hand over state assets to Russian counterparts.

On July 15^th, President Lukashenko met with Russia’s Deputy Prime Minister Arkady Dvorkovich.

Belarusian official media reported that Russia’s Deputy Prime Minister Dvorkovich visited Minsk primarily to discuss Eurasian integration issues. Interestingly, Dvorkovich’s visit to Minsk had not been announced in advance and took place after a telephone conversation between President Lukashenko and Prime Minister Medvedev “following the request from the latter”.

During the meeting Deputy Prime Minister Dvorkovich “conveyed greetings” from President Putin to President Lukashenko. It should be noted that only two weeks earlier Lukashenko and Putin met in Minsk, and that right after the meeting Belarus received a USD 2 billion loan from the Russian VTB Bank. These funds have prevented Belarus’ international reserves from falling below the level of USD 4.4 billion, or 1.1 months worth of imports – a critical marker for the national currency’s stability.

Deputy Prime Minister and member of the Russian Government’s Presidium, Dvorkovich is an important figure Dmitry Medvedev’s team. He oversees real economy, including fuel and energy complex. He carried out several successful privatization projects in Russia. In February 2013, after Dvorkovich’s visit to Minsk Belarus named five major Belarusian companies for privatisation in favour of Russian capital. Russians are interested in purchasing the following assets: MAZ, “Integral”, Minsk Wheel Tractor Plant (MWTP), “Pelenga”, and “Grodno Azot”. In May 2014, during the World Ice Hockey Championships, Dvorkovich visited Belarus privately and looked at attractive assets in Belarusian state property.

During the most recent meeting with Dvorkovich, Belarus’ Prime Minister Mikhail Myasnikovich said, “I know, that today during a meeting with Belarus’ President they discussed the following steps in the major integration projects. The Government, in turn, will do everything in order to meet the deadlines”. However, Belarus had failed the ‘deadlines’ before (the most recent was in late 2013) and was able to crumb the Kremlin’s ‘integration’ plans of transferring Belarusian assets to Russian companies.

It is likely, that the Belarus’ officials in their traditional manner attempt to play on Russia’s internal contradictions. Last week, Belneftekhim Head, a Russian citizen Ivan Zhilin was suddenly arrested – regardless of the concern’s good performance in the last six months. In addition, in May this year, Prime Minister Medvedev announced redistribution of power in the Russian Government. Partially, Dvorkovich might be stripped of his powers in favour of Deputy Prime Minister Khloponin (most likely those associated with fuel and energy complex). However, this is unlikely to affect significantly the Belarusian-Russian relations as regards “integration” projects.

Belarus’ growing dependence on foreign aid (mainly from Russia) is likely to prompt officials in Minsk to yield to the Kremlin’s pressure regarding privatization of some large state assets before late 2014.