Russia continues defining the scope of economic aid to Belarus

Putin and Lukashenko agreed that Russia will continue providing economic assistance to Belarus, namely, keeping comfortable gas prices and refinancing Belaruskali. However, the size of this aid is strictly limited, yet the key issue – the resumption of ‘solvent export schemes’ – has not been resolved.

There are two facts about Lukashenko’s visit to Sochi worth attention. First, Lukashenko phoned Putin to ask for an urgent meeting immediately after the government’s report on the socio-economic development in January-August 2012. Second, the return date was not announced.

The main reason behind this extraordinary visit was suspension of ‘solvents’ exports. On August 4^th, Belarus shipped the last solvents lot, which was the main source for country’s foreign trade surplus. Suspension of this business is bound to affect the currency market and economic performance, especially in Vitebsk region. This region demonstrated outstanding performance during the first seven months of 2012 and after the suspension of the solvents exports the region’s industrial production volumes had reduced dramatically.

Lukashenko’s return date was not announced, probably because the authorities needed the time to prepare the ‘positive outcomes of his short vacation’. There are no significant alterations in the gas supply planned for the next year. Preliminary agreed natural gas price, USD 185 per thousand cubic meters, including Beltransgaz extra charges for 2013, is very favourable for the country’s economy. Refinancing of Belaruskali’s loan will be carried out on the new conditions in the course of the following three years, which eased up the pressure in terms of the external public debt payments.

Simultaneously, the authorities are carefully avoiding any discussions related to petroleum products supply. Clearly, an agreement has not been reached concerning this key issue. Since the ‘solvent’ scheme has been suspended, Belarus’ positive foreign trade balance became a history and it is possible that the audit will reveal other dubious trading/export schemes. Even though an agreement has been reached to refinance the Belaruskali loan, the new rate is commercial and very high.

Belarus has once again managed to receive certain economic assistance from Russia. However, Russia has refused to pay for the limitless appetites of the Belarusian socio-economic model.