Belarusian enterprises up for sale of interest to Putin’s inner circle

The State Property Committee (SPC) has published a list of companies to be put up for auction.

Often, statements by the Belarusian authorities about the sale of state-owned enterprises do not always imply real action. This time, some assets allegedly put up for privatization have drawn interest from people within Putin’s inner circle who supported Alexander Lukashenko during the ‘potash conflict’. The potential asset sales will be prepared to ensure minimal reputational losses for Lukashenko in the eyes of the population.

The SPC has repeatedly stated its plans to privatize state assets. The Belarusian government annually approves a new list of businesses and real estate for privatization. While these plans are not met in full, some assets are transferred to both Belarusian and foreign owners, mostly Russian.

State property privatization reduces Lukashenko’s absolute power, which is why these decisions are difficult for him to make. He is much more willing to carry out other unpopular measures, such as to ‘narrow’ the welfare state or to devalue the Belarusian ruble.

For a long time, the incumbent president was a guarantor of property remaining in the ‘people’s hands’, and was a keen fighter against the ‘oligarchs’. Despite the recent discrepancies in Lukashenko’s actions and rhetoric, he still seeks to maintain his image of the ‘peoples’ president’. Belarusian society has developed a strong opinion that he is reluctant to sell state property.

However, sometimes Lukashenko sells state assets, which often end up in Russian ownership. Most often, such privatization is carried out step-by-step and forced by various circumstances.

In May 2007, Gazprom and the SPC signed a contract to sell 50 % Beltransgaz shares for USD 2.5 billion to be paid in equal installments over four years. The deal was closed in 2010. The agreement to sell the remaining 50% of Beltransgaz shares for USD 2.5 billion was signed in November 2011 following the triple devaluation of the Belarusian ruble and deteriorated socio-economic situation in Belarus. Gazprom Head Alexei Miller said the deal was prepared back in June 2011, when Belarus had received the first USD 800 million tranche from EurAsEC ACF.

Assets on the latest privatization lists include Belarus’ shares in the Mozyr Oil Refinery, which is co-owned by Gazprom Neft and Rosneft (42.581%), Belarusian Government (42.757 %) and Mozyr Refinery Plus (12.252%). Russian large businesses have a clear interest in this asset.

During the recent ‘potash conflict’ Lukashenko met with two influential representatives from Putin’s inner circle: Rosneft President Igor Sechin and Gazprom Board Chairman Alexey Miller (who also chairs the Directors’ Board at Gazprom Neft). Back then there were no official reports that substantial agreements had been reached, but one month later, the State Property Committee included Mozyr Refinery in its privatization plans (Igor Sechin has interest in this asset).

Perhaps the announced privatization plans will not be met in full, but Russia will continue strengthening its presence in the Belarusian economy by acquiring the most attractive assets.