Belarus-Russia: rouble depreciation, talks on loans and supplies of petrochemicals

The Belarusian government is negotiating with the Russian government a USD1 billion loan to refinance Belarus’ public debt, in the pursuance of its policy aimed at reducing the public debt and negotiating favourable terms of supply of Russian petrochemicals to Belarus. Despite the importance of these aims, the devaluation of the Russian rouble due to its weight in Belarus’ foreign trade is likely to have a greater impact on the Belarusian economy than the terms of the loan and the terms of petrochemicals’ supply.

Already former Deputy Prime Minister Matyushevsky said that the Belarusian government was negotiating a state loan with the Russian government, confirming the information of the Russian Finance Ministry and refuting Reuters. According to Matyushevsky (as well as the Russian Finance Ministry), the chances for a loan were high. Naturally, given that Belarus is a neat borrower and an ally.

Matyushevsky also said that negotiations on the supply of petrochemicals were ongoing and held in a constructive manner. The matter is about the annexe to the agreement on oil supplies, which currently does not cover the supplies of petrochemicals. The latter is being used by Russian companies, so as the Belarusian market is more appealing to them than the domestic one. It is assumed that the supply of petrochemicals is likely to be limited to Belarus’ domestic demand.

The issue with the appointment of a new Russian Ambassador has not yet been resolved: so far, neither Russia nor Belarus have made any statements in this regard. It is possible that the media have exaggerated Russia’s readiness to promote Babich or actually insist on a particular candidate.

The devaluation of the Russian rouble and troubles of the Russian economy, i.e. matters which are not the subject of harmonization in bilateral relations, have had a much stronger impact on the Belarusian economy. For instance, they have worsened export opportunities for Belarusian enterprises, and the terms of the refinancing of their debts agreed with the Russian Sberbank a month ago.