"A Billion Dollars Spent on Cockroach's Palaces"

The regime is consuming funds.

Within three years, Belarus may place government bonds in Russia for 100 billion Russian rubles (more than $ 1.3 billion at the current exchange rate). The decree was adopted "for the purpose of refinancing the external state debt of the Republic of Belarus." At the same time, Russian media write that this year's third negotiations between Aliaksandr Lukashenka and Vladimir Putin may take place before the end of May.

Economist and political scientist Dzmitry Balkunets explained to Current Time why, in a situation when Belarus' debt to Russia is only increasing and Minsk has nothing to pay with, the Kremlin still does not refuse new loans. As of April 1, 2021, the external national debt of Belarus amounted to $ 18.1 billion. Russia is the largest creditor to Belarus (over $ 8 billion).

"Most of the debts will never be paid off"

- Belarus will place bonds on the Russian market for 100 billion rubles. What is this amount for the authorities?

- I would like to note that now the economic situation in Belarus is rather complicated. It has never been easy for all the years, but now it is a rather painful period for Belarus. I looked at the latest analytical reports of the National Bank and other departments - the situation is deplorable. The budget deficit for this year is already more than $ 2 billion, and, a few months ago, there were other figures, much more positive. This year, the entire Belarusian economy owes more than $ 5 billion to external creditors. The national debt is $ 3 billion. And gold and foreign exchange reserves, namely their foreign currency part, already amount to less than $ 3 billion. In this situation, there are problems with insolvency.

Belarusian enterprises feel completely unstable and insecure. Over the past 15 months, the debt of enterprises has grown significantly. At the same time, enterprises take money from state banks. State banks, in order not to hang bad assets on their balance sheets, buy shares of unprofitable Belarusian enterprises - and these debts are increasing. The latest estimate is that the total debt of all enterprises in Belarus exceeded the country's GDP, it's more than $ 60 billion. Most of these debts will never be repaid because these enterprises are unprofitable - enterprises and factories that actually exist in such a limbo.

And here a new situation overlaps with the sanctions imposed by the United States of America against petrochemical enterprises. This automatically cuts off Belarus from foreign exchange earnings and can lead to a decrease in foreign exchange earnings by about 20-25% due to a decrease in exports.

In this situation, the only opportunity for the Belarusian government to get funding somewhere is Russia. And it is obvious that the Belarusian authorities are apparently trying to place these bonds on the Moscow stock exchange. I would like to note that last year's placements were also held on the Moscow Stock Exchange and in Europe. But European investors are already rejecting Belarusian bonds and are ready to get rid of them.

I will also add that if the placement in Russia takes place, and most likely it does, the percentage will be quite high. We are talking about a rate of about 9-10%, these are practically junk bonds, this is a high-risk investment of funds, and it is at this rate that the Belarusian government is ready to borrow funds in foreign markets. Lukashenka has no other opportunities today. I know that he negotiated with China on taking some kind of state loan, but China, in this situation, apparently, will refrain from the political crisis in Belarus.

"The Belarusian authorities will not allow any Russian capital or business into their territory"

- Political scientist Alexander Morozov wrote on his Facebook about the placement of Lukashenka's bonds: "Belarus is just like a pawnshop for Putin." Why do you think he thinks so?

- Belarus constantly borrows from Russia, and Russia is the largest, one might say, investor and creditor of the Belarusian economy, and, in recent years, the debt to Russian banks and the Russian Ministry of Finance on the part of Belarus has only increased. Moreover, each time Russia refinances certain debts because Belarus de facto has nothing to pay with. There is such a hypothesis that Russia will be ready, for example, to take some Belarusian assets in exchange for paying off debts or for new loans. I've heard about this for a quarter of a century, and no one has taken anything. And even if they did, the Belarusian authorities simply seized Russian business in a raider way, as it was last year with Belgazprombank.

The situation is now repeated in a slightly different model with the Russian Alfa-Bank, where the head of this organization did not pass certification by the decision of the Belarusian National Bank. It is obvious that the Belarusian authorities will not allow any Russian capital or business on their territory. Therefore, Lukashenka has no other options, and I want to note that, in August 2020, when Vladimir Putin supported Lukashenka and recognized his victory, Russia de facto assumed obligations to maintain a certain socio-political stability. Accordingly, it took on this burden, including the financial burden, understanding, probably, what the consequences of recognizing Lukashenka would be, realizing that this would be pressure with sanctions on Belarus, on the Belarusian political class, on business, and so on. Of course, in this situation, Russia is now unraveling its summer policy, which was adopted last year.

At the same time, I would like to note that Lukashenka turned out to be a dishonest person: he did not fulfill the promises he made to Putin on carrying out prompt political reforms in the country and holding early presidential elections. Let me remind you that they were supposed to take place in the spring of 2021, according to the obligations that Lukashenka gave to Putin in September last year. Nothing of the sort happened. Now Lukashenka is trying to prove to Putin that the West has sanctioned all this, and again goes to Moscow to ask Putin for some finances in order to prevent default.

I assume that the Russian Federation will provide Belarus with another assistance at the level of the Ministry of Finance, and restructuring will be carried out because Russia is not interested in a default, especially on some kind of Russian financial obligations by the Belarusian side. Therefore, Belarus will probably receive some kind of assistance. If we are talking about restructuring, this is just assistance from the Ministry of Finance.

As for the placement on the Moscow stock exchange, there are certain risks for Russian companies, which may buy these shares. We are talking more about Russian banks, the risks are associated with possible sanctions pressure because I do not exclude such a story that European companies and the United States of America may consider this situation unacceptable for supporting the authoritarian leadership of Belarus and so on, and they can promptly accept any then measures, some kind of sanctions package.

And, in this situation, it seems to me, potential buyers, and this, I will emphasize again, large banks with the state capital, are hardly worth the risk and invest today and buy Belarusian bonds, even guaranteed by the government, given that many of these banks operate in the European market. I would not recommend putting yourself under the blow of the sanctions. Indeed, there are extremely high risks because there is a consolidated position of Europe and the United States on the situation in Belarus, and the new package, even if it will be the fifth sanctions package, may also affect Russian business.

"A billion dollars spent on palaces"

- What can be the consequences for both countries if Minsk stops paying debts?

- As for the return of money to the Russian side, I think that the mechanism there will be the same: some kind of intergovernmental agreement will be signed, and restructuring will be carried out, or some kind of delay in the payment of interest and loans will be provided. Russia, I emphasize once again, is not interested in default and Belarus not being able to pay off any Russian loans. Each time it will be postponed for a new period, the amount will be accumulated. And I exclude the possibility that Russia will really go to extreme measures and refuse new loans to Belarus in order to pay off old loans.

But I think Russia will no longer provide loans for the development of the economy because Aliaksandr Lukashenka, firstly, is no longer engaged in the development of the country, but he is engaged in consuming the funds that are given to him. Each time this money goes to the security forces, to some senseless residences. I recently calculated that Lukashenka spent about a billion dollars on ice rinks alone in 20 years. That is, a billion dollars was spent on palaces that are a burden on regional centers, on the administrations of cities and regions, and this is a very costly story. There were dozens of such palaces, absolutely unprofitable.