Russia, Belarus fail to agree on $500M loan


Associated Press Writer

(AP:MINSK, Belarus) Russia and Belarus failed to agree Thursday on the last $500 million installment of a $2 billion Russian loan that aimed to help its struggling neighbor avoid bankruptcy, Russia's finance minister said.

Russian Finance Minister Alexei Kudrin said his country offered to provide the final installment in Russian rubles instead of dollars but Belarus refused.

Kudrin, who accompanied Russian Prime Minister Vladimir Putin on a trip to the Belarusian capital, blasted Belarus's planned economy and the stiff control of its currency as a "meaningless policy." He also described Belarus as taking a "parasitic" attitude to Russia.

The unusually blunt criticism reflected a growing tensions between the two neighbors and allies, which have been increasingly divided by economic and political arguments.

Kudrin told reporters that Belarus _ which spent $2 billion to prop up its national currency in the first quarter of 2009 _ will run out of hard currency reserves by the end of the third quarter if it keeps up that level of spending.

"We may see insolvency of the Belarusian government and the Belarusian economy as a whole due to the hard currency shortage at the end of this year or next year," he said.

Despite the failure to reach agreement on the loan, Putin said after the talks that Russia will consider providing credits to Belarus in the future. "Whatever happens in the world economy, Russia will always give its shoulder to Belarus when necessary," he said at a news conference.

Russia and Belarus have an accord envisaging close political, economic and military ties, and they declared a joint goal of building a single state. Moscow has been the main ally and sponsor of Belarusian President Alexander Lukashenko, who has been described by many in the West as "Europe's last dictator" for his relentless crackdown on the opposition and free media.

But the Kremlin has been increasingly vexed by Lukashenko's staunch resistance to Russian attempts to take control of key Belarusian industrial assets.

"Belarus is sliding toward default, and the Kremlin could use that to control Lukashenko," said Leonid Zaiko, a Minsk-based independent political analyst.

Moscow also expected Belarus to quickly follow its example in recognizing Georgia's breakaway provinces of South Ossetia and Abkhazia as independent nations, which Russia did in the wake of the Russian-Georgian war last August.

The Belarusian parliament, however, has not taken up the issue.

Kudrin denied that the disagreement on the final loan installment to Belarus had been rooted in Belarus' refusal to recognize the independence of two Georgian regions.

"I have never raised this issue with any Belarusian official," he said.

Adding to Moscow's dismay, Lukashenko has sought recently to improve ties with the United States and the European Union, releasing political prisoners and making other overtures. Russia has accused the West of trying to encroach on what it sees as its traditional sphere of influence.

Associated Press Writers Nataliya Vasilyeva and Vladimir Isachenkov contributed to this report from Moscow.



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