BELARUS NEWS AND ANALYSIS

DATE:

27/11/2007

Russia Gives Belarus Financial Boost

Belarus expects to receive a $1.5-billion stabilization credit from Russia with an interest rate of LIBOR +0.75%, Belarusian Finance Minister Nikolay Korbut stated yesterday in London. Korbut said that the Russian Finance Ministry has not yet made a final decision on the loan, but the draft loan agreement has been written. He did not specify the term of the loan. The loan is intended to counteract budget problems in Belarus arising from higher prices paid by that country for Russian natural gas.

The loan is to be paid in two installments: $1 billion by the end of this year and $500 million in the first half of next year. The Russian Financial Ministry declined to comment on the loan.

Analysts say that the loan is not at market rate for Belarus, which has a rating of B+. There is also a political element in the loan. While Russian subsidies to the country have been curtailed since 2006, the loan will put off the inevitability of reform there. Belarus may also respond with favors of its own. Korbut mentioned the possibility that, in response to the extension of U.S. sanctions to the Belneftekhim company, it may convert its trading to the Russian ruble. Russian President Vladimir Putin has spoken many times about the need to trade Russian oil in Russian rubles.

Source:

http://www.kommersant.com/p829803/foreign_relations_aid/