Russia halves its electricity exports to Belarus over $54 million debt

Russia cut the electricity it supplies to Belarus by more than half because of $54 million in unpaid bills, increasing pressure on the already fragile ex-Soviet republic to privatize some of its lucrative assets, according to BBC News.

Inter RAO, the Russian electricity exporter, said it would cut off all of its power by June 19 if the money was not paid, according to the local Belta news agency, the Financial Times reported. The electricity it provides represents 12 percent of Belarus’s electricity needs.

After 17 years of rule by its authoritarian leader, Alexander Lukashenko, the country finds itself facing a deepening financial impasse that was brought on by a sharp devaluation of the national currency, the ruble, according to a GlobalPost story earlier this month. The crisis has resulted in a sharp rise in prices, while more stable currencies like dollars and euros have disappeared from the country’s banks. Some Belarusians are spending their rubles in a flurry of panic buying, before the currency loses any more of its value.

Russia’s western neighbor ran up the debt on electricity imports in March and April, the Globe and Mail said, because of Belarus's "certain problems with its currency," a spokeswoman for the Belarusian Energy Ministry said.

The country has announced that it is raising its main interest rate from 14 percent to 16 percent, and is freezing prices on a number of staple foods until July 1, according to BBC News.

The Financial Times reported that the Russian energy minister, Sergei Shmatko, said on Thursday that the move to cut the electricity supply to Belarus was a commercial one, not a political one. It has been suggested in the past, particularly in the case of Ukraine, that Russia has used energy supplies for political leverage to draw former Soviet republics back under Kremlin's influence, the Financial Times added.

The move to cut Belarus's power supply comes at a crucially important time. The country is seeking a $3 billion loan from the Russian-led Eurasian Economic Community, staggered over three years, as well as an emergency loan from the IMF of as much as $8 billion.

It is expected that Russia will exact a high price for any assistance, demanding significant parts of the Belarusian economy in return, GlobalPost said. Russia has been pressing Belarus to undertake extensive economic reforms and sell $7.5 billion in state assets in return for any bailout money, according to the Financial Times.

According to GlobalPost: “If Russia gives Belarus loans, that will definitely be a loan collateralized by Belarusian enterprises,” said Jaroslavl Romanchuk, a former presidential candidate and economic expert. “That’s the time that Lukashenko will be forced to sell valuable assets … that cost billions and billions of dollars.”

Russia’s Gazprom is already in talks with Belarus about taking over its gas pipeline network, which is used to transport some Russian gas to Europe, according to the Globe and Mail. Gazprom bought a 50 percent stake in the pipeline operator Beltransgas for $2.5 billion in 2007 and is prepared to pay the same amount for the remaining 50 percent, Russia’s ambassador to Belarus, Alexander Surikov, said on Thursday.