Russia tightens grip on Belarus with power cut

The Jakarta Post, Yuras Karmanau, Associated Press, Minsk | Thu, 06/09/2011

Russia halved its electricity supplies to Belarus on Thursday over back payments, ratcheting up the pressure on its crisis-crippled neighbor to sell lucrative economic assets.

The electricity cut hits Belarus as it suffers its worst financial turmoil since the 1991 Soviet collapse. The country has recently devalued the national currency, causing panic buying of goods. But Russia has promised a bailout only on condition that Belarus privatize key industries, such as its network of natural gas pipelines.

Russia has traditionally been Belarus' main ally, but it phased out economic subsidies in recent years as it pushed for control of those strategic assets. Belarus' authoritarian President Alexander Lukashenko has refused to sell, causing ties to grow increasingly strained.

Belarusian Energy Ministry spokeswoman Lyudmila Zenkovich said Thursday that Russia cut the electricity supplies because Belarus still owed $54 million for shipments taken earlier this year.

Imports of Russian electricity account for less than 10 percent of Belarus' needs and Zenkovich said consumers won't be hurt by the move. She said Belarus will try to quickly settle its debt despite a shortage of hard currency.

The current crisis was triggered by Lukashenko's decision to raise government wages by one-third as he campaigned for re-election in last December's vote. The pay hikes fueled inflation and raised demand for foreign currency, quickly draining scarce government reserves. The government last month was finally forced to cut the value of the national currency, the Belarusian ruble, almost in half against the dollar.

The spiraling crisis has threatened the authority of Lukashenko, who has ruled the 10-million nation with an iron hand for nearly 17 years, earning the nickname of "Europe's last dictator" in the West.

Independent experts say Belarus would quickly need at least $9 billion in loans to stabilize its finances.

The country has said earlier this month that it was asking the International Monetary Fund for a loan of up to $8 billion, but observers have been skeptical that it could meet the IMF's criteria.

Russia has offered $3 billion in loans over three years through an economic grouping of ex-Soviet nations on condition that Belarus launches a privatization. It promised only $1.2 billion this year.

"Lukashenko has no other way but to start a sellout, as soaring prices may provoke a social explosion," said Alexander Sosnov, an independent Minsk-based analyst.