Russia Halves Electricity Supply to Belarus

MOSCOW - - Please respect FT.com's ts&cs and copyright policy which allow you to: share links copy content for personal use & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/6bc96c64-92c1-11e0-bd88-00144feab49a.html#ixzz1OqRkpMKz Russia on Thursday ramped up pressure on an increasingly fragile Belarus, cutting the electricity it supplies to the ex-Soviet republic by more than half in an attempt to secure payment on $54m in unpaid bills.

Inter RAO, the Russian electricity exporter, said it would cut off all of the power by June 19 if the money was not paid, according to the local Belta news agency. The electricity it provides accounts for 12 per cent of BelarusÂ’s needs.

The company declined to comment, but RussiaÂ’s energy minister, Sergei Shmatko, said on Thursday that the move was a commercial decision and had no political overtones.

Russia has in the past been accused, notably in Ukraine, of using energy supplies as political leverage to bring former Soviet republics back under the KremlinÂ’s influence.

Mr Shmatko said: “What is going on now is just a usual commercial operation. There are no political conclusions to be drawn.”

He said Belarus had been warned in advance of the impending cut. He added he believed the country had enough reserve coal-fired generation capacity to make up for the reduced supplies.

Ludmilla Zelkovich, a spokeswoman for the Belarusian energy ministry, told Belta that Belarus was having trouble paying its debts because of the difficulty in obtaining foreign currency – one of the effects of a growing economic crisis.

Russia is already demanding that Belarus undertake deep economic reforms and sell off $7.5bn in state assets in return for a $3bn bail-out from the Russian-led Eurasian Economic Community.

As the economy crumbles and prices soar, Alexander Lukashenko, the country's authoritarian president, is facing the first stirrings of popular discontent since the countryÂ’s downturn deepened.

In response, he decreed that fuel price increases announced on Tuesday should be reversed from Thursday. “Let us agree that from tomorrow morning, gasoline will cost ... no more than 4,500 roubles $0.81,” he told his cabinet.

Fuel prices had been increased by almost a third at the beginning of the week, prompting hundreds of motorists to block the main street in the capital Minsk on Tuesday.

Since becoming president in 1994, Mr Lukashenko has been keeping a tight grip on the country. In return he has promised stability and fast economic growth.

That strategy began to unravel several years ago when Russia demanded higher prices for the oil and gas that kept the Belarusian economy afloat. Last year, Mr Lukashenko sparked the economic crisis by boosting public spending before DecemberÂ’s presidential election.

As a result, Belarus has problems with its balance of payments, the central bank’s reserves have withered, foreign currency has disappeared from banks, prices have soared and companies are beginning to shed workers – a shock in a country that until recently had aimed at Soviet-style full employment.

In addition to the loan from the Eurasian Economic Community, Belarus is also asking for an IMF bail-out of up to $8bn, but the price is also likely to be economic reforms.

The US and the European Union have been putting pressure on Mr Lukashenko to halt the political repression unleashed after protests that followed the election, widely seen as fraudulent.

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