The three-hour meeting in Sochi was the first between the two leaders since talks last spring in Medvedev’s residence outside Moscow, after which relations between Minsk and Moscow plummeted to unprecedented lows.
Despite Belarus’ dire financial situation, the presidents apparently did not make any progress on loans or energy, the two issues that analysts have identified as laying at the core of the difficulties between Moscow and Minsk.
“On a practical level, Lukashenko did not raise the subject of loans,” a source in the Russian delegation told Interfax after the Sochi talks.
The source said deliveries of Russian gas also did not feature in the talks.
Instead, Medvedev’s foreign policy aide Sergei Prikhodko said later that those problems would be discussed through intergovernmental channels.
“Both presidents agreed to order their governments to hold consultations on both financial and economic issues,” Prikhodko said, Interfax reported.
Belarus’ largely state-run economy has been severely hit by the crisis, and worries have been escalating that the country might be on the verge of bankruptcy. Its total foreign currency reserves stood at $2.65 billion on July 1, down from $3.9 billion in May, while gross foreign debt stood at $16.3 billion in April, according to the Belarussian central bank.
Dependent on foreign loans, Minsk has been looking to two sources — Russia and the International Monetary Fund.
In May, Finance Minister Alexei Kudrin angered Lukashenko by saying Russia would not pay the last $500 million tranche of a $2 billion loan because Belarus might be insolvent by the end of the year.
The IMF’s senior representative to Belarus, Marek Belka, actually echoed Kudrin’s words this week when he told Belarussian Prime Minister Sergei Sidorsky that a shortage of foreign reserves posed a threat. “This might be a danger to the country’s stability,” Belka said.
Minsk has received $1.48 billion of
a planned $2.5 billion loan from the IMF.
Thanks to the cash injection, Belarus’ reserves are growing again and have reached $3.16 billion, according to preliminary central bank figures.
The IMF estimates that Belarus will need $11 billion in loans to survive this year and next, Interfax reported.
Minsk also asked Moscow for a much bigger loan of $9 billion earlier this year for a new Russian-built nuclear power plant in its western Grodno region.
Belarus is now asking for $1.5 million of this to be paid immediately, Kommersant reported Thursday. If Medvedev does not respond positively, Minsk is threatening to give the tender to another country, possibly China, the report said, citing an unidentified Russian government source.
Prikhodko did not mention the threat but said progress had been achieved on the nuclear project. “Here, we are moving forward and [our] positions are drawing closer,” he told reporters.
Traditionally Russia’s closest ally, Belarus abruptly sought friendlier relations with the European Union last year, despite the fact that Lukashenko has long been ostracized as Europe’s last dictator.
Minsk joined the EU’s Eastern Partnership program last spring, which promises to slash hurdles to trade and investment but has been branded by Moscow as an attempt to diminish its influence in post-Soviet countries.
The Kremlin seemingly responded by blocking Belarussian dairy imports for purported quality problems. Although reports said the “milk war” was over by the end of July, Russian inspectors last week sent a 60-ton shipment of condensed milk back to Belarus for alleged violations of transportation safety rules.
Belarus suffered from a massive current account deficit of $1.8 billion in the first quarter of 2009, and trade with Russia fell by 40 percent to $10.5 million in the first half of this year compared with the same period last year, the Belarussian Belta news agency reported.
But Lukashenko intensified his pro-Western policies over the past three months, making a historic trip to Rome while snubbing two summits of post-Soviet states in Moscow. That included a key meeting of leaders of the Collective Security Treaty Organization in June, which saw the inception of a rapid-reaction task force, seen as a key move to transform the loose military group into a defense alliance.
Lukashenko not only missed the signing of the agreement for the task force, but also forced Moscow to take the organization’s rotating chairmanship, which would have been Minsk’s if the president had showed up.
No word emerged Thursday on any movement on the task force issue, and Prikhodko said only that Russia and Belarus would hold joint military exercises in Belarus late September and Minsk would return to the chairmanship issue after consultations with other members.
In an interview published in Thursday’s Izvestia, Lukashenko seemed to suggest that he opposed deeper integration into a military alliance whose seven members include four Central Asian states. “Why should my men fight in Kazakhstan? Mothers would ask me why I sent their sons to fight so far from Belarus. For what? For a unified energy market? That is not what lives depend on. No!” he was quoted as saying.
Belarus also has not followed Russia’s lead in recognizing the independence of the Georgian breakaway regions of Abkhazia and South Ossetia.
South Ossetian leader Eduard Kokoity said last week that he would like to join a union state formed in the 1990s between Russia and Belarus.
Analysts said Thursday that Lukashenko would keep any bargaining chips to himself and that talk of the separatist regions joining the Russia-Belarus Union was premature.
“He is in a very difficult situation because his future depends on money from two sources that ultimately challenge his political survival,” said Vladimir Zharikhin, an analyst with the Moscow-based CIS Institute.
Zharikhin explained that financial aid from the EU and the Western-dominated IMF would be linked to political reforms that ultimately would threaten the government’s grip on power.
While Russia’s aid is conditioned purely on economic reforms, they also might bring Lukashenko down because they focus on reducing the state’s Soviet-size share in the economy, Zharikhin said.
“Much of Lukashenko’s popularity depends on his social policies,” Zharikhin said.