Lukashenka Fires National Bank Chairman

On July 18, Belarusian President Alyaksandr Lukashenka dismissed the chairman of the National Bank of Belarus, Pyotr Prakapovich. Last month, Lukashenka asserted that the latter had “made mistakes” (Bloomberg, June 23). No replacement was announced, so in the meantime Yury Alymov continues as acting chairman.

One week earlier, the bank, which has been responding to a growing economic crisis, announced a 2 percent rise in interest rates to 20 percent, effective on July 13. The move is an attempt to control inflation, which was reported as 20.2 percent in the first five months of this year with the prospective of rise to almost 40 percent by the end of the year (Agence France Presse, July 11).

Prakapovich has been ill for some time and had heart surgery last month, and at the age of 69, could be considered close to retirement. His temporary replacement is the former Deputy Chairman, Alymov, born in Kyrgyzstan in 1957 and trained at the Financial and Economic Institute in Leningrad and the Belarusian State Economic University. For some weeks, the president has been threatening to take retaliatory measures for the shaky economic situation and Prakapovich, along with Prime Minister Mikhail Myasnikovich, has been singled out as a target (RIA Novosti, May 27).

The Prime Minister made a bold statement on July 18 in an interview with the Russian magazine Itogi that the government intends to privatize some 250 enterprises by the end of the year. Most of these are in the sectors of light industry, construction of houses and building materials. Myasnikovich bemoaned Moscow’s apparent lack of enthusiasm for such measures, commenting that EU, Chinese and Japanese companies have shown more interest in investing in Belarusian industry than the Russians. He noted also that several fields are receiving priority treatment for development, such as the defense industry, microelectronics, optics and energy efficiency (www.law.by, July 18).

Another area held up as a prospect for foreign investment is the Belarusian Steelworks, which has 14 projects requiring about 700 million Euros ($991 million) in foreign investment, including a share of the company itself (Beltelradio, July 17). On July 18, the Council of Ministers adopted Resolution 942 for the social and economic development program for 2011-2015. However, the program resembles earlier Soviet plans in its vagueness and false optimism. It mainly concerns modernization of existing enterprises, such as Belaruskali (potassium), Gomselmash (Homel’ agricultural machinery and MAZ trucks), reducing dependence on natural gas in electricity production and joint development of foreign oilfields (presumably with Venezuela in mind) (www.law.by, July 18).

The simple fact is that the Belarusian government needs foreign investment and loans. Its anxiety is transparent. It is also plain (Myasnikovich stated it openly) that it wishes to give first option to Russian and Kazakh companies as partners in the Common Economic Space (Beltelradio, July 17). However, the slow progress in finalizing purchases or mergers is frustrating the Belarusian side. The more desperate it is to improve its financial situation, the more lethargic the Russian partners appear to be. Simply put, the Russians anticipate that delays will result in a lowering of purchase prices.

An investigative article by Tatyana Manenok in Belarus’ main business newspaper reported that on July 12, Myasnikovich informed journalists about discussions with Russian investors concerning the sale of seven major companies. These are as follows: the sale of Hrodna Azot (liquid ammonia) to SIBUR (owned by Gazprom) and Rosneft; Naftan-Polimir petrochemical company to Lukoil; Beltransgaz to Gazprom; Mazyr oil refinery to Rosneft; MTS cell phones to AFK Sistema; MAZ to Russian Machines and Rostekhnologii, and Intehral (semi-conductors) to Rostekhnologii (Belorusy i Rynok, July 18).

In almost all cases, extensive discussions have been held (some began more than three years ago as part of the original privatization plan of former Prime Minister Syarhey Sidorski) but no final agreements have been reached. Another potential sale frequently touted as one that could relieve Lukashenka of immediate financial worries is that of Belaruskali by Uralkali, the giant potash company in the Urals region (EDM, June 20). The press reported that an offer had been made of $15 billion for 50 percent +1 shares, but the two sides later denied that any agreement had been reached. First Deputy Prime Minister Uladzimir Syameshka reported the imminent sale of the oil reprocessing company Naftan-Polimir to the Russian companies Lukoil and Rosneft in 2009, but it was delayed by the world financial crisis and adverse changes to the conditions for importing Russian oil to Belarus (Belorusy i Rynok, July 18).

For the Belarusian president, several priorities are evident. First, he would prefer to retain the most valuable companies in state hands, and sell off some of the smaller ones, i.e. those included in the 250 cited by his Prime Minister. Second, if this proves impossible, then he wishes to get the highest possible price for the larger ones. However, in either case, he needs immediate sales or foreign loans to alleviate state debts. Increasingly his government lives in a surreal environment in which it can gloat about GDP growth (11 percent in the first half of the year) (Belarusian Telegraph Agency, July 11) at a time of growing impoverishment and fear among his population that the national currency is likely to suffer further devaluations. Wages have declined in real terms by about 40 percent since the start of the year and the situation for the average resident will become even worse once apartments need heating.

The removal of Prakapovich was predictable and perhaps even justified, but he will not be the last official to lose his job. Further scapegoats will be needed as long as the economic crisis persists.