Russia threatens to cut off Belarus electricity

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Russia threatens to cut off Belarus electricity

By Dmitry Zaks (AFP) – 3 hours ago

MOSCOW — Russia's power utility warned Tuesday it would cut off all electricity

to cash-strapped Belarus if it remains in arrears after receiving the first

tranche of a $3 billion bailout loan.

A potential interruption of Russian supplies should not hit resource-starved

Belarus too severely because it only receives a tenth of its electricity from

its energy-rich neighbour.

But it adds another psychological blow to a nation of 10 million that this year

has already seen its currency devalued by more than a third and inflation reach

a staggering 32.6 percent amid its worst crisis since the Soviet era.

The cutoff threat stems from a $54 million electricity payments debt that

resulted in a partial disruption in supplies earlier this month.

The Russian utility initially threatened to cut off supplies Tuesday at 2000 GMT

before extending the deadline by six days until the end of the day Monday after

holding urgent talks with Minsk officials.

" They insisted that they will be able to pay by Monday, " a source at the Inter

RAO UES utility told AFP. " We will see. "

The warning came only hours after $800 million of Russian orchestrated

assistance reached Minsk -- the first line of support to reach depleted state

coffers since the crisis began in the winter.

The three-year package was agreed under strict conditions that include the

government's adoption of a wholesale privatisation programme.

Belarus has thus far failed to put its Soviet-era state firms up for sale. The

loan's release was imperiled further by strongman President

Lukashenko's vow to shut down Russian media outlets operating in Belarus.

But Russian Finance Minister ei Kudrin told news agencies that " Belarus

fulfilled all the formal obligations (on Monday) evening " and was sent the first

payment on Tuesday.

The hard currency and basic goods shortage poses the most serious challenge of

Lukashenko's 17-year presidency and has seen the mercurial leader make a series

of at times contradictory pronouncements.

He warned on Friday that he was ready to close the country's borders and require

consumers to rely only on domestic goods if the economic situation deteriorated

further.

Kudrin said Tuesday that Moscow reserved the right to review the release of

additional money if Lukashenko barred Russian goods from entering the republic.

Belarus is scheduled to receive its next payment of $440 million by the end of

the year but the money is unlikely to provide more than stopgap help.

The country last week raised its main interest rate to one of the world's

highest at 18 percent to help fight inflation that reached 32.6 percent in May.

Its foreign currency holdings meanwhile fell by another 9.6 percent last month

as the state took desperate steps to keep the local ruble from losing even

further value.

Russia has served as the increasingly isolated republic's most important link

with the outside world and on Tuesday defended its ally against another round of

sanctions imposed by the European Union.

" We view such a policy as counterproductive, no matter how difficult the

dialogue in the human rights arena might be, " news agencies quoted a Russian

foreign ministry spokesman as saying.

The new EU sanctions were the first to hit the Belarus business sector.

Belarus has accused the West of trying to topple Lukashenko's regime and on

Tuesday vowed to take reciprocal steps against the EU.

" The European Union's actions escalate the confrontation and complicate our

ability to move on to normal cooperation, " a foreign ministry spokesman said.

" Belarus will take adequate step to defend the legitimate interests of its

citizens and enterprises, including reciprocal measures against the initiators

of this decision. "

Copyright © 2011 AFP.