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bne July 2019 Eastern Europe I 47
rest. However, if there is no compensa- tion from Russia Yermolovich says that might change and Minsk will refinance all its debt to buy more time to adjust the refineries' profile as well as to start sourcing crude oil from elsewhere.
then there will be losses. But now its still too early to make assumptions.”
The only losses will be the cost of repair- ing the damage that the contaminants did to the refining equipment, but
has already been passed, the Russian authorities are sitting on the money. Political relations between Minsk and Moscow have been fraught this year as the two sides argue over compensation for the tax manoeuvre.
Earlier the same week, Anton Siluanov, Russian First Deputy PM and Finance Minister, said that Russia is not going
to provide new loans to Belarus nor dis- cuss possible compensation for Russia’s tax manoeuvre in the oil sector until the two countries agree on a vision for their further "integration".
In the meantime Yermolovich says Minsk is looking at alternative sources of financ- ing, including the possibility of raising a yuan-denominated RMB3.5bn ($500mn) loan from the Chinese Development bank. “We hope there will be a deal in the sec- ond half of this year,” says Yermolovich.
More use can also be made of domestic borrowing as well, where Yermolovich says the government has already raised $500mn – ahead of the budget plan with six months left to run.
“And there are another $150mn of Belarusian bonds we could issue on the Russian market in the near future,” says
“In the case of no compensation we are ready to raise the refinancing to 100% of the debt repayments to buy time to make deeper
“One option we have is we can change our debt strategy,” says Yermolovich. “Now the revenues from the oil trade are a major source of revenue for our budget from the export of oil products, which
is also the source of debt repayment... In the case of no compensation we are ready to raise the refinancing to 100% of the debt repayments to buy time to make deeper adjustments to the economy.”
Dirty oil and bonds
The government has passed a conserva- tive budget for this year that will be in surplus and the excess revenues used to pay down debt, and no new Eurobonds are planned until 2020, although Minsk will tap both the Russian government and the Russian bond market to refi- nance the outstanding debt, says Yermolovich, who was in London to pre- pare the ground for the eventual issue.
“The talks have shown that investors' interest in the Belarusian Eurobonds is high. Actually we have made the decision to sell the euro-denominated bonds,” the minister said.
Minsk is hoping to have more luck with its other claim for compensation from Russia, that Russian crude supplies to its refineries were contaminated with chlo- rine in May that temporarily shut down the pipelines. However, Yermolovich says that the “dirty oil” affair will have no impact on Belarus’s budget this year, despite the outage of crude deliveries.
“The budget calls for the refining of 18mn tonnes of Russian oil and if this doesn't change we will not lose any- thing,” Yermolovich says. “If there is reduction [in the volumes of oil refined]
Minsk is seeking compensation from the Russian pipeline operator Transneft for those and it is liable under the terms of the supply contracts.
With budget revenues on track to hit their targets the refinancing programme for the $2bn due this year is key, but there are some uncertainties there too. Specifically, a $600mn loan from the Russian government, the centre piece
of the refinancing programme, was approved by the Russian government
in April, but has not been released.
“Debt payments this year are roughly $2bn and our original plan was to refinance all the payments to Russia with new Russian borrowing of roughly
“the plans will probably have to be changed as there is a “a lot of uncertainty,” over the $600mn Russian loan”
$600mn,” Yermolovich says. “The budget this year calls for $400mn to be raise on the internal market. $700mn is the bud- get surplus used to repay debt. $300mn we planned to raise from the Eurasia Fund for Stabilisation and Development. And $100mn will be raised in Russia by issuing a bond on that market. There are no plans for another Eurobond.”
But the plans will probably have to be changed as there is a “a lot of uncertain- ty,” over the $600mn Russian loan, says Yermolovich.
While the Russian loan has been approved, is in the Russian budget, and the necessary law to release the loan
Yermolovich. “We are technically ready with a two year borrowing programme to raise about RUB10bn – but the deci- sion depends on market conditions.”
Between the Russian and Chinese bonds markets and squeezing some more out of the domestic market, Yermolovich
is confident that the hole left by the delayed $600mn Russian loan can be easily filled if necessary.
“I don't know what the delay is,” says Yermolovich. “We have already fulfilled all the conditionality linked to the loan and all the necessary decisions on the Russian side have already been made. So we will see.”
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