Belarus is going to have an even more difficult time extricating itself from its growing economic morass after a decision by the Royal Bank of Scotland to refrain from helping the country’s authoritarian government with future capital raising efforts.

RBS, which along with Russia’s Sberbank, France’s BNP Paribas and Germany’s Deutsche Bank formed a syndicate that sold a total of $1.85bn in Belarusian government debt last year and this January, had come under fire from human rights groups for helping fund the government at a time when it was cracking down on the opposition.

RBS said in a statement:

Given sanctions, the deteriorating political situation in Belarus and the fact that it has reneged on key elements of the IMF programme, RBS has ceased any type of capital-raising for or on behalf of the Belarus Republic and we have no plans to change that position until these issues have been resolved. In assessing where we do business, we have a responsibility to consider a number of factors, including social and ethical issues and compliance with the letter and spirit of all international sanctions.

The move was hailed as a victory by the Index on Censorship, a human rights group which met with RBS officials last week.

The group said in a statement:

We’re delighted that RBS has heeded our calls to stop acting as a broker for authoritarian President [Alexander] Lukashenko. This couldn’t come at a more crucial time. The government of Belarus needs nearly $1bn a month in foreign capital. RBS has sent a clear signal not to risk investing in an regime that violates fundamental human rights and may not last,” said Mike Harris, the group’s head of advocacy.

Belarus saw its public finances deteriorate sharply last year, when Lukashenko ramped up spending before December’s presidential elections, setting off a balance of payments crisis.

Although the regime’s police has quashed protests – including such innovative attempts at dissent as having people clap at the same time or have their mobile phones go off simultaneously – the economic situation is not improving.

Belarus was saved earlier this year by a $3bn loan from the Russian-led Eurasian Economic Community, but reports from the country say there are food shortages, and people are still lining up outside bank offices in the forlorn hope of changing their depreciating roubles for hard currency.

A longer-term fix would involve a loan of as much as $7.5bn from the International Monetary Fund coupled with a credible economic reform programme. The Fund is considering the request on Monday, but is not expected to come up with a swift response.

With western funding increasingly problematic, that means Belarus is going to have to turn for help to the east, at the probable cost of selling off its largest companies and most lucrative assets to Russian companies.

On Monday, Belta, the official Belarusian news agency, announced that MAZ, the heavy truck maker that is an icon of Belarus’s Soviet-style economy, is planning to set up a holding company with the Russian Machines Corporation.

Related reading:
Belarus: fill up for dollars, beyondbrics
A Belarus bull: yes, they do exist, beyondbrics
Belarus – on the brink?, beyondbrics
Belarus devalues but not by enough, beyondbrics
At least you’re not in Belarus, FT Alphaville
Belarus: shining light into a dark corner, Lex

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