Sergei Kuznetsov in Minsk -

Last year's economic meltdown in Belarus amid a serious shortage of hard currency reserves pointed to the government having to step up its privatisation efforts. But since the sale of a 50% stake in Beltransgaz to Russian gas giant Gazprom for $2.5bn in November, the government's plans for the privatisation of major state-owned enterprises remain unclear.

The annual privatisation of $2.5bn worth of state assets in 2011-13 is one of the conditions that the government agreed to as part of the $3bn loan from the Eurasian Economic Community (EurAsEC). The privatisation proceeds are expected to be channelled to the country's international reserves alongside the loan.

To meet this condition, the Belarusian government drew up a preliminary list of major state-owned assets for privatisation that could secure this annual revenue in 2012 and, possibly, in 2013. This list remains undisclosed, but sources close to the government tell bne that it included about 20 major state-owned assets, including Naftan oil refinery, Gomeltransneft Druzhba oil pipeline, Krinitsa brewery, Belarusian Metal Plant foundry, BelAZ truck maker, cement plants and the state shareholding in mobile operator MTS.

The list was submitted to President Alexander Lukashenko for approval, but during a government session held on March 30, Lukashenko rejected the very idea of the list. He explained that any enterprise in theory could be privatised, but that there would be no wholesale privatisation. "Privatisation should be carried out on a case-by-case basis, if the state needs it, and all Belarusian enterprises can be privatised for the right price," he said.

Lukashenko also gave instructions for the government during the second quarter to work out "a single comprehensive document to regulate the entire privatisation sphere." He did not specify which provisions should be included in this document, but judging by what he said, it should be a traditional set of requirements that the Belarusian authorities impose on large investors. "We should definitely stipulate that the enterprise has to be modernised, stipulate what products will be made, how people will be employed, salaries, taxes and so on. After that, we can go ahead and allow privatisation," Lukashenko said during the government meeting.

Government officials did not comment on the results of the meeting with the president for almost two weeks; only as late as April 12 did Belarusian Economy Minister Nikolai Snopkov address the issue, telling reporters the privatisation process might not necessarily need specific lists of companies that should be privatised. "Privatisation is possible, and it is underway, it depends on prices and terms offered by investors," he said.

Disappointment

Lukashenko's decision to give up on having a list of specified assets to be privatised will disappoint many potential investors who had hoped for a more rigorous privatisation campaign. In fact, this decision means that everything in this sphere will likely stay just as it has for the last few years, when the authorities were involved in sluggish negotiations with several potential investors, mainly Russian, with most of these failing because of the unfavourable terms put forward by the Belarusian side, usually over the price.

It looks like EurAsEC is also disappointed with Lukashenko's position. The governor of Belarus' central bank, Nadezhda Ermakova, said at a press-conference on April 4 the EurAsEC wanted Belarus to redouble its efforts "in terms of privatisation". She did not elaborate, though.

Roman Osipov, director of UNITER investment company, tells bne that Lukashenko's decision leaves no doubt that the pattern of privatisation of the major state-owned assets in Belarus will remain the same as it has for the last decade. "Privatisation is only possible on a case-by-case basis. And it will depend on how much a potential investor is interested in some asset, and whether the authorities are ready for cooperation," he explains. "The level of decision-making on the sale of major assets remains very high. All transactions are to be considered at the level of the president, as it has been before. Nothing has changed compared with previous years."

He adds that the main message to potential investors who would like to purchase large assets in Belarus is that they "can discuss specific assets, but the authorities will insist on laying down their conditions."

This is confirmed by the postponement of Lukashenko's annual address to the nation and the parliament, originally scheduled for April 19. The president turned down the initial version of the speech and sent the draft back to the government for revision. Specifically, Lukashenko told the government to finalize the clauses concerning state property privatisation, instructing "the state bodies to focus on the matters of principle: to rule out excessive 'liberality' in state property sales, avoid mass privatisation, ensure the protection of the interests of workers and regular citizens of Belarus during the possible privatisation of companies," official news agency BELTA reported, quoting presidential spokesman Pavel Lyogky.