Sergei Kuznetsov in Minsk -
The European Bank for Reconstruction and Development (EBRD) and the Belarusian government have agreed to work together on the privatisation of state-owned Belinvestbank. This move comes after four years of reluctance on the part of the EBRD to cooperate with the administration of President Alexander Lukashenko over problems with human rights in the country.
On the eve of the EBRD’s annual meeting in Tbilisi, the lender’s first vice president, Phil Bennett, and Belarus Deputy Prime Minister Vladimir Semashko on May 13 signed a memorandum of understanding, under which the Belarusian government will by 2020 sell its controlling stake in Belinvestbank, Belarus’ fourth largest lender by assets, with support from the EBRD.
“The EBRD is ready to make pre-privatisation funding available on the condition that certain agreed goals are met that will strengthen Belinvestbank’s corporate governance and guarantee its independence as a commercial entity free from political influence," the lender said in a statement. "The funding could include an equity investment in Belinvestbank, as well as setting up a trade financing line for the bank and providing it with loans aimed at fostering the growth of local small and medium-sized businesses.”
According to Belinvestbank’s chairman, Gennady Sysoev, the EBRD intends to buy a stake of 25% plus one share in the bank, after which the controlling stakes would be sold to one or more strategic investors.
For the multinational lender this deal is the first of its kind since April 2011, when the EBRD decided to recalibrate its approach to Belarus following the disputed December 2010 presidential election and continuing violations of human rights. The new policy meant that the lender concentrated on developing the private sector and did not give any support – financial or technical – to the central authorities.
Vladimir Zinovsky, the economy minister of Belarus, tells bne IntelliNews that the EBRD’s decision to reconsider its approach in the case of Belinvestbank and to assist in the preparation of its privatisation is “long-awaited, but it is also the expected result of the country’s consistent efforts to establish a mutually beneficial and mutually respectful dialogue with its European partners”.
Over the past few months some signs of a thaw in relations have appeared after Minsk played a crucial role in facilitating peace negotiations between Ukraine, the EU and Russia. On February 11, French President Francois Hollande and German Chancellor Angela Merkel participated in peace talks held in Minsk on the Ukraine crisis, which was presented as a diplomatic victory by the Belarusian state-controlled media.
Alexander Mukha, a Minsk-based independent financial analyst, believes that the EBRD’s decision to resume cooperation with the Belarusian government is also motivated by difficulties the lender is experiencing with Russia. “The [EBRD] can no longer finance projects in Russia as it did previously, due to the Western sanctions against this country. That is why the EBRD has decided to reorient its funding,” he says.
Last year, EU leaders decided to ask the EBRD to suspend new lending to Russia, which has traditionally been the biggest recipient of financing from the multinational institution – the EBRD lent €1.8bn in 2013.
New strategy, old investments
In the second half of 2015 the EBRD is due to start drafting its strategy for Belarus for 2016-2018. “We hope that the document will reflect the EBRD's acknowledgment of its interest in expanding mutually beneficial cooperation with our country, as well as in mitigating the recalibrated approach with the aim of abandoning it in the future,” Zinovsky says.
In February at a meeting in Minsk, President Lukashenko called on the EBRD’s president, Suma Chakrabarti, to consider removing all restrictions on cooperation with Belarus, in particular with regard to state-owned enterprises. “I think the government will show you the state-owned enterprises and you will be able to decide for yourselves whether the Bank could cooperate with these enterprises on a wide range of matters,” Lukashenko said.
Meanwhile, analysts believe that the EBRD could pursue an exit from the small-sized RRB-Bank, where it currently holds a 13.91% stake. The multinational lender became a shareholder of RRB-Bank approximately eight years ago. This is a normal period after which an exit can be expected, due to the EBRD's practice of employing a life-limit regarding investments in banking capital.
In 2013, the EBRD sold its 21.67% stake in the Belarusian Bank for Small Business (BBSB) to Poland's Getin Holding. Getin, controlled by Polish businessman Leszek Czarniecki, owns financial firms across Central and Eastern Europe, in Poland, Romania, Russia, Belarus and Ukraine.
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