RUSSIA: Belarus economy will survive increase in Russian gas price, says first deputy PM Vladimir Semashko

Belarus's government will overcome difficulties linked to steep increases in the price of Russian gas and oil by proceeding with a cautious programme of privatisation, a top government official said. Vladimir Semashko, first deputy prime minister, said the increases Belarus accepted after a row last month that briefly halted the flow of Russian oil across its territory to Europe dealt an economic blow that is difficult to absorb. "This represents a serious challenge for the economy of the (Belarussian) republic. That is why in such an exceptional situation, the government of Belarus, the presidential administration, and the president himself, have taken a number of steps to diminish this effect, to avoid any shocks on the main sector of the economy, and for the population," Semashko told Reuters late on Tuesday (February 6). "We have some preliminary data which shows that the economy and the industry in general has managed to cope with the shock of the extreme rise in tariffs on energy," he added. Under President Alexander Lukashenko, accused in the West of crushing fundamental rights and clinging to Soviet-era economics, Belarus has maintained considerable state control over the economy. The president and his ministers say they want to avoid the excesses of Russia's fast-paced privatisation of the 1990s and keep to a minimum the gap between rich and poor. "Despite disruptions in January, initially in the Petro-Chemical sector, we hope to meet the economic targets, and hope to show that despite the substantial rise in energy prices, we will manage to maintain economic growth of 7 to 8 percent," said Semashko. He said preliminary figures showed industrial output was on course to hit a 12-13 percent increase this month. Belarus has posted annual growth of about 10 percent of gross domestic product over the past three years with 8 percent initially forecast this year before the price rises. Russia nearly doubled the price of gas and imposed an export duty on oil shipments amounting to a 25 percent cost increase, posing severe difficulties for Belarus's two large oil refineries. Minsk initially tried to impose an oil import duty of its own, prompting Moscow to halt oil shipments altogether, but later relented and oil flows resumed. Government estimates say the increases will cause losses to the budget of up to 2.7 billion US dollars. The government has tried to cushion households by raising prices for industrial users by 89 percent for gas and 21 percent for electricity. The government has also said it wants to reorient its economic and trade policies, switching its previous heavy emphasis on traditional partner Russia, to attract Western investors. Semashko also said the government was considering an orderly privatisation of enterprises in specific sectors, including the chemical industry. "We think that this year will be difficult for us, but we will survive 2007, and then we expect the situation to stabilise," he added. Belarus, he said, was also prepared to discuss the sell-off of loss-making firms to any private buyer prepared to make major investments to rescue them.

ITN Source | February 7, 2007

Tags:. .specific. .sectors. .maintained. .duty. .exceptional