Belarus Looks to Russia, Iran for Loans

WSJ -- Belarus said on Monday it is close to securing a $400 million loan from Iran as the authoritarian Eastern European nation scrambles to line up financing from its few allies amid a deepening economic crisis.

Meanwhile, the International Monetary Fund will visit the country starting Tuesday after rebuffing requests for a loan last month, although few observers expect an IMF deal anytime soon.

Iran may lend the country $400 million, while Russia's biggest state-controlled bank may lend up $1 billion backed by shares in the Naftan oil refinery, officials from President Alexander Lukashenko's government said on Monday, according to the official state news agency.

Since his controversial re-election last year, Mr. Lukashenko has increasingly become isolated from the U.S., which recently toughened sanctions, as well as from Europe and even Russia.

The Belarusian ruble has lost three-fifths of its value against the dollar in the past year, and foreign reserves have fallen to a level that puts the economy at risk, according to officials and analysts.

The IMF will be looking for progress in reforms that might justify a loan. Belarus is seeking about $7 billion in IMF financing, but analysts have said a smaller sum is more likely, or perhaps no loan at all.

Difficulties with the IMF may push Minsk back toward Moscow, which has sought access to Belarusian assets such as potash miner Belaruskali. The fertilizer producer, if merged with Russia's OAO Uralkali, would become the biggest potash company in the world.

Belarus already boosted its refinancing rate to 30% to halt an exodus of Belarusian ruble deposits, and it also liberalized some trading in the ruble last month. Those reforms, linked to a $3 billion, three-year loan from a Moscow-led regional bailout fund, are a "step in the right direction" but don't go far enough, the IMF said last month.

Minsk should also roll back wage increases that were part of Lukashenko's re-election campaign, among other structural economic reforms, the fund said.

Overall, the IMF visit is "technical," and since political tensions are running so high, there is no talk of a loan agreement any time soon, VTB Capital analyst Petr Grishin said. Meanwhile, the immediate problem of the country's large current-account deficit has been solved by the steep ruble devaluation, he said.