5 Min Read
* Minsk must privatise state companies - Kudrin
* Belarus currency crisis has pushed it towards Russia
* Belarus's Lukashenko is on poor terms with West (Adds no statements to press after Putin-Lukashenko meeting)
By Gleb Bryansky and Andrei Makhovsky
MINSK, May 19 (Reuters) - Russia urged Belarus on Thursday to sell off state assets in order to secure a credit lifeline from a Moscow-led bailout fund as a currency crisis deepened in the former Soviet republic.
Belarus could raise $7.5 billion to $9.0 billion from privatisation in the next two to three years to supplement a proposed $3.5 billion bailout loan, Russian Finance Minister Alexei Kudrin said.
"I think Belarus has enough assets to complement the lending programme with necessary foreign currency resources that can be obtained in the next two to three years to stabilise the economy," Kudrin told reporters.
Moscow itself could buy Beltransgas, Belarus' gas pipeline network operator, which tranships Russian gas to Europe, said Kudrin, who visited Minsk with Russian Prime Minister Vladimir Putin.
The Belarussian ruble continued a downward spiral, weakening to 8,000/9,000 against the dollar BYR= in thin trading on the interbank market, from 7,100/7,600 on Wednesday, market sources told Reuters.
Market players were awaiting the outcome of a meeting between Putin and Belarussian President Alexander Lukashenko with speculation that the Russian leader might disclose more details of a Moscow-backed aid package.
Putin had talks with Lukashenko on Thursday night after a meeting of heads of governments of EurAsEC, a regional economic grouping established by some ex-Soviet republics.
But officials said the two leaders would not talk to the press after the meeting, which took place behind closed doors.
Talks are under way with Belarus over a potential $3.0 billion to $3.5 billion loan over three years from an anti-crisis fund run by EurAsEC. Kudrin said the final decision on the loan could be made on June 4.
The currency crisis in Belarus, which runs a Soviet-style economy with many vital sectors under state control, is eroding Belarussians' ruble savings and causing a shortage of imported goods such as medicines. [ID:nLDE74H1KR]
It appears to be pushing Belarus, whose leader is on poor terms with the European Union over a crackdown on the opposition, more toward Russia even though Lukashenko has had uneven relations, too, with Moscow over the years.
A multi-level exchange rate system is operating in the country with an official rate of 3,120 per dollar, the level at which exporters must sell 30 percent of their foreign currency revenues to the central bank.
Apart from the interbank rate, there is also a separate rate at which ordinary Belarussians can buy dollars at cash points -- though in practice the crisis means the supply of dollars at these outlets has all but dried up.
Interbank trading remained thin on Thursday, reflecting uncertainty over the ruble's future ahead of the Putin visit, the market sources said.
"The quotes are in a spread from 8,000 to 9,000 per dollar. There is practically no trading going on," one source said.
"Everyone is waiting for the decisions which will be announced today," another source said.
Belarus has said it might also turn to the International Monetary Fund for help, though it is not clear if a formal approach has been made yet.
Lukashenko's chances of receiving IMF aid may have been hurt by Western outrage over the arrests of opposition activists, including politicians who ran against him in his re-election last December.
Despite regarding Lukashenko as an eccentric and unpredictable ally, Moscow has subsidised Belarus's Soviet-style economy in exchange for it delivering Russian oil to Europe without problem.
With Belarus now in crisis, Moscow, in return for loans, will have its eye on valuable assets that Minsk may now be under pressure to privatise -- including oil refineries, the gas pipeline system, its main mobile phone provider and its potash production complex. (Writing by Richard Balmforth amd Olzhas Auyezov; Editing by Jan Paschal)