MOSCOW Days before Alexander Lukashenko won a fourth term as president of Belarus in December, Russia cast the authoritarian leader a $4-billion lifeline by scrapping duties on oil exports to the former Soviet republic.
Now the Kremlin is trying to reel him in.
Moscow is using its own economic might to weaken Lukashenko and increase its influence on Belarus, an ally facing a crisis that stems from lavish public spending before a widely criticized vote that further soured relations with the West.
Russia is dangling the prospect of badly needed loans before Lukashenko, who damaged his chances of further aid from the International Monetary Fund by jailing opponents after a police crackdown on peaceful protests over his election.
In return, analysts say, Moscow is eyeing prize assets that Belarus is under pressure to privatize -- potentially including its two big oil refineries, its gas pipeline system, its main mobile phone provider and Belaruskali, a top potash producer.
"Russia is not going to give free money to Belarus," a European Union nation diplomat said on condition of anonymity. "They want a piece of Belarus in return, and that is totally understandable."
Russian Finance Minister Alexei Kudrin sent a similar message on Tuesday when he said agreement on a loan for Belarus was close and could be reached during a visit to Minsk by Prime Minister Vladimir Putin on Thursday.
In addition to a potential $3-billion loan from a Russian-dominated regional anti-crisis fund, paid out over three years, Kudrin said Belarus would have to sell assets worth $3 billion this year to claw its way out of the crisis.
Belarus had been hoping for $3 billion right away, including $1 billion from Russia itself.
But Moscow, which for years has subsidized Belarus' Soviet-style economy in exchange for smooth delivery of oil to Europe and the loyalty of an ally sandwiched between Russia and NATO, seems determined to shorten the leash on Lukashenko.
"Loans will be granted in an amount that is enough to avert a collapse but in no way enough to preserve the status quo," said Kirill Koktysh, an associate professor at the Moscow State Institute of International Relations.
That status quo has been shaken hard.
In scenes reminiscent of the chaos of the Soviet Union's collapse 20 years ago, Belarussians have been waiting for hours in long lines at currency exchange offices to avoid devastating losses as the value of its rouble falls.
Wage increases awarded before the election by Lukashenko, who has been president since July 1994, are eroding. Prices of vegetables rose by nearly 25 percent in April.
Longer-term, Russia may seek to cement closer integration with Belarus, possibly reviving a push for a single currency that would sharply increase Moscow's influence, said Fyodor Lukyanov, editor of the journal Russia in Global Affairs.
"Given the extremely difficult situation in Belarus, there may be calls not just for privatization but along the lines of, 'Come on, let's decide once and for all on deepening integration'," Lukyanov said.
In a phone call on Tuesday, the Kremlin said Russian President Dmitry Medvedev and Lukashenko discussed "cooperation on integration within the Customs Union" and other regional groups Moscow is using to bring Belarus closer into its orbit.
The Kremlin's ultimate hope, Lukyanov said, is "to make it so that Belarus is oriented, irreversibly and forever, toward economic cooperation and integration with Russia."
Lukashenko, 56, has played up historical ties with fellow Slavic, Orthodox Christian-majority neighbor Russia to his political and economic advantage, winning cheap energy supplies and successive endorsements of elections condemned by the West.
He has also intermittently courted the United States and Europe, only to alienate them with intolerance of opposition and clampdowns on dissent.
But Lukashenko's crackdown on protests over the December election has played into Russia's hands. Several candidates have been jailed and a prominent opponent, Andrei Sannikov, received a five-year prison sentence on Saturday.
Russia initially cast the crackdown as an internal matter but added to the pressure on Lukashenko this week, criticising the sentences against Sannikov and others. [ID:nLDE74F1JQ]
Lukashenko's ties with the Kremlin has been strained since early in Putin's 2000-2008 presidency, and there were signs last year that Moscow might try to push him out of power in the December election.
Even with Belarus in dire economic need, however, analysts say that is not Russia's goal because any replacement would add to the uncertainty.
Instead, Koktysh said, Russia's leaders want to discredit Lukashenko, who has used Moscow's largesse to cast himself as "a successful post-Soviet leader who can present himself as an alternative to both Medvedev and Putin."
"He will be shown as a failed manager and a person who is unable to support his economic model or care for his country."
(Additional reporting by Lidia Kelly; editing by Ralph Boulton)