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Russia will send Belarus first $1 billion of loan by year's end

MOSCOW (Reuters) - Russia will send Belarus the first $1 billion tranche of a $1.5 billion loan by the end of the year and provide the remainder of the loan in 2021, Russian Finance Minister Anton Siluanov said on Wednesday.

FILE PHOTO: Russia's President Vladimir Putin attends a meeting with his Belarusian counterpart Alexander Lukashenko in Sochi, Russia September 14, 2020, in this still image taken from a video. Russian Presidential Executive Office/Handout via REUTERS

The loan in Russian roubles and U.S. dollars is the latest in a number of support measures by Moscow to its former Soviet ally Belarus headed by President Alexander Lukashenko for 26 years.

Mass protests have dogged Lukashenko since he claimed victory in an Aug. 9 election that the opposition says was rigged, an allegation Lukashenko denies.

The protests triggered heavy withdrawals and an increased demand for foreign currency, pushing the Belarusian rouble to all-time lows and forcing the central bank to burn $1.4 billion - or a fifth of its reserves - to support the currency.

Belarus was due to pay Russia back $1 billion this year, Lukashenko was quoted as saying by Belta state news agency on Wednesday, and he was ready to pay it back “despite all the difficulties”. He asked Russia to move repayment to next year ... “This was a refinancing matter,” Belta quoted Lukashenko as saying.

By providing Minsk with a $1.5 billion lifeline, Moscow would stabilise finances of “our partner”, finance minister Siluanov told reporters.

He said the final loan’s terms were yet to be finalised but it was likely to bear a 10-year maturity, supporting Minsk finances amid a nearly $1 billion in outflows last month.

Around a half of Belarus’ total state external debt of $18 billion falls on Russia, according to Sofia Donets, chief economist at Renaissance Capital in Moscow.

While no data was yet available for September deposit dynamics, recent statements by the central bank and money-market indicators “suggest that liquidity stress in the banking system has subsided,” ratings agency Moody’s said this week.

“Still, given Belarus’ political turmoil, depositor confidence is fragile and outflows risk intensifying again,” Moody’s said.

Russia had already asked its state banks to continue providing its Belarusian counterparts with liquidity, sources have told Reuters, and has started joint military drills near the Belarus border with Poland this week.

Reporting by Darya Korsunskaya and Andrey Ostroukh; Writing by Gabrielle Tétrault-Farber and Katya Golubkova; Editing by Catherine Evans and Grant McCool