Updated at 18:21,18-06-2018

Belarus strongman balances between Ukraine war, Putin, EU

by Aliaksandr Kudrytski and Ryan Chilcote, Bloomberg news

Aleksandr Lukashenko has been president of Belarus for so long that he was sometimes called Europes last dictator.

But the pro-Russian insurgency in Ukraine shook him and, in an interview, he called on the U.S. to play a central role in the Ukrainian recovery, warned that Belarus wouldnt become Russias northwestern province and even poked a finger at Vladimir Putin.

Im not Europes last dictator anymore, Lukashenko, 60, said with a chuckle. There are dictators a bit worse than me, no? Im the lesser evil already.

The two-hour interview -- in the new, stadium-sized, mostly empty marble-and-glass Independence Palace -- showed a ruler engaged in a complex acrobatic act. He is trying to keep a firm grip over his country while cautiously balancing among a re-assertive Russia, war-torn Ukraine and the European Union, all of them his neighbors.

Lukashenko, the longest serving leader in Europe, has used Soviet-style electoral maneuvers since first being elected in 1994 and has been in office nearly as long as his country has existed as an independent state. He is Putins closest ally and Putin is his.

Yet with some comments he defied Putin and with others he appeased him. He said that the U.S. and its allies were mistaken to think that the Russian president was seeking to restore an empire but added that Putin and Russia react emotionally to open challenges. So one should tread carefully around Russia, he noted.

Northwestern Province

He made a point of declaring Belarusian independence, saying his nation of 9.5 million will fight to the last man against any outside force that may threaten it. There are, he added, a lot of people in politics in Russia who think imperialistically and they dont see Belarus as anything other than a northwestern province.
Lukashenko was both assertive and cautious in responding to this notion, saying, We wont be some northwestern province just like we will never get into conflicts with Russia.

Putin and Lukashenko traded congratulations Thursday, celebrating a union state formed in 1996. The Russian leader praised the alliance for its effectiveness, saying it was a base for a wider economic union with Kazakhstan and Armenia.

Powerful State

The introduction of a common currency or a deeper integration of the bloc isnt on the table, Lukashenko said in the interview.

You know that in the Eurasian space, Russia is the central state, the most powerful state, he said. But to become an empire, a member of some empire, a province in this empire -- you know, were probably not ready for that yet, neither in Kazakhstan nor in Belarus.

Lukashenkos increasingly pro-independence stance and concerns over Russias role in Ukraine appear to have earned him more support ahead of this years presidential elections in which he is seeking his fifth term. The opposition he defanged over the past two decades is striking a notably gentle stance.

Vladimir Neklyaev, for example, who ran against Lukashenko in 2010 and was beaten and thrown into prison before the election ended, said in an interview in Minsk that the opposition should avoid active protests so as not to provide Russia with an excuse to interfere.

Weak Opposition

Alexander Milinkevich, a pro-democratic politician who challenged Lukashenko in the 2006 elections, said he supported the presidents pro-independence actions although he did complain about the countrys lack of freedom.

Lukashenko mockingly took note of the oppositions weakness, saying in the interview, I dont need another opposition, I should nurture this one, preserve it the way it is.

While his opponents are in disarray, it is the economy and its dependence on Russia that may become the presidents main challenge as he runs. The Belarusian ruble has lost 33 percent against the dollar in the past 12 months, the third-worst performance among more than 170 currencies tracked by Bloomberg, behind the Ukrainian hryvnia and the Russian ruble.

The sanctions which the West introduced against Russia seriously affect us, Lukashenko said.

Soviet-Era Factories

Those sanctions along with capital outflows from Russia and its plunging export proceeds from cheaper oil joined with collapsing demand for Belarusian produce put its industry in danger. Access to the Russian market remains critical for the countrys Soviet-era state-owned factories, producing trucks, tractors and buses which can hardly compete in the West.

The country was forced to reintroduce an export duty on potash, one of its chief sources of revenue.

We have not had enough time to put more distance between us and the Russian market, leave the post-Soviet market and re-orient ourselves into other markets, Lukashenko said.

Lukashenko vowed that the economic woes wouldnt prevent his country from paying in full its foreign debt this year. Belarus has that money set aside for debt payments, he said, while it still may sell new Eurobonds, refinance its Russian debt and seek to borrow as much as $2 billion from the International Monetary Fund.

Vulnerable Debt

The countrys vulnerability was highlighted in January when Lukashenko misspoke at a news conference, rattling the bonds. He talked about the possibility of restructuring debt, sending notes to a record low before he corrected himself, saying he meant refinancing. The yield on the countrys August 2015 bonds, surged almost 32 percentage points that day, to more than 47 percent. It was at 14.3 percent on Wednesday, according to data compiled by Bloomberg.

Lukashenko, who helped broker a Ukrainian cease-fire deal in February by hosting the leaders of Russia, Ukraine, Germany and France in his new palace in Minsk, said he was worried that the lull in Ukraines fighting may be the calm before the storm.

He called it worrying that the U.S. wasnt directly part of the talks and asked the U.S. to immediately join the peace process. As Ukraines government and pro-Russian insurgent leaders there distrust each other and uncontrolled paramilitary groups abound, he said, he fears the worst may still be ahead should the fragile cease-fire fall apart.

This can all end in war, he said.