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Belarus investors urged to verify use of 2026s and 2031s proceeds, warned about lack of government’s authority since 5 November

The Coordination Council of Belarus, recognised by the EU and the US as a body facilitating the peaceful transition of power in the country, has sent statements to international financial institutions warning that the proceeds of the country’s latest USD 1.25bn Eurobonds might have been used to fund state repressions and that the current government lacks the authority to raise further funding, according to documents seen by Debtwire.

The statements have been sent to three banks that acted as joint lead managers on the Eurobond issuance of the USD 500m 6.125% 2026s and USD 750m 6.375% 2031s in June last year as well as to 27 investment institutions believed to be holding the bonds. The three banks are Citigroup, Societe Generale and Raiffeisen Bank International.

The statements call on the bank-arrangers and bondholders to assess applicable legislation and their internal policies and decide whether they can continue their involvement with Belarus sovereign Eurobonds, in particular urging them to conduct an audit on the use of proceeds from the June 2020 Eurobonds issuance.

An extract from the statement sent to Societe Generale

CLICK HERE to View the Statement to Societe Generale

The Council draws attention that arrests of civil activists and political leaders of the 2020 presidential campaign had been in full swing by 16 June, when Belarus started marketing its Eurobonds. The bank-arrangers, however, ignored the political situation and human rights violations in the country and proceeded with the issuance.

“As a result, [Alyaksandr] Lukashenka’s regime got access to funds and the additional financial strength to enable violent repressions and terror across the whole country,” the Council notes in its statements.

Societe Generale acknowledged Debtwire’s request for comments but did not reply before the time of publication.

In accordance with the bonds' prospectus, the proceeds of the issuance were to be used to refinance external public debt. The National Bank of Belarus contributed the Eurobond funds to its FX reserves, according to its report from 1 July.

But the Council points out that there is no evidence of the proceeds being used to repay debt, while the country’s FX balance decreased since the bonds’ issuance. Belarus repaid USD 681.7m of its external public debt between July 2020 and November 2020, while it raised an additional USD 778.6m of debt in the same period, the Council notes referring to publicly available statements from the Ministry of Finance.

The country’s FX reserves fell by USD 1.994bn during 2020 and stood at USD 7.469bn as of 1 January 2021, according to the National Bank.

The Ministry of Finance did not return a request for comments.

Lack of legitimacy

A separate statement has been sent to the International Monetary Fund, seeking clarification on whether Belarus is still eligible to use general resources of the Fund “in the absence of the legitimacy of the executive and legislative authorities” in the country.

Belarus currently does not have any IMF funding, but its eligibility for the Fund’s resources is part of the terms and conditions of the 6.125% 2026 and 6.375% 2031 notes.

The US, the EU, the UK and Canada refused to accept results of the presidential elections held in Belarus on 9 August, which are widely believed to have been fraudulent, and did not recognise Alyaksandr Lukashenka as a legitimately elected leader, following his secret inauguration on 23 September.

Lukashenka, therefore, lacks legitimacy to appoint the head of the National Bank and the Minister of Finance, who are authorised to deal with the IMF, the Council notes in its statement to the Fund seen by Debtwire.

The Council writes that a “growing brain-drain, closure of businesses, massive dismissal of skilled workers for political reasons, strikes and economic sanctions will undoubtedly have a significant negative effect on the economy in the near future.”

The country depends on refinancing its external debt, which increased by 25% relative to its gross domestic product last year to around 50% of GDP, and is very likely to be on the brink of default, the Council warns.

An IMF spokesperson declined to comment on the Council’s statement but said that the Fund “would consider any Belarusian authorities’ request for assistance from the IMF, in accordance with IMF policies, as Belarus retains all rights and obligations of a member.”

RBI’s and Priorbank’s involvement

In its statement to RBI, the Council additionally noted the business conduct of its Belarusian subsidiary Priorbank JSC.

The Austrian bank, either directly or through its local subsidiary, funds major state-owned enterprises, including Belaruskali, Naftan and Grodno Azot, whose workers have been intimidated, threatened by police and dismissed, treatment which breaches the UN Global Compact Principles, and RBI’s sustainability commitments and Code of Conduct, the Council notes in the statement to the bank.

Priorbank also withdrew money from the accounts of individuals that received financial help for medical and legal services after being beaten and arrested by the security services for participating in peaceful demonstrations, according to the information provided by the Council and independently verified by Debtwire with the people managing charitable funds.

“The withdrawals were arguably done based on the requests of the Investigative Committee, but in violation of the Belarusian legislation, the Bank withdrew not only the funds received from the charitable organisation (as it was prescribed in the Investigative Committee’s requests), but also the funds from other accounts of these individuals, even putting some accounts in overdraft,” the Council said in the statement to the bank.

Paval Latushka, a member of the Council’s presidium, had a meeting with the executive director of RBI group’s European and public affairs Paul Pasquali, who said that the group would take the statement into account, analyse it and reply with their position on the matter, according to Latushka.

Latushka also informed a representative of the Austrian president’s office about the RBI business conduct in Belarus.

CLICK HERE to View the Statement to RBI

The Council plans to contact the regulators and the respective state authorities supervising sanctions compliance if RBI fails to take action on their statement and continues to support, directly or indirectly, the regime of Alyaksandr Lukashenka, noted Latushka.

“We strongly reject the allegation that RBI’s subsidiary Priorbank has taken any illegal actions against its customers. Priorbank did not act contrary to Belarusian laws and regulations,” an RBI spokesperson said in an emailed response to Debtwire.

Interview with Coordination Council’s representative Paval Latushka

Debtwire asked Paval Latushka, who currently also acts as the head of the National Anti-crisis Management team, and previously held ambassador posts and was the Minister of Culture between 2009 and 2012, to comment on the Council’s statements and its vision on the sustainability of the sovereign debt.

Paval Latushka. Photo credit: courtesy of the National Anti-crisis Management team

On legitimacy of the government:

First of all, we have to say that Alyaksandr Lukashenka’s presidency ended on November 2020, in accordance with the Constitution. An illegitimate head of the country cannot appoint a legitimate government, therefore, neither he nor the government can implement any state loan agreements.

It is a joint position of the Coordination Council and the National Anti-crisis Management that we will not necessarily consider loans agreements signed after 5 November 2020 as binding [if there will be a transition of power in Belarus], based on the fact that persons signing such loan agreements do not have the appropriate legal authority.

On 2026 and 2031 Eurobonds issuance:

Lukashenka has been under personal sanctions since 2006 in the US, a number of high state officials of Belarus are also under personal sanctions of the European Union. Everyone knows that the human rights situation in Belarus has been a significant problem over the past 20 years, there have been big questions related to corruption, which is still encouraged by the current illegitimate authorities. [All of this] has been ignored or has not been taken into account by the banks that arranged Eurobonds.

On June 18, for example, presidential candidate Viktar Babaryka was detained, before thatSiarhey Tikhanousky, who also planned to run as candidate, was detained. The banks, that organised the Eurobond issuance, couldn’t not have known about this, they absolutely had this information and decided they would go ahead with the issuance.

We know of people that died last year as a result of mass protests, a huge number of people (over a thousand) were tortured, more than 33,000 citizens of our country were arrested, and it is impossible to count the number of detained.

We have a great degree of confidence that this resource [the Eurobonds proceeds] was used to finance large-scale mass repressions that have been taking place since May 2020 to this day in our country. This is a violation of the terms of the use of proceeds, and banks have to check where these funds have been really directed to.

Of course, the new government of Belarus will always be ready to comply with its debt obligations. But at the same time, it is an obligation of the creditor to monitor and analyse the intended use of provided funds. If the creditor does not carry out their obligations under credit agreements, this will give us legal grounds to question the expediency of paying these debts.

On the ability to pay debt:

Taking into account the fact that the budget for 2021 was formed with a deficit, a fall in gross domestic product, a large outflow of investments (for example, we predict that 50% of IT companies, forming a systemically important sector, plan to transfer their business to other countries), taking into account the fact that there is a fairly large outflow of human resources, primarily qualified personnel, [that the Belarusian ruble devalued by 18% last year], we question the ability of the Belarusian economy to pay its debts. It is not a secret to anyone that in recent years the Belarusian economy survived only through refinancing its debt obligations. Among the sources of our financing have been Eurobonds, credit lines from various financial institutionsas well as loans from the Russian Federation.

Based on the sanctions that have already been introduced, we can predict that Belarus will not receive financing from the European Union in the near future. The United States very clearly expressed its position to defend the approach against supporting any credit lines by international financial institutions [in the Belarus Democracy, Human Rights, and Sovereignty Act of 2020]. The European Bank for Reconstruction and Development and the European Investment Bank announced the freeze of new financing following unprecedented repressions in the country. 

It will be impossible to service our debt obligations by attracting additional funding, and the only source of funding will be credit lines from the Russian Federation. But we see that the Russian Federation is also not ready to provide financing in the amount required by the Belarusian economy [Belarus needs around USD 3bn in 2021 to service and repay its external debt].

There is no political will to invest into Belarus at the expense of Russian citizens and the Russian state budget.

On sanctions:

In the event that the banks do not respond to our appeals, we plan to contact the regulators, The European Central Bank, the US Treasury Department, the European Commission’s department overseeing sanctions, seeking their opinion on the compliance with sanctions against the Lukashenka’s regime and the legitimacy of providing funding opportunities for it.

The sanctions mechanism has only started to work and more economic sanctions are to be expected this year, including sanctions against sovereign debt.

The Council has been set up to facilitate the transition of power and sanctions is only one of the tools to put pressure on the regime. We are looking to develop cooperation with countries in the European Union and the US and we have appealed to the European Commission to develop the so-called Marshall Plan to support the Belarusian economy and the new government once Belarus is on the path to democratic development.


The Coordination Council formed around the leading opposition presidential candidate, Sviatlana Tsikhanouskaya, after the 9 August 2020 presidential elections.

It is recognised by the EU “as an interim representation of the people demanding democratic change in Belarus" and by the US “as a legitimate institution to participate in a dialogue on a peaceful transition of power in Belarus."

by Alesia Sidliarevich

Alesia Sidliarevich Associate Editor, CEEMEA Debtwire
Alesia Sidliarevich Associate Editor, CEEMEA Debtwire

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