Lukashenko Reshuffles Cabinet as Russian Oil Money May Dry Up

(Bloomberg) -- Belarusian president Alexander Lukashenko reshuffled the government in his biggest overhaul in almost four years as the former Soviet republic confronts the prospect of a drop in earnings from Russian oil supplies just as billions of dollars in foreign debt come due.

Lukashenko appointed Belarusian Development Bank Chief Executive officer Sergei Roumas, 48, as Prime Minister, according to a statement on the president’s website Saturday. He also replaced several deputy prime ministers, four ministers and the chairman of the state military industrial committee.

The shake-up comes amid the risk that a key source of foreign-currency revenue will be undermined by a Russian plan to reform oil taxes. Moscow wants to gradually abolish levies on oil exports, which would reduce Belarusian profits from purchases of duty-free Russian crude. The government forecasts a $300 million shortfall next year as result of the Kremlin’s planned tax rules.

“If we let our economy crash, then there can be no independence,” Lukashenko said, criticizing officials he sacked for a lack of discipline. “No verbiage will save us from destruction.”

Tax Maneuver

Russia plans to gradually bring oil export duties to zero by 2024, while raising a tax on crude extraction. This may widen the Belarusian current account deficit by one-third to $2 billion next year, Sberbank CIB analysts estimated. Belarus has an agreement by which it can import Russian oil without levies, and so the changes would eliminate that advantage.

Roumas’s new government needs to meet $3.7 billion in foreign debt payments next year, which is more than half the size of the Belarusian central bank’s reserves. The country wants to refinance as much as half of the debt due in 2019 and is seeking to borrow $1 billion from Russia as talks for an International Monetary Fund loan have stalled.

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