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. Last Updated: 07/27/2016

Belarus Reaches Deal On Gazprom Debts

MINSK, Belarus -- Russian natural gas giant Gazprom said Thursday that it had agreed on a deal with Belarus to settle the country's gas debts involving the supply of goods worth $300 million to Russian budget institutions.

Part of the debt will also be met with Belarussian government debt and some cash will be thrown in.

"We have proposals how to get out of the financial dead end but we must from today draw up the laws in line with what we agreed," Gazprom chief executive Rem Vyakhirev told reporters after a two-hour meeting with Belarussian President Alexander Lukashenko.

Vyakhirev denied that the agreement amounted to a barter arrangement, deals that the International Monetary Fund says should be reduced as part of the Russian government's efforts to boost its tax haul.

"The word barter has got nothing to do with it," he said. "The International Monetary Fund is mistaken in thinking that deals offsetting mutual debts are not subject to tax and undermine the tax base. That's nonsense."

Belarus proposed a plan to offset the debt, currently worth $250 million, up from $109 million Jan. 1, by delivering goods not just for Gazprom but for other Russian entities funded by the federal budget, including the Defense Ministry.

The goods would include cars, tractors, refrigerators and other items produced in Belarus.

Belarus will also pay for part of its debt with government paper, Vyakhirev said after the meeting, although he did not confirm whether the amount would total $200 million as was agreed in a deal signed in May.

"This will be financial paper in the form of bonds," he said, adding that there had been no talk of settling the debt with shares in companies as there was no privatization program in Belarus.

Belarussian government representatives said Russian Deputy Prime Minister Boris Nemtsov had lent his support to the scheme, although Lukashenko said at the beginning of his talks with Vyakhirev that the proposal had yet to find favor with the Russian authorities.

Lukashenko said that a previous Gazprom demand that the entire debt be settled in cash could not be realized.

"In Belarus we have just one problem -- money," he said. "If Russia was to count on our money rather than our goods, then it would not just be Gazprom that had a problem."