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. Last Updated: 07/27/2016

Lukashenko Pops His Top Over Baltika

Belarussian President Alexander Lukashenko on Tuesday threatened to ban Baltika -- and every other Russian company -- from investing in Belarus.

Why?

Because Baltika, Russia's largest brewery, asked for its money back.

Baltika struck a deal last year with Lukashenko personally, which called for it to invest some $50 million over two years in Krinitsa, the largest brewery in Belarus, in return for a controlling stake in the state-owned company. But after spending more than $10 million to modernize Krinitsa -- and being ignored by Lukashenko's government for more than two months -- Baltika cut off funding in January and this week decided to ask for its money back.

The move provoked a lacerating response from Lukashenko, who on Tuesday accused Baltika of using zakazukhi, or commissioned media stories, to put pressure on him. He also said that if Russian investors want to participate in local privatizations, they must do it "the Belarussian way."

"Tell [Baltika president] Taimuraz Bolloyev that if I see any more bought material on NTV [television] or any other scoundrel media, then there will be no Baltika here -- nor will there be any other Russian firms," Lukashenko told the Cabinet, Interfax reported.

Lukashenko was referring to NTV's "Namedni" program, which broadcast a critical take on the floundering deal late Sunday.

"The fate of the investments made in Belarus by Baltika, the biggest brewery in Russia, has for the first time clearly demonstrated what it means, plainly speaking, to be hoodwinked Belarus-style," Leonid Parfyonov, the TV show's presenter, said while introducing the program.

Baltika vice president Adam Tlekhurai said by telephone from St. Petersburg that Baltika had been waiting for two months for the Belarussian Cabinet to convene a shareholders meeting at Krinitsa, which should have paved the way for the transfer of 50 percent plus one share in the company. When the meeting never came, the company informed the Belarussian government that it was calling in its debts, Tlekhurai said.

Both Tlekhurai and "Namedni" denied that Sunday night's story was commissioned. Tlekhurai said "Namedni" contacted Baltika frequently seeking comment, but that his company refused.

"We're not journalists, we're brewers -- and we have nothing to do with any media -- be they scoundrels or not," Tlekhurai said.

"It is very bitter and disappointing for us to hear these things. We don't deserve these words. We categorically refused to participate in the program knowing that the problems wouldn't be resolved through the media," he added.

"The fact in this case is that [the Belarussian government] promised a controlling stake to Baltika before the new year. The brewery began to perform the conditions of the agreement, while the Belarussian side did not," Nikolai Kartozia, the chief editor of "Namedni," said in an e-mail interview Tuesday.

Baltika is now seeking a "peaceful" split with Minsk, but the possibility of pursuing the matter through the courts has not been ruled out, Tlekhurai said.

Belarussian officials were quick to spin their leader's remarks.

Vladimir Divin, the head of a state property department that manages the Belarussian government's 90 percent stake in Krinitsa, suggested that the president's words had been misinterpreted.

"The media blow these things up and spoil relations as a result. As if we don't have any problems other than beer ... it's not such a strategic enterprise to be worth writing about. The problem will be solved in a civilized way," he said by telephone from Minsk.

"I don't want to comment on the president's words, but I think it is impossible to be as categorical as this at present. Our relations haven't been spoiled, we are working with [Baltika]," he said.

Deputy Prime Minister Alexander Popkov said that Bolloyev had been invited to meet with Lukashenko next Tuesday to discuss the deal and expressed hope that he still would. "I do not think that this will result in the breaking off our relationship," Interfax quoted Popkov as saying.

If the deal had gone ahead, it would have given Baltika, which controls about 22 percent of the Russian beer market, its first production unit abroad.

The whole affair had industry analysts and players both in Russia and Belarus scratching their heads as to why Baltika would do business with Lukashenko.

"We have a situation where the agreements proposed by the president of Belarus aren't carried out," said Vyacheslav Mamontov, head of Russia's Brewers' Union. "In a situation where the president approves business deals in his country, this should act as a guarantee against certain risks."

"[Baltika] came here in vain. There's no way that Lukashenko will let such a tasty morsel out of his grasp. There's no money in the republic, and suddenly they get Baltika's $10 million," Alexander Yegorov, an economist and columnist with the Belarussky Chas newspaper, said by telephone.

"Lukashenko is very worried about losing control, the one-man control that he exercises in all aspects of the country's life, especially its economic life," he said. "Any independent economic subject in the country is very dangerous for the present vertical power structure."

Yegorov said that, considering the experience of U.S. auto giant Ford, it is a wonder that Baltika ever thought that a promise from Lukashenko meant something. "Ford set up a joint venture in 1996 to produce vans and Escorts at a $20 million plant. Not the government but the president promised tax benefits for several years ahead, jobs were created, the agreements were signed. It ended with Ford leaving -- they were also accused of being scoundrels, the president's favorite word. It is the pathological hatred of the powers that be for the Western market model."

"[Belarus] needs an investor that will come and work in the country," said Alexei Krivoshapko, consumer goods analyst at United Financial Group. "Lukashenko will have trouble working with anyone at all if he carries on like this," he said. "The market has great potential, but at the same time the risks are huge. Now we see evidence of this. ... It would have been simpler not to get involved at all."