What is big Russian business looking for in Belarus?

Despite the economic crisis in Belarus, the country still remains attractive for Russian investors. One of them is former governor of Chukotka, billionaire Roman Abramovich. Biocad, where 50% is owned by Abramovich’s MillhouseCapital, is planning take to part in the construction of Nativita pharmaceuticals in Beshenkovichi.

Abramovich is not alone here. The other investors are ZIA Valda of Lithuania, Vitvar of Belarus and Natco Pharma of India. The cost of the project is just $15mn. So, Abramovich can hardly expect any big profits here. The size of the Belorussian pharmaceutical market is estimated at $800mn-900mn, of which $500mn are imports. Preference here is given to state-owned enterprises, with private companies having just a small part of the market. One more problem is that business rules and property forms in Belarus can change in a wink. This has already affected Baltika, Uralkali and many other Russian and western companies. This is why, perhaps, Biocad is has not yet invested any money in Nativita. Abramovich is just putting out feelers to see if things in Belarus have changed or not and if it makes sense to invest money there.

Unlike Abramovich, many other Russian businessmen are more daring in Belarus and are actively enlarging their presence in the “brotherly” republic. Much here depends on President Lukashenko. If he lets a business to enter his country, it will have no problems there.

For example, in Sept 2015 Slavkali, owned by Russian businessman Mikhail Gutseriev, launched a project to build the second biggest potash fertilizer factory in Luban, Belarus. Gutseriev is on good terms with Lukashenko, so, the Belorussian president has given him free hand in Luban. He even promised him to rename Luban into Gutserievsk, if the project proves to be a success. The new factory is expected to give Belarus $860mn in exports. But Lukashenko has one more goal here. He wants to show ordinary people that he cares for them. So, Gutseriev will also have to spend a lot of money on Luban’s social sector. According to the Russian businessman, he is to invest almost $250mn in infrastructure, industry and social facilities.

The investors of the Beshenkovichi project will hardly avoid this “honorable” mission. At least, they will have to support kindergartens, schools and even farms and to build new houses. One more project approved by Lukashenko is a complex to be built by Gazprom in Minsk. By 2019, Gazprom Transgaz Belarus is to build not only the complex but also a hotel, a parking lot, a sports and recreation center, a health center, a power facility and a flyover.

There is one if here. If investors promising to do such things fail to do them, the Belorussian authorities may ask them to leave the country and may nationalize their facilities.

There are lots of proofs that Russian businessmen should not quarrel with the Belorussian authorities. Among them are the cases of Baltika, Uralkali and Igor Makarov. A few years ago Makarov’s company was supposed to become one of the biggest investors in Belarus’s history. Among its projects were the construction of Minsk City business center and Parus residential compound. But later Makarov changed his plans and now is now trying to take his assets out of Belarus. In fact, he has deceived Lukashenko, which means that there is no way for him to get his assets back or to visit Belarus again. Minsk City has already been given to Lukashenko’s new “friends” a Dana Holding from Serbia.

This has not however scared off other Russian businessmen. Last Nov, PonyExpress, a company owned by Oleg Deripaska’s Basic Element, opened a universal visa center in Minsk.

Anatoly Ternavsky and his Univest-M are also thriving. Some time ago the Europeans included Ternavsky and his company in the EU’s sanction list but later they removed them.

Russian businessmen are active in Ostrovets, the site of the first Belorussian nuclear power plant. Now that small town has almost as many foreign offices as Minsk. Here you can see Rosatom’s Atomstroyexport, Alexey Mordashov’s Power Machines, Mosfundamentstroy-6, Dzerzhinskkhimmash, Trest RosSEM, Atomenergoproekt, Energospetsmontazh. This $11bn project is the tastiest cake for potential investors in Belarus.

Last year more than 70 companies opened their offices in Minsk, among them EuroChem, Uralkhim, Russian Agency for Export Credit and Investment Insurance. Russian businessmen are losing interest in construction and real estate and are turning their faces towards production, technologies and logistics. Belarus has lots of highly-qualified IT specialists. So, now that the West has imposed sanctions on Russia, business in Belarus is the only way-out for it.

Pavel Yurintsev