ROYAL Bank of Scotland has cut ties with the government of Belarus after it came under mounting criticism for its role in £1 billion fundraising deals for the oppressive Eastern European state.
The bank, which is more than 80% owned by the British taxpayer, worked as part of a consortium to sell Belarussian government bonds on the capital markets to raise money for the beleaguered state amid its deteriorating democratic and human rights situation.
RBS refused to say how much it earned in fees from the deals but has now announced it will stop doing business with the country. The decision comes after mounting pressure from campaign groups, which claimed that the Edinburgh-based bank was propping up “Europe’s last dictator” by raising capital for President Alexander Lukashenko’s authoritarian regime.
These deals were signed during a period when President Lukashenko came under increasing global condemnation following the arrest of hundreds of pro-democracy campaigners around the time of December’s disputed elections. Widespread allegations of torture followed.
Individual sanctions have been issued by the European Union and the United States against President Lukashenko and hundreds of his lieutenants.
The bank announced its split with Belarus yesterday following a “tense” meeting with Free Belarus Now and Index on Censorship.
A spokesman for the bank said: “Given sanctions, the deteriorating political situation in Belarus and the fact that it has reneged on key elements of the IMF pro-gramme, RBS has ceased any type of capital raising for or on behalf of the Belarus Republic and we have no plans to change that position until these issues have been resolved. In assessing where we do business, we have a responsibility to consider a number of factors, including social and ethical issues and compliance with the letter and spirit of all inter-national sanctions.”
Mike Harris, head of advocacy at Index on Censorship, who attended a meeting last week at RBS with Free Belarus Now representatives Natalia Koliada and Professor Alan Flowers -- a leading scientist expelled from Belarus -- welcomed the decision. Mr Harris said: “We’re delighted that RBS has heeded our calls to stop acting as a broker for authoritarian President Lukashenko. This couldn’t come at a more crucial time. The Government of Belarus needs nearly $1bn (£600m) a month in foreign capital. RBS has sent a clear signal not to risk investing in a regime that violates fundamental human rights and may not last.”
The controversy follows the move by RBS, as part of a consortium that included BNP Paribas and Deutsche Bank, to enter negotiations with Belarus as it struggled amid the global downturn given its failing housebuilding sector, loss of manufacturing, rising public sector wages and the escalating cost of oil.
The IMF pinpointed “serious vulnerabilities” in the state’s financial health and urged the country to raise funds with the help of third parties.
The consortium entered three separate deals, worth a total of £1.1bn, between July 2010 and July 2011, to sell government bonds on the stock markets, with the banks underwriting the high-interest deals. A spokesman for RBS said that the bank had not directly lent any money to the state of Belarus.
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