Investors face a classic 'dictator dilemma' in Belarus - hold on to securities that benefit from the status quo in a brutal regime, or sell them and sever their ties - but which way they go may depend largely on Vladimir Putin's Russia.
While an end to Lukashenko's rule could be a long-term benefit for the country, it would also come with the risk of an immediate debt crisis that would hurt major investors. "The question now is what Lukashenko does - does he double down on the use of force, or head to the exits in a helicopter?" Some investors said the upheaval has only added to Belarus's woes. The IMF already forecasts a 6per cent economic slump this year and with more than 90per cent of its international debt in dollars, a currency collapse may open the door to default - especially with US$2.5 billion of bond payments due by the end of the year.
Graphic: Belarus's bonds and currency have been struggling https://fingfx.thomsonreuters.com/gfx/mkt/jznvnkwkypl/Pastedper cent20imageper cent201597395432684.pngUnion Investments' portfolio manager Sergey Dergachev said Russia's reaction was key with"an impact on bond prices and sentiment since it is material for future economic and political trajectory of Belarus."
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