The moves would increase Russia’s military presence in
Belarus, viewed by Moscow as a buffer between Russia and NATO,
and could unnerve neighbouring members of the Western alliance.

Russia agreed in 2009 to set up a joint air defence system
with Belarus and talks were held before then on establishing an
air base there, but few concrete steps have been taken.

“We have begun considering the plan to create a Russian air
base with fighter jets here,” Shoigu said at a meeting with
Belarusian President Alexander Lukashenko in the capital, Minsk.

“We hope that in 2015 there will be a regiment of warplanes
(in Belarus) which will serve to defend our borders,” Shoigu
said in a portion of the meeting shown on Russian state
television.

Shoigu said the plan is for the first fighter jets to arrive
in Belarus this year. Russian aviation regiments normally
consist of roughly 60 warplanes.

While Russian and NATO officials say armed conflict between
the former Cold War adversaries is all but unthinkable,
relations are strained and former Soviet satellites now in the
Western alliance are particularly wary of the Russian military.

An anti-missile shield the United States is deploying in
Europe together with NATO nations is a chief source of tension.

Shoigu’s remarks coincided with a meeting in Brussels at
which Foreign Minister Sergei Lavrov told NATO that Moscow still
wants guarantees the system would not be used against Russia,
despite a recent decision to scale it back.

Ruslan Pukhov, director of the Moscow defence think-tank
CAST, said the deployment of fighters in Belarus would do little
to increase security and would be seen by Russia’s Western
neighbours “as a display of hostility”.

Russian President Vladimir Putin has been seeking to
strengthen Moscow’s military and economic ties with other former
Soviet republics since he came to power in 2000.

Russia has an air base in Kyrgyzstan, in Central Asia, and
is the most powerful nation in a security alliance of ex-Soviet
states, the Collective Security Treaty Organisation (CSTO).

Russia uses a Soviet-era early-warning radar station in
Belarus and has supplied it with weapons including air defence
missile batteries.

Lukashenko told Shoigu that the West “should understand that
if they look at us will ill intentions, we will react”,
according to Belarusian state news agency Belta.

But he made no specific public comment on Russia’s plans for
the deployment of fighters or a base, and the Foreign Ministry
declined to comment.

Lukashenko’s suppression of dissent has made him a pariah in
the West but he has also been wary of giving Moscow too much
influence on the nation of 10 million.

(Editing by Steve Gutterman and Michael Roddy)

Russia on Friday denied remarks by Belarussian President
Alexander Lukashenko that it had agreed to increase its crude
oil supplies to Minsk, vital for the Belarus economy, and said
that it still intended to cut them next year.

On Thursday, Russian President Vladimir Putin criticised
Ukraine for failing to agree on a deal, in return for cheaper
gas, under which it would lease its pipeline network to Moscow
and the European Union.

Russia, the world’s top energy producer, supplies over a
quarter of Europe’s gas and oil needs. Ukraine ships around two
thirds of Europe’s imports of Siberian gas through pipelines
across its territory, while Belarus is mainly responsible for
oil deliveries

Clashes over energy pricing and pipeline transit with
Ukraine and Belarus have led over the past decade to cuts or
halts in Russian oil and gas supplies to Central and Western
Europe. These have most often happened over the New Year, when
Russia failed to agree on energy supply terms with the two
countries.

The European Union has accused the Kremlin of using its
energy might as a political tool, while Moscow has argued it
wants its neighbours to pay fair prices promptly for energy.

On Friday, Belarussian state news agency BelTA quoted
Lukashenko as saying Russia had agreed to increase oil supplies
next year to 23 million tonnes (460,000 barrels per day) from
21.5 million this year.

“We have really agreed on the supply … We will get the oil
without any issues,” he said.

Moscow was quick to deny the report, insisting it was
offering 18.5 million tonnes, an effective cut in supplies.

“As of today, an agreement on supplies to Belarus in 2013
has not been signed,” Russia’s Energy ministry said in a
statement. “The Russian side’s offer is supplying 18.5 million
tonnes of oil. Supplies in the first quarter of 2013 will be
based on the suggested volume.”

Russian oil is crucial for the economy of Belarus and is
supplied free of Russia’s normally hefty export duties as Moscow
seeks to keep the country within its political orbit.

Belarus has two large oil refineries that process Russian
crude and export gasoline and diesel to the West.

The refining business earns vital hard currency, but Moscow
has occasionally bridled over supply terms, part of a complex
arrangement that also covers pipeline supplies of Russian oil
and gas to Europe via Belarussian pipelines.

Belarus, which suffered from a balance-of-payments crisis in
2011, faces a foreign debt repayment crunch next year when about
$3 billion of its liabilities fall due.

UNCIVILISED DECISION

The stand-off with Belarus comes as Moscow is struggling to
reach a deal with Ukraine over gas deliveries. Ukraine’s
reluctance to strike a deal on its gas transit system led to the
last-minute cancellation of a visit to Moscow by its President
Viktor Yanukovich this week.

Although Moscow has regularly been at odds with both
neighbours, it has never faced a situation of simultaneous cuts
through both countries to Europe.

At the same time tensions between Moscow and the European
Union have risen over economic, political and human rights
issues.

Putin, in Brussels on Friday for a Russian-EU summit, said
it was unacceptable that EU rules were applied retroactively. He
was particularly referring to the Third Energy Package of EU
legislation to create a single energy market and prevent those
that dominate supply from also dominating distribution.

An EU antitrust case against Russia’s gas export monopoly
Gazprom as well as EU attempts to diversify its energy
suppliers away from Russia and legislation to encourage
competition have angered Moscow.

“Of course the EU has the right to take any decisions, but
… we are stunned by the fact that this decision is given
retroactive force,” Putin told reporters in Brussels.

“It is an absolutely uncivilised decision.”

Russia presented the European Commision with new proposals
on the legal status of its gas pipeline infrastructure to
accommodate its export projects in Europe, Energy Minister
Alexander Novak told reporters.

Russia has been seeking exemptions from EU regulation that
would allow it to make full use of pipelines bringing gas to
Europe by routes that skirt around Ukraine.

(Additional reporting by Alexei Anishchuk in Brussels; Writing
by Dmitry Zhdannikov; Editing by Anthony Barker)

The IMF urged the former Soviet republic last month to start
raising interest rates immediately, and avoid overstimulating
its economy, to keep a lid on inflation and maintain stability
after a crisis last year which led to a 65-percent rouble
devaluation.

But Yermakova told Reuters in an interview that the
regulator would prefer to keep the rate unchanged at 30 percent.

“Looking at what we have, looking at the situation on the
foreign exchange market, we think that we will not have to raise
the refinancing rate,” Yermakova said at the bank’s headquarters
in the capital Minsk.

“As for cutting (the rate) we will look at the situation.”

The central bank has cut its benchmark interest rate several
times this year as the economy rebounded from the crisis and
inflation fell, but stopped cutting last month to prevent a run
on the rouble.

The currency weakened from about 8,300 roubles per dollar in
early August to about 8,550 in October and has remained largely
stable since, trading at 8,546 roubles per dollar on Tuesday.

Belarus had planned to achieve economic growth of about 5
percent this year but its gross domestic product grew by just
2.2 percent year-on-year in January-September.

EUROBOND YIELD CEILING

The country, run by President Alexander Lukashenko since
1994 as a government-dominated economy, also faces a tough debt
repayment schedule in early 2013 and has announced plans to
issue a fresh Eurobond worth $500-600 million.

Belarussian officials are running a road show in Hong Kong
and Singapore from Nov. 27 until Nov. 30 to gauge investor
interest in the potential bond, although not actually selling
it.

Yermakova said the central bank, which was also involved in
the preparations, would only support borrowing at an acceptable
yield as the government could also raise money domestically if
needed.

“No more than 7.5 percent,” she said of the yield

Yermakova did not say what the maturity of the new bond
could be. Belarus’ 2015 Eurobond traded with a
yield of 7.8/8.6 percent on Tuesday.

The IMF has said it was not prepared to lend to Belarus
until the government commits to comprehensive reforms, prompting
Lukashenko to accuse the Fund of “playing politics”.
.

(Writing by Andrei Makhovsky and Olzhas Auyezov. Editing by
Jeremy Gaunt.)

The Executive Committee of the Commonwealth of Independent States (CIS), a loose group created as the Soviet Union broke apart in 1991, said earlier this month the summit was due to take place in Turkmenistan on November 2.

“The (new) dates are being confirmed. They are being agreed with all the presidents,” said CIS spokeswoman Vera Yakubovskaya. She declined to give any reason for the postponement.

The Kremlin dismissed talk that Putin had been sidelined from foreign trips after government sources told Reuters he was suffering from back trouble that could require surgery.

The sources said the Russian leader’s schedule was being cleared for early November, including the postponement until late December of a trip to India that had been expected soon.

Putin, a judo black belt who is known for stunts that show off his physical prowess throughout his almost 13 years in power, was first seen limping in September when he hosted an Asia-Pacific summit in Russia’s Far East.

Putin’s spokesman said at the time his boss had pulled a leg muscle.

A recent documentary showed him swimming long distances, working out in a gym and eating raw quail eggs and cream cheese for breakfast.

The former KGB officer could rule Russia until May 2024, according to the constitution.

“LIFE BRINGS CHANGES”

Speculation increased when Putin failed to travel to Pakistan for a four-nation summit on Afghanistan this month or to make an expected trip to Turkey. None of these trips had been officially announced by the Kremlin.

“Many dates which the media reported as fixed were in fact not fixed. Life brings changes and it concerns plans for visits. A lot of information has been misinterpreted by the media,” Foreign Ministry spokesman Alexander Lukashevich told reporters.

On Friday Putin sent a video message to participants of a Congress of Compatriots in St. Petersburg, attended by Russians who live abroad.

Putin, who turned 60 this month, made ties with neighboring ex-Soviet states his priority when he returned to the Kremlin in May for a third presidential term.

A decree issued hours after his swearing-in called for closer integration of the ex-Soviet space a “key foreign policy direction” and reiterated plans for a Eurasian Economic Union, based on a Customs Union with Kazakhstan and Belarus.

Putin hosted CIS leaders in the Kremlin a week after his inauguration, making it the first major international event of his new term in office. He traveled to ex-Soviet Belarus before going to Europe.

(Reporting by Gleb Bryanski; editing by Andrew Roche)

The poll for the 110-seat chamber takes place two years after police cracked down on street protests after a presidential election which installed hardline President Alexander Lukashenko for a fourth term in power.

Scores of opposition activists were arrested in the December 2010 unrest and many people, including several candidates who stood against Lukashenko, were handed prison terms.

“Honest people cannot take part in pseudo-elections to a fake parliament,” Anatoly Lebedko, leader of the United Civic Party, said at a weekend rally at which the party announced it was withdrawing its 38 candidates from the election.

“I know I shall not be elected. And that is in no way because people will not vote for me,” said Grigoriy Kostusev, deputy head of the Belarussian People’s Front, which also opted to pull its 31 candidates out of the poll.

The two parties appealed to voters to boycott the ballot which they said could not be considered democratic because opposition activists remained in jail. Human rights agencies say there are about 15 political prisoners in the former Soviet republic.

“Go fishing. Visit your parents. Have some coffee with your friends. Don’t take part in a farce,” Lebedko said.

Authorities reacted sharply to the boycott call. “Those who do not want to take part in the elections and want to disrupt them have shown (by their action) that we need to perfect the law here. We need to make it much stricter. It seems that democracy is not to everybody’s liking,” Lidiya Yermoshina, head of the central election commission, told Belarus 1 television.

Lukashenko, a former Soviet state farm chief described as Europe’s last dictator by the last U.S. administration, has been in power for 18 years. Western monitoring agencies have not judged an election in Belarus free and fair since 1995.

WESTERN SANCTIONS

There is no organized opposition in the parliament, which essentially rubber-stamps Lukashenko’s policy directives, and neither the United Civic Party nor the Belarussian People’s Front are represented. The election is expected to have little impact on the political scene.

Despite U.S. and EU sanctions, which prevent Lukashenko and his inner core of officials travelling to anywhere in the West, the small country of 9.5 million people has managed to weather a currency crisis which drained it of dollars and caused two big devaluations of the national currency.

This was largely thanks to Russia, which provided about $4.5 billion in loans and investments in exchange for access to industrial assets such as pipelines pumping Russian gas to Europe.

Senior opposition figures who have dropped out of sight following the government crackdown include Andrei Sannikov, a former deputy foreign minister, and Vladimir Neklyayev who heads the Tell the Truth movement. Both of them ran against Lukashenko in 2010 and subsequently spent time in jail.

Despite television debates this time among candidates – a novelty in Belarus – election campaigning has been unusually listless, something conceded by the authorities.

“If the candidates were fake, then so was the political campaigning,” election commission secretary Nikolai Lazovik told Reuters. “There has been no effective competition, weakening the intensity of the political struggle,” he said.

Elena, a 34-year-old voter asked for her views on the forthcoming election, said: “Well, in principle I know we have elections … But nobody has come to me to ask for my support.”

Sociologist Oleg Manayev said: “There will be many who say that the elections were not democratic and open. But to expect that the outcome of these elections will be a factor in reviving political activity and bringing people out en masse on the square – that is not realistic.”

(Writing by Richard Balmforth; Editing by Pravin Char)

The European Union has tightened sanctions against Belarus
and withdrew ambassadors from Minsk in February, prompting
concerns that the row would push Minsk back into Russia’s orbit.

But relations have since improved somewhat and some
diplomats returned to the former Soviet public after the Belarus
leader released jailed opposition leader Andrei Sannikov.

Lukashenko, who had earlier ordered his government to soften
its foreign policy message, struck a conciliatory tone during a
speech in parliament in the capital Minsk on Tuesday.

“Yes, we (Belarus and the West) have different views on
certain social issues,” he said. “But these differences should
be overcome through dialogue and negotiations rather than
sanctions and bans.”

“In terms of economics, and politics as well, Belarus and
the European Union are important partners to each other.”

In a jab at Russia, Lukashenko also spoke against
large-scale privatisations – one of the conditions of a
financial bailout package provided by Russia last year.

“Those who hope to make hay on Belarussian privatisation are
wasting their time,” he said.

Under the Russian deal, which has helped Belarus avert
economic collapse, Minsk pledged to sell $2.5 billion worth of
state assets a year for three years. Since then, it has sold its
gas pipeline network to Russia’s Gazprom.

Analysts expect Russian firms to be the main buyers in
future privatisation deals but Lukashenko said Belarus would now
limit asset sales and insist on the protection of employees’
rights at privatised companies.

Lukashenko often maneuvers between Moscow and Brussels, part
of his strategy to play them off against each other to extract
favours from both, according to Western observers.

Russia, which has long subsidised the Belarussian
welfare-state economy with cheap energy supplies, sees Belarus
as a buffer against the West while the EU hopes to promote
economic and political reforms in the nation of 10 million.

(Reporting by Andrei Makhovsky; Writing by Olzhas Auyezov
Editing by Maria Golovnina)

The European Union has introduced travel bans and asset freezes against Lukashenko and a number of Belarussian officials and businessmen in response to the veteran leader’s crackdown on the opposition after his re-election in late 2010.

Signaling Lukashenko’s willingness to repair relations with the West, his office said he had ordered references to “excessively tough response measures” in foreign policy to be removed from his annual address, initially planned for Thursday.

“The (new) date has not been set yet,” Lukashenko’s spokesman Pavel Liogkiy said. “Changes need to be made (to the text).”

Analysts said that by making a point out of the last-minute changes to the text of the speech, Lukashenko, known more as a spontaneous speaker, appeared to be sending a message to the West that he was ready to soften his tone.

The move also comes just a week after one of Lukashenko’s most vocal political opponents, Andrei Sannikov, was pardoned and released from prison.

As tensions escalated in February, the European Union withdrew its envoys from Minsk, highlighting the former Soviet republic’s growing isolation.

Lukashenko usually invites all foreign ambassadors present in the country to parliament for the annual address but diplomats from the 27-member bloc have yet to return to Minsk.

“The fact that the president has ordered to soften the foreign policy message can be regarded as a signal to Brussels that Minsk is ready to become more flexible,” Minsk-based political analyst Alexander Klaskovsky said.

“The delay means Belarus wants to take a pause and see what steps Brussels takes.”

SWINGING BETWEEN MOSCOW AND BRUSSELS

Lukashenko has run Belarus since 1994, tolerating little dissent and relying heavily on Russian economic support to maintain a welfare state with artificially low prices and near-full employment.

He has, however, repeatedly engaged the European Union, building up warmer ties with Brussels at times when Russia turned more assertive – only to backtrack again when his power at home appeared challenged, diplomats say.

According to Lukashenko’s office, the Belarussian leader was also unhappy with privatization plans outlined in the address, seeing them as too aggressive.

The sale of state assets was a key condition of the Russian bailout package that helped Belarus avoid economic collapse after last year’s currency crisis triggered by excessive pre-election spending.

Russia has already used the opportunity to take over Belarus’ gas pipeline network which ships Russian gas to Europe.

The European Union has not yet indicated if it would ease sanctions or at least send back ambassadors in response to Sannikov’s release.

Human rights groups say there are still about 15 political prisoners in Belarus, including another former presidential candidate, Nikolai Statkevich.

Sannikov told Reuters after his release he had been pushed to commit suicide in prison and urged the West to keep up pressure on Minsk until all political prisoners are released.

(Reporting by Andrei Makhovsky; writing by Olzhas Auyezov; editing by Maria Golovnina)

In an interview with Reuters two days after he was released and pardoned by President Alexander Lukashenko, Sannikov, 58, said the government had placed special provocateurs in prison with him who had tried to break his spirit and get him to take his own life.

“The aim of the provocations was to humiliate me, to bring my status in the eyes of the inmates to the lowest possible level,” he said.

“I am sure I was being pushed to end my life… What has happened to me was organized by the most sophisticated sadists who knew the psychology of a prison inmate in general very well and knew what was happening in my soul.”

Sentenced to five years in prison last year for taking part in a protest against Lukashenko’s disputed re-election in 2010, Sannikov said he was moved from one prison to another seven times.

His release could help ease tensions between Minsk and the European Union, which had been lobbying for his freedom and had recalled all its ambassadors from Belarus in February.

Lukashenko pardoned Sannikov after the EU imposed visa bans and asset freezes on government officials and businessmen in the former Soviet republic.

Some of the cellmates Sannikov said he thought were put there just to make his life hell were outcasts, even in the criminal world they inhabited, he said, adding that his treatment amounted to torture.

“Now, I want to rebuild my crushed life,” said Sannikov.

A former deputy foreign minister and presidential candidate, Sannikov called on the government to now release the rest of the political prisoners it was holding.

“The release of political prisoners must definitely be a priority now,” he said. “We do not know what is happening to them.”

Human rights groups say the government is holding around a further 15 people on purely political grounds.

Lukashenko has run Belarus since 1994, tolerating little dissent and maintaining a Soviet-style economic system with artificially low prices, a large public sector and nearly full employment.

The system relies heavily on financial support from Russia, which provides Belarus with cheap energy and other benefits.

Sannikov ran against Lukashenko in the 2010 poll which Western observers criticized as fraudulent. The vote handed Lukashenko, a former Soviet collective farm manager, a fourth term in office.

Sannikov’s wife, a journalist, was also jailed by the authorities. She has already been released.

Sannikov’s 2010 campaign chief Dmitry Bondarenko was released last week.

(Writing by Olzhas Auyezov; Editing by Andrew Osborn)

Sannikov, a former deputy foreign minister and presidential candidate, was sentenced to five years in prison last year for taking part in a protest that followed Lukashenko’s disputed re-election victory in December 2010.

On Saturday, he said he was released from his high-security prison thanks to a presidential pardon, a move that may help calm a diplomatic spat between Minsk and the European Union, which has been lobbying for his freedom.

“This is a result of solidarity, without solidarity there would not have been a decision (by Lukashenko),” Sannikov said by telephone from the city of Vitebsk.

“What I really want to do now is see my family… My (normal) prison term ended last September. Then torture began,” he said.

Sannikov is one of the leading opposition leaders in the tightly run authoritarian nation and his wife, a journalist, was also jailed by the authorities. She had already been released.

The EU had long demanded Sannikov’s release, imposing travel bans and asset freezes on a number of Belarussian officials and businessmen to help secure his freedom.

That pressure triggered a diplomatic row with Minsk in February that led to all of the 27-nation bloc’s ambassadors leaving Belarus.

Sannikov, 58, ran against Lukashenko in the 2010 poll which Western observers criticised as fraudulent. The vote handed Lukashenko, a former Soviet collective farm manager, a fourth term in office.

Sannikov had initially refused to ask Lukashenko for pardon but submitted such a request last December after what he described as threats against his family.

A number of other opposition politicians and activists were detained at the same rally and jailed afterwards, though most have since been released.

Lukashenko has run Belarus since 1994, tolerating little dissent and maintaining a Soviet-style economic system with artificially low prices, a large public sector and nearly full employment.

He has relied largely on financial support from Russia, which provides Belarus with cheap energy and other benefits, seeing it as a buffer between itself and NATO.

Human rights activists say about 15 people are still kept in Belarussian prisons on political grounds.

(Writing by Olzhas Auyezov; Editing by Andrew Osborn)

Sannikov, a former deputy foreign minister and presidential candidate, was sentenced to five years in prison last year for taking part in a mass protest that followed President Alexander Lukashenko’s re-election for a fourth term in December 2010.

The European Union has long urged his release and introduced travel bans and asset freezes against a number of Belarussian officials and businessmen, prompting a diplomatic row with Minsk in February after which all EU ambassadors left Belarus.

In a move that could help avert any further escalation of the conflict, Lukashenko’s government released Sannikov from his high-security prison on Saturday without giving any official explanation as to why he had been released.

“He is at a railway station in (city of) Vitebsk,” Sannikov’s wife Irina Khalip told Reuters. “We are arranging for his return.”

Sannikov’s family said it had not been given any explanation on why he was released. The authorities could not be reached for comment.

Human rights activists say about 15 people are still kept in Belarussian prisons on political grounds.

Sannikov, 58, ran against Lukashenko in the 2010 poll which Western observers criticised as fraudulent, and is one of the leading opposition politicians in the tightly run authoritarian nation.

A number of other opposition politicians and activists were detained at the rally and jailed afterwards, although most have since been released.

Sannikov had initially refused to ask Lukashenko for pardon but submitted such a request last December after what he described as threats against his family.

Lukashenko has run Belarus since 1994, tolerating little dissent and maintaining a Soviet-style economic system with artificially low prices, large public sector and nearly full employment.

He has relied largely on financial support from Russia, which provides Belarus with cheap energy and other benefits, seeing it as a buffer between itself and the NATO.

(Reporting by Andrei Makhovsky; Writing by Olzhas Auyezov Editing by Maria Golovnina)