British MPs have urged the government to halt the Belarusian regime’s access to finance through the London Stock Exchange, openDemocracy can report today.

Belarus and its dictator Alyaksandr Lukashenka are facing fresh sanctions after journalist Raman Pratasevich was taken off a diverted Ryanair plane by law enforcement in Minsk, leading to calls for the British government to curb Belarus’ ability to raise money in London.

Last June, the London Stock Exchange (LSE) “welcomed” the listing of Belarusian sovereign bonds worth $1.25bn (£800m).

Announcing the move, LSE said “Belarus is keen to improve its ESG [Economic, Corporate and Social Governance] credentials.” But at the time, opposition activists in Belarus were being harassed and imprisoned.

Former Labour shadow chancellor John McDonnell said that: “Immediate action is needed from the government to halt Belarus using the London Stock Exchange as part of the sanctions to be introduced to secure the release of Raman Pratasevich.”

McDonnell told openDemocracy that there needs to be “a more thoroughgoing review of the regulation of the UK’s finance sector to address the role of the City in money laundering and handling dirty money”.

Conservative MP and chair of the foreign affairs select committee Tom Tugendhat said: “Belarus’ dictators aren’t acting in isolation. Their allies in Moscow help them militarily but sadly too many others allow them to survive financially.

“So much of the money flows through democratic states. We should expose this corruption and reveal the regime for what it is.”

SNP foreign affairs spokesperson, Alyn Smith MP, said that “any discussion of sanctions against Belarus must include hitting financial assets and closing down loopholes they have been exploiting.”

An expert in Eurasian politics and finance told openDemocracy it is “cheaper and easier for dictators” to borrow from Western private capital markets “than it ever has been before”.

“Countries can often borrow at a cheaper rate, in terms of political and dollar costs, in the west than they would receive from China or Russia,” said Maximilian Hess, from the Foreign Policy Research Institute think tank.

The EU introduced new sanctions on Belarus on Monday, after a Ryanair plane flying from Athens to Vilnius, Lithuania, was forcibly diverted over Belarusian air space, landing in Minsk, the country’s capital. Two passengers, journalist Pratasevich and his girlfriend Sofia Sapega, were taken off the plane and arrested before the flight continued.

Pratasevich is a co-founder of opposition news channel NEXTA, which became a prominent source of news in the aftermath of Belarus’ contested 2020 presidential election.

At least three demonstrators were killed in the aftermath of the election in August last year, with 6,700 people detained, and hundreds, if not thousands, of people deliberately tortured or injured by the police. Ensuing criminal investigations have followed many participants of the protest wave, forcing them to leave their country and seek new lives outside the country, which has been ruled by Lukashenka since 1994.

The US, the EU, the UK and Canada have refused to recognise the election results and have imposed sanctions on the Belarusian leadership, including Lukashenka, for human rights violations and election tampering.

Late on Monday night, a video of Pratasevich in Belarusian custody was released, where he stated that he had confessed to charges of organising “mass riots” in connection with the country’s protest movement, and that he had been treated fairly by law enforcement. Reacting to the video, Pratasevich’s father said that “it’s not his words, it’s not his intonation of speech. He is acting very reserved and you can see he is nervous,” and suggested his son had been subjected to violence.

The ‘dictator premium’

In a first-time listing in London, Belarus’ Finance Ministry issued two sovereign eurobonds on the London Stock Exchange for a total of $1.25bn in late June 2020.

“This successful bond listing is a testament to the high level of investor demand in the Belarusian story,” said LSE’s Ayuna Nechaeva at the time. “It has strong potential to open up the gateway to further equity and debt listings from Belarus on the London Stock Exchange.”

The transaction was managed by US financial services firm Citigroup, Austria’s Raiffeisen Bank, Russian private investment bank Renaissance Capital and French investment group Société Générale.

“Belarus listed these bonds because it’s a country that is strapped for international capital, and needs the ability to go and raise it from a diverse set of issuers,” said Hess.

Stock markets such as London have “effectively reduced the ‘dictator premium” by failing to impose restrictions on states such as Belarus, he noted.

“Western regulations and market structures do not impose political costs or implement political hurdles to borrowing on western capital markets because we’ve chosen not to impose them,” Hess said.

“The West’s bond market-driven responses to the 2008 financial crisis, the Eurozone financial crisis, and now the COVID crisis, particularly through quantitative easing, has lowered private market borrowing costs for everybody, including for emerging market countries.”

When asked about Belarus’ London listing in March 2021, the UK Foreign, Commonwealth and Development Office said it was “committed to supporting investment into the Belarusian economy where it supports the Belarusian people”, but that “controls on the UK financial markets and institutions falls within the mandate of the Financial Conduct Authority”.

The Belarusian bonds are held by international financial institutions such as HSBC, French-based Amundi and American firms BlackRock and PIMCO, according to filings. According to the Belarusian Ministry of Finance's original bond prospectus, “none of the proceeds of the issue [...] will be used to fund activities or persons in violation of sanctions introduced by the EU, UK or the United States.”

A UK-based Belarusian pro-democracy group, Nadzeya, has called on investors to reconsider their investment.

“We would call on those institutions which hold these bonds to urgently look at their ethical investment policies and ask whether they and their customers are comfortable with holding assets issued by a regime involved in systematic oppression and torture of peaceful protesters in Belarus,” a spokesperson for Nadzeya told the i.

The London Stock Exchange acknowledged openDemocracy’s request for comment.

Update 26 May: This article has been updated to reflect the Belarusian Ministry of Finance's original bond prospectus, which states that proceeds may not be used for sanctioned activities.