MINSK Winning a fourth presidential term in a vote marred by the harsh suppression of opposition protests may have been the easy part for Belarus's Alexander Lukashenko.
Bulging external deficits threaten the economic basis of Lukashenko's 16-year-old grip on power, but he won a pre-election reprieve by patching up ties with former colonial master Moscow and winning a sweetheart deal on energy imports.
That means the 56-year-old leader may be able to ride out European criticism of the conduct of Sunday's election, the harsh crackdown on street protests and the detention of rival candidates.
Yet, even if Lukashenko reckons he can get by without the European Union opening its chequebook, he has no choice but to open up Belarus's Soviet-style command economy to sustain his rule.
"It is going to be Lukashenko's toughest five years so far," said Sergei Chaliy, an independent financial analyst in Minsk. "Something must be done because the economy can't go on like this much longer. The question is does he realise that and what is he willing to do?"
Since the 2008 global crisis, Lukashenko has manoeuvred between Russia, the European Union, China and Venezuela, often switching sides to win pledges of investment and financial aid.
He recently persuaded Russia to scrap export duties on oil products, saving $4 billion (2 billion pounds) next year. That would help plug a budget deficit forecast at 3 percent of gross domestic product (GDP). Yet economists are wary.
"Many of the agreements are still just declarations. Nothing has been signed," said Kirill Koktysh, a political analyst at Moscow's State University of Foreign Affairs. "Let's see how all this is implemented. We're talking about Lukashenko after all."
DEFICIT, DEFICIT, DEFICIT
Belarus's economy weathered the global crisis relatively well and the International Monetary Fund estimates GDP will grow by 7.2 percent this year and 6.2 percent in 2011.
The relative outperformance helped Minsk raise $1 billion in its maiden five-year Eurobond in the summer. The bond yields 8.2 percent, little changed from an initial 8.3 percent, but up from 7.7 percent in November, reflecting weaker market sentiment.
Belarus plans to borrow $2.2 billion in 2011, with $1 billion through bond issuance.
While its economic expansion has been driven by state investment, demand for low-tech Belarussian exports remains below pre-crisis levels, especially in the key Russian market.
Ratings agency S&P has a negative credit outlook on Belarus due to its rising external financing needs. The IMF has sounded the alarm on a current account deficit that has reached 14 percent of GDP.
"We remain concerned about the external vulnerability of the Belarusian economy," the IMF said last month.
Lavish pre-election spending to support the economy and hike minimum wages by a third may cost as much as $1 billion per month next year.
The oil deal with Russia will ease the financial burden but, even if fully implemented, the savings fail to address the weaknesses of an economy in desperate need of structural reform to pare back the state's 80 percent share of output.
"What's going on now is just patching holes by shifting money around," said Chaliy.
There is scant western investment in Belarus, strategically located between Russia and the European Union and known for producing foodstuffs, heavy machinery and chemicals.
Privatisation, in addition to foreign borrowing, is the surest way to get cash. Yet Lukashenko has yet to fulfil promises to dispose of state assets on a large scale.
"It's one of the few markets that remains absolutely untapped. It'd be very exciting to create the footprints, to be one of the first to invest," said Michael Kart, managing partner at Marshall Spectrum, a Moscow-based private equity firm.
But he is not ready yet. "What we're interested in is the format of the reforms, in terms of entering the market and investing in the market ... I haven't seen that yet."
The continuity created by Lukashenko's grip on power, however, assures a measure of political stability. That contrasts with neighbouring Ukraine, where political bickering led to a shift of power and losses for some foreign investors.
"Belarus is not Ukraine. The incumbent has too much control," said a London-based fixed income investor after a recent visit to Minsk. "We made an investment. Now, if anything, we are getting more bullish. Belarus has more potential."
(Writing by Lidia Kelly; Editing by Ruth Pitchford)