Cablegate: Belarus Bi-Weekly Pol/Econ Report - February 26, 2009

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INFO RUEHZG/NATO EU COLLECTIVE
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RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
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UNCLAS SECTION 01 OF 04 MINSK 000059

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STATE FOR EUR/UMB (ASHEMA), DRL (DNADEL), AND EUR/ACE (KSALINGER)
EMBASSY KYIV FOR USAID (JRIORDAN AND KMONAGHAN)

E.O. 12958: N/A
TAGS: PGOV PREL PHUM ECON ENRG ETRD BO
SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - FEBRUARY 26, 2009

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1. The following are brief items of interest compiled by Embassy
Minsk.

TABLE OF CONTENTS

Civil Society
-------------
- GOB Crackdown on Polish Minority Sparks Flash Point with EU
- The Aggressive Suppression of Peaceful Demonstrations Returns
- New Election Law But GOB Control of Election Commission Endures
- State Media is Encouraged to Criticize Opposition Candidates

Economy
-------
- Belarus Accepts New Russian Oil Tariff, But Only for Six Months
- Gazprom Now Has 50% of Beltransgaz, But May Want Majority
- IMF Most Likely To Issue Final SBA Tranche in late March
- Belarus Suspends Unilateral WTO Accession Talks

Quote of the Week
-----------------

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Civil Society
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2. GOB Crackdown on the Polish Minority Sparks Flash Point with
EU

During his meeting with Polish Foreign Minister Radoslaw
Sikorski in Kyiv on February 25, President Lukashenka termed the
conflict between Polish minority groups in Belarus a
"misunderstanding" that would be resolved. He stated that there
were no bilateral problems stemming from differences between the
Union of Poles of Belarus (UPB) recognized by the GOB and the
Warsaw-backed UPB. Sikorski said that Lukashenka had agreed to
set up an expert group to study the issue of Belarus' Polish
minority. The meeting came as a European Parliament (EP)
delegation arrived in Minsk on February 25 for a three-day
fact-finding mission. The delegation will meet with GOB
officials, representatives of civil society, and opposition
forces. The mission is expected to issue a report based on its
findings that will be incorporated into an EP resolution on the
human rights situation in Belarus. The report will also include
recommendations on membership of a Belarus' delegation to the
EU-Neighborhood East Parliamentary Assembly Euronest to be
comprised of ten participants with observer status, likely
representing MPs and civil society and opposition parties, a
position the GOB opposes. Anzhelika Borys, Leader of the
Warsaw-backed UPB, was in Brussels and Warsaw recently for a
series of meetings with EP members and the Polish President who
expressed solidarity with the Polish minority in Belarus. Borys
explained that the GOB has sought "to present it as an internal
conflict in order to distract peoples' attention, so that the
issue is not seen in the context of human rights." The
Spokesperson for Catherine Ashton, the EU's High Representative
on foreign policy, expressed EU FMs' concerns about the human
rights situation in Belarus and announced that the EU will
"remain vigilant and continue to raise the issue." In addition,
Ashton condemned police action against the Warsaw-backed union
and what she called "attempts by authorities to impose a new
leadership on the Polish community." Critical statements and
yet another round of confrontation between the official and
unrecognized unions stemmed from the February 17 GOB ruling that
ordered Borys' union to vacate the Polish House in Ivyanets. In
addition, Borys was sentenced February 15 to a $365 fine for
participating in an unsanctioned demonstration in Hrodna on
February 10 in support of Teresa Sobal, the ousted manager of
the Ivyanets Polish House. Borys' three senior associates
received five-day jail sentences for similar charges on February
15. A senior Polish MFA official was quoted on February 19 as
saying that all the 16 Polish Houses in Belarus should be under
control of the Borys' union. Only two of the Polish Houses,
which serve as social and cultural centers, still remain outside
control of the GOB-controlled union.

3. The Aggressive Suppression of Peaceful Demonstrations Returns

After permitting the monthly Solidarity Day demonstrations to
take place this fall (reftel Minsk 024), authorities cracked
down aggressively, manhandling and arresting demonstrators, as

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activists attempted to stage three public protests in February.
Belarus security forces arrested 29 democratic activists
demonstrating in downtown Minsk on February 16 in remembrance of
opposition leaders who disappeared in 1999-2000. Police for the
first time grabbed people as they approached the venue dragged
them off to waiting vans, while others were arrested in the
square a few minutes later. Only two of the several dozen
policemen on site were in uniform. Officers in plainclothes
used force against journalists, blocking photo and video
cameras, and pushing them away from the demonstrators. In a
separate incident on February 14, police broke up a St.
Valentine's Day march staged by the Malady Front and arrested 22
activists, including four legal minors. Young Belarus and
European Belarus civil groups held three rallies at different
venues on February 8 in support of the two Vaukavysk activists,
Mikalay Autukhovich and Uladzimir Asipenka, who have been held
in pretrial detention on terrorism charges since February 8,
2009. Approximately 20 activists from those groups were
detained. On all three days, people detained were eventually
released without charges but many reported being fingerprinted
and recorded on video and complained of suffering bruises and
scratches while in police detention, as well being threatened
verbally.

4. New Election Law But GOB Control of Election Commission
Endures

At a press conference on February 1, Central Election Commission
(CEC) Chairwoman Lidziya Yarmoshyna said that for the April 25
local elections 1,495 territorial election commissions covering
regional, town, and village councils have been established in
Belarus, with a total membership of 11,697. Of those, 51.9
percent were nominated through the collection of voter
signatures, 35.3 percent were nominated by NGOs and political
parties, and 12.8 percent by "workers' collectives." The
requirement that one-third of commissions' membership be
nominated by NGOs and political parties is a new requirement in
the electoral law. However, as it has turned out only 105
persons or 0.9 percent of the total territorial commission
members are affiliated with political parties; and of these only
15 represent opposition parties, including nine with the
Spravedlivy Mir Belarusian Party of the Left, four with the
United Civic Party, and two with the Belarusian Social
Democratic Party Hramada. There are 4,024 NGO members on the
territorial commission, but the vast majority are associated
with the state-controlled NGOs or associations such as Belaya
Rus, National Youth Union, Women's Union, Veterans' Union,
Federation of Trade Unions and others. Independent observers
concluded that the overwhelming majority of territorial
commission members had served on commissions during previous
elections campaigns in Belarus and described them as
"ideologically" loyal to the regime. At the district level,
there are 367 elections commissions (covering Oblast/Regional
councils and the Minsk city council). The district commissions
have a total of 4,542 members, of whom 43 percent were nominated
by NGOs, mostly GOB-controlled, 18.2 percent by "workers'
collectives," 6.7 percent by political parties; 32.1 percent
sought membership through the collection of signatures. Of the
political party representatives, only 72 come from opposition
parties. The deadline for establishment of precinct-level
electoral commissions is March 7.

5. State Media is Encouraged to Criticize Opposition Candidates

On February 16, CEC Chairwoman Yarmoshyna stated at a workshop
on the role of the media in the election process that state
media have the right to criticize "opposition candidates" during
the election campaign. The First Deputy Head of the
Presidential Administration Natallya Pyatkevich echoed her
remarks, saying that any journalist has the right to hold an
opinion and "report" it. It is up to the journalist to do this
"correctly," she said, arguing that the interest of freedom of
information should be counterbalanced by responsibility on the
part of reporters.

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Economy
-------

6. Belarus Accepts New Russian Oil Tariff, But Only for Six
Months

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Lukashenka issued an edict on February 12 approving the January
27 bilateral agreement on oil imports from Russia. Russian
President Medvedev signed the amendments into law on February
15. According to the new agreement, Belarus will receive 6.3
million tons of Russian oil duty-free in 2010 for internal use;
but additional supplies for refinement and export to any market
other than Russia will be subject to a 100% export duty.
Russian duty-free quota for Belarus may be reduced if Belarus
imposes additional transit duties on Russian oil passing through
Belarus to Europe. Domestic consumption of crude oil for each
year will be adjusted by October 1. While Lukashenka made no
public comments after signing the amendments, some senior GOB
officials have repeatedly argued that the export duty applied to
Russian oil supplies to Belarus violates Russia's commitments
under principles of the Custom Union of Belarus, Russian and
Kazakhstan. Belarus' Deputy Foreign Minister Andrei Yevdochenko
announced on February 16 that Belarus will insist that the
export duty be abolished starting July 1, 2010, when the single
Customs Union is scheduled to become operational. In the
meantime, the GOB is looking for ways maintain the profitability
of the country's two oil refineries, which are facing serious
difficulty in adjusting to terms of the new oil supply agreement
with Russia. IMF has calculated that GOB will lose no less than
$2 billion dollars in revenues since it is no longer able to
pocket the difference between the subsidized oil it use to
receive from Russia, and the refined petroleum products it sold
mainly to Europe at market rates.

7. Gazprom Now Has 50% of Beltransgaz, But May Want Majority

According to media reports, Russia's Gazprom transferred $625
million on February 24 for 12.5% stock in the Beltransgaz
natural gas transportation company, thus increasing its stake in
Beltransgaz to 50%. This was the final tranche under $2.5
billion agreement signed on May 18, 2007. On February 25, the
Russian Ambassador to Belarus Alexander Surikov told the press
that Gazprom is interested in acquiring a controlling stake in
OAO Beltransgaz. "If Gazprom paid for 50% in Beltransgaz, it
definitely wants to have more. What other reason is there to buy
a 50% stake?" he explained. On a separate issue, according to
the First Deputy Director of Beltransgaz Sorokhan, Belarus did
pay for Russian gas delivered in January 2010 under the terms
outlined in the five-year gas supply contract signed with
Gazprom in 2006, that will remove Russian subsidies on gas in
full by 2011. The average import price Belarus paid in 2009 was
$148 per 1,000 cubic meters. In the first quarter of 2010,
Belarus will pay $168, and given the current trends in world
prices, expects the price to go up $4 in the 2nd quarter "unless
we have contract adjustments," the official explained. Belarus
has already been forced to raise natural gas prices for its
industrial consumers by 25% to $217.7 per 1,000 cubic meters.
The country imported a total of 17.6 billion cubic meters of
Russian natural gas in 2009 - 20.4% short of the agreed volume,
but Gazprom, according to Russian Ambassador to Belarus
Alexander Surikov, is not likely to seek compensation from
Belarus for importing less than agreed. At the same time,
Belarus' Deputy Foreign Minister Andrei Yevdochenko stated on
February 16 that Belarus objected to the Gazprom's monopoly of
gas supply within the Belarusian, Russian, and Kazakhstani
Customs Union. Commenting on the wish of the Belarusian
authorities to revise Gazprom's monopoly on gas supplies to
Belarus the Russian Ambassador said that Belarus must respect
the monopoly of Russia's Gazprom on natural gas export. When
Belarusian monopoly exporters supply tractors and trucks to
Russia, "this is considered normal but when a single Russian
exporter supplies natural gas, it is considered wrong," he argued

8. IMF Most Likely To Issue Final SBA Tranche in late March

An IMF staff mission and the GOB have reached an agreement,
subject to approval by the IMF Executive Board at the end of
March, on completion of the fourth and final review of the $3.52
billion Stand-By Arrangement (SBA) with Belarus, the IMF
announced. The final tranche is valued at approximately $700
million under the current SBA. According to the IMF staff
mission statement, "performance under the economic program
supported by the SBA has been good. All end-December
performance criteria and structural benchmarks were met~ The
recent agreement with Russia on the pricing of imported crude
oil, in the absence of any offsetting measures, would widen
significantly the current account deficit and the general
government deficit. The government is taking strong actions to

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contain the effects of the oil price increase on the budget and
the balance of payments, and Fund staff support these measures.
Monetary policy and, more specifically, further tightening of
the limits on lending under government programs would support
the credibility of the exchange rate regime. The current
exchange rate regime remains appropriate~ The authorities made
good progress on the financial sector issues~ The privatization
process has been slower than expected and the authorities need
to step it up to reduce government intervention in the economy
and to attract foreign direct investment. The mission reached
understandings with the authorities on the measures which would
move the privatization process forward~ The authorities
expressed interest in continued cooperation with the IMF after
the expiration of the current program. A possible follow-up
program with the Fund could be considered upon the completion of
the current [15-month] SBA." The estimated external financial
gap that GOB will face in 2010 is $2 billion.

9. Belarus Suspends Unilateral WTO Accession Talks

Belarus Foreign Ministry official, Anton Kudasaw, announced on
February 19 that the WTO will soon take up consideration of the
possibility of Belarus, Kazakhstan and Russia jointly joining
WTO as a single Customs Union. A negotiating team has been
formed to hold consultations with WTO members on the
simultaneous accession of the three countries. "Our side is
suspending unilateral negotiations on accession to the WTO," the
official explained. Negotiations may begin after WTO members
study the explanatory notes for the Customs Union that are
expected to be submitted soon.

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Quote of the Week
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10. Speaking at the seminar for ideology officials of Minsk
region on February 17 the Fist Deputy Head of the Presidential
Administration Natalia Petkevich said:

"Political and economic culture of Belarusians has grown. As a
result, their attitude to life and the world has become more
critical. In this context, ideology methods should change. They
should not be prohibitive. One should act subtler, wiser and
more cunningly~ We need an informal approach. The time of
slogans is gone. We should proceed from life and follow the
needs of people. If they need information, you should give it to
them. Otherwise, they will get it from other sources~ Let the
information originate from ideology services rather than
opposition websites."
SCANLAN

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