Identifier
Created
Classification
Origin
05MINSK1177
2005-09-28 10:26:00
CONFIDENTIAL
Embassy Minsk
Cable title:  

Largest Private Bank Offers Foreign Policy Advice

Tags:  ECON EINV PGOV BO 
pdf how-to read a cable
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ZNY CCCCC ZZH
R 281026Z SEP 05
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 3057
INFO RUCNOSC/ORGANIZATION FOR SECURITY COOPERATION IN EUROPE
RUEHVEN/USMISSION USOSCE 0676
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001177 

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E.O. 12958: DECL: 09/27/15
TAGS: ECON EINV PGOV BO
SUBJECT: Largest Private Bank Offers Foreign Policy Advice

Ref: Minsk 1146

C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001177

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E.O. 12958: DECL: 09/27/15
TAGS: ECON EINV PGOV BO
SUBJECT: Largest Private Bank Offers Foreign Policy Advice

Ref: Minsk 1146


1. (SBU) Summary: The chairman of the Austrian holding
company that owns Priorbank, the largest and most
internationally recognized private bank in Belarus,
recently stated his company has been seeking a change in EU
policy vis-Q-vis Belarus. Dr. Herbert Stepic, the Chairman
of Raiffeisen International Bank-Holding AG, told Pol/Econ
Chief the most effective way of promoting political and
economic reform in Belarus is to work with President
Lukashenko, "not to back him into a corner." Stepic said
he will rely on his close contacts in the European
Commission and the Austrian government to help steer the EU
on a new course, particularly when the Austrians take over
the EU presidency in January 2006. End Summary.

Priorbank Recognized For Outstanding Performance
-------------- ---


2. (U) On September 13, The Banker, a prominent
publication of the Financial Times group, gave the 2005
award for best bank in Belarus to Priorbank, the country's
largest private bank. The bank has won the award three
years in a row, and the chairman of the holding company
that owns Priorbank, Austria's Raiffeisen International
Bank-Holding, organized an event on September 14 to
celebrate the bank's success in Belarus. Raiffeisen
Chairman Dr. Stepic told a large crowd of high-ranking GOB
officials, local business leaders, and diplomats that
Priorbank had much to be proud of: profits reached nearly
USD 22 million from January to August; the bank ranks third
among Belarus' banks in terms of capital volume; it has
more than 1,800 employees, 42 branches and outlets, and
approximately 510,000 clients. Raiffeisen has enjoyed
similar success with its banks in other Central and Eastern
European countries.


Raiffeisen Chairman Sees Himself As Goodwill Ambassador
-------------- --------------


3. (U) Stepic stressed throughout his speech that the
proper course for EU countries is to build stronger
economic bridges in Belarus, much like his company has. He
suggested that Belarus has yet to be discussed "positively"

within the EU, and it was part of his company's mission to
change this tendency. Stepic announced that when the
Austrian government takes over the EU presidency in January
2006, he would call upon his good Austrian friend Benito
Ferrero-Walder, the European Commissioner responsible for
Belarus, and upon his close contacts in the Austrian
government to develop a more conciliatory political and
economic relationship with the Lukashenko regime. Stepic
briefly turned his attention to the GOB by noting the
government could do more to create a more attractive
business environment. The Raiffeisen chairman concluded
his public remarks by disclosing that he envisioned himself
as an ambassador between the EU and the GOB, encouraging
both sides to move towards the middle.


4. (SBU) Following his remarks, Stepic told Pol/Econ Chief
he thought it was counterproductive to back President
Lukashenko into a corner, and he noted the EU's policy was
doing just that. He maintained that his vast experience in
the area has led him to the conclusion that strengthening
economic ties and de-emphasizing the negative aspects of an
oppressive regime is a more effective policy for
encouraging political and economic change. He said he was
committed to improving the image of Belarus in EU political
and business circles.

How Does Priorbank Remain Private?
--------------


5. (SBU) Raiffeisen represents the largest shareholder of
Priorbank, controlling 61 percent of the stock, and the
European Bank for Reconstruction and Development (EBRD) is
the second largest shareholder with 14 percent equity.
When asked about Raiffeisen's strategy for preventing the
GOB from expropriating Priorbank (via the Golden Share
policy),Stepic told Pol/Econ Chief the government accepted
Raiffeisen's unconditional term for taking ownership of the
bank - no GOB pressure. Stepic stated Belarus' central
bank chairman accepted the condition and there have been no

MINSK 00001177 002 OF 002


problems to date. (Comment: Post knows that the GOB has
pressured Priorbank to give a loan to at least one company,
and there are rumors of other forced loans. However,
Priorbank has taken all the necessary steps to ensure the
loans are profitable investments.) Later in the
conversation, he conceded Priorbank has had to follow the
central bank's "suggestion" that the bank concentrates its
activities in individual accounts and not in state-owned
entities, but Stepic maintained this arrangement was
mutually profitable for his company and the GOB.


Comment
--------------


6. (SBU) The future appears bright for Priorbank. Without
question, it is an impressive banking institution,
controlled by an impressive Western holding company.
However, part of the bank's success has to do with
Raiffeisen's willingness to play by President Lukashenko's
rules. Raiffeisen Chairman Stepic's unambiguous and public
support for stronger economic and political ties between
Belarus and the EU has certainly earned him brownie points
with the regime. Accordingly, Stepic seemed quite sure of
his company's ability to keep the GOB from interfering too
much in Priorbank's operations. Although he recognized the
efforts of other private banks - such as those of Djem Bank
(reftel) - to keep the regime at arm's length ultimately
failed, Stepic suggested the fate of his bank would be
different.


7. (C) There is probably more to the Raiffeisen-GOB
relationship than Stepic was willing to admit. Rumors
abound that Priorbank may act as the regime's bank to the
outside world and may be involved in handling the personal
accounts of Lukashenko and other regime friends. But so
far there has never been found proof of such activities.

KROL