SQUEEZING BELARUS, BUT NOT UNTIL IT POPS

1. (C) Summary. Moscow's embrace of Lukashenko before and
immediately after his March 19 reelection has tightened into
a clench. Analysts here agree the GOR has sent a blunt
message to Lukashenko: he needs to move from talk to action
on at least economic integration. Some observers see
Moscow's approach as a sign Putin is "playing the Union State
card" as part of his presidential succession strategy, and
others suggest the Kremlin is pursuing both Union State (as a
maximum benefit) and control over state-owned energy company
Beltransgaz (at a minimum). Other CIS-watchers think Moscow
chiefly wants economic benefits from Belarus, contending that
there is insufficient support in either country for pressing
to make the Union State a reality in the short term. One
experienced CIS observer predicts Russian-Belarusian
relations will remain at an impasse, as Lukashenko draws on
his ample experience in resisting Moscow's pressure. While
the pressure has been stepped up, we expect Putin will take
care to avoid pushing Lukashenko to point of destabilizing
Belarus. In the lead-up to the G-8 summit, there is likely
to remain little common ground between the West and the
Russians on Belarus, since real steps toward democratization
there would introduce risks Moscow is unwilling to accept.
End Summary.

Kremlin Strategy on Belarus


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2. (C) Most observers with whom we have spoken in recent
weeks agree that following the March election, the Russian
government has sought to use its leverage on Lukashenko to
extract significant benefits. Independent Ekho Moskvy
Editor-in-Chief Aleksey Venediktov told us Putin had laid
down a blunt marker for Lukashenko, saying that gas prices
would soon rise to world levels; that Russia wanted to
conclude a comprehensive gas deal; and that Belarus should
expect to become part of the Russian Federation. A unnamed
senior Kremlin official floated the same formula in the press
May 15: "If Belarus wants cheap gas, it should become a part
of Russian territory." Beyond that, official Moscow has been
mum on likely next steps. The Russian MFA has has for some
time been a source only of bland statements about bilateral
relations, reflecting its marginal role in Belarus
policymaking (ref B). Security Council Deputy Secretary
Zubakov and State Duma CIS Committee Chairman Kokoshin have
recently passed over opportunities to comment on developments
in Belarus, while other Russian officials -- notably, Federal
Assembly International Affairs Chairmen Margelov and Kosachev
-- have also kept relatively quiet on that issue. Our
contacts are interpreting the de facto "no comment" line as a
sign the Belarus file has been moved into Putin's office.



3. (U) In the press, a May 12 Kommersant article (entitled
"Lukashenko Is Being Readied For A Hostile Takeover" and
citing unnamed Kremlin insiders) reported the existence of
Presidential orders calling for "exhaustive measures" to put
economic, financial, and trade relations with Belarus on a
market-based footing. Those measures began with Gazprom's
renewed bid for Beltransgaz's pipeline network and its threat
to sharply increase gas prices, the article said. On May 26
the same newspaper reported that Belarusian Prime Minister
Sidorskiy had sent Russian Prime Minister Fradkov a letter
complaining that the foundations of the Union State were
being undermined by Russian policy. Fradkov was "not
hurrying" to respond to Sidorskiy's letter, Kommersant
reported.

Is It A Push for Anschluss...


--------------------------





4. (C) Against that background, some here speculate that
10-year old plans for a Russian-Belarusian Union State may
have a new lease on life as a potential succession vehicle
for Putin. BBC Moscow Bureau Chief Konstantin Eggert told us
he did not discount that Putin's sharp message to Lukashenko
was a sign the Kremlin is "playing the Union State card" as
part of its succession strategy. Eggert said Deputy PM and
Defense Minister Sergey Ivanov had hinted to journalists in
an off-the-record meeting in February that relations with
Belarus would soon undergo a change. Heading the Union State
would offer Putin the "cleanest possible" way to stay in
power after 2008 and consolidate his legacy, Eggert argued.
In that scenario, Gazprom's threats to treble the price of
Russian gas deliveries to Belarus would be intended to force
Lukashenko from power and give the people of Belarus a chance
to express their "free will" (on the assumption they would
approve the Union State). Eggert thought Belarusians would

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in fact favor the Union State by a 60-40 majority, if sops to
Belarusian "sovereignty" were included. The West would be in
a poor position to criticize market pricing or a Union State
endorsed by a free vote of the Belarusian public.



5. (C) Dmitriy Oreshkin, an analyst with the Mercator Group,
agreed that the Kremlin is eager to move forward with the
Union State negotiations. Concluding a Union State treaty,
he pointed out, would solve the "third-term dilemma,"
effectively remove Lukashenko (whom he called an
"embarrassment" to the Kremlin) from power, and thereby
position Russia as the "savior of democracy." The West (or
at least many Europeans), such thinking goes, would even be
grateful to Russia for removing the last dictator in Europe.
But Oreshkin did not believe Lukashenko would give up power
voluntarily, and (unlike Eggert) he thought an overwhelming
majority of Belarusians would strongly resist the Union.



6. (SBU) Center for Political Technologies Director Igor
Bunin suggested the Kremlin is pursuing a "multi-vectored"
approach aiming at a Union State (as a maximum goal) and
control over Beltransgaz (as a minimum). He suggested that
the Kremlin sees the creation of a genuinely functioning
Union State, in which Belarus would fall de facto under the
sovereignty of Russia, as the only alternative to a
pro-Western path of development in Belarus after the next
election. In the near term, Bunin predicted
Russian-Belarusian relations could undergo a period of open
conflict, with Lukashenko dialing up his anti-Russian
rhetoric and Moscow increasing economic pressure, perhaps
even by turning off gas supplies before next January.

...All About Economics...


--------------------------





7. (C) Other analysts told us that for Putin, economic
integration -- including control of Beltransgaz, a single
currency and access to Belarusian state assets -- was highest
on the bilateral agenda. RFE/RL CIS correspondent Vitaliy
Portnikov saw the Kremlin's call for integration as "chiefly
economic," but thought Lukashenko would not ink the Union
State treaty or sign away Beltransgaz's pipelines, since
either move would mean giving up political control. More
likely, Portnikov said, Lukashenko would do everything
possible to extend Union State talks past 2008, at which
point he would expect to have a new negotiating partner in
Russia.



8. (C) Moscow-based opposition leader and former Belarusian
General Valeriy Pavlov said the Kremlin saw Lukashenko, with
some justification, as an impediment to economic integration
and wanted to exchange him for "someone more reliable." Talk
of the Union State, Pavlov maintained, is driven by the force
of inertia. Pavlov supported proposals to trade
Beltransgaz's pipelines for upstream assets or other
concessions. After all, he contended, if Russia redirected
gas transport through the Baltic Sea pipeline, Belarus could
lose revenue and its role as gatekeeper. Given what he
described as broad dislike for Lukashenko and united
opposition leader Milinkevich's lack of charisma, Pavlov put
forward former Presidential candidate Kozulin as the best
possible "compromise candidate" to replace Lukashenko. He
added that Lukashenko had kept Kozulin -- unlike Milinkevich
and Communist Party leader Kolyakin -- in jail because he is
genuinely afraid of the political traction that Kozulin has
with ordinary Belarusians. (Pavlov said he is putting
together a group of Russian human rights advocates to protest
Kozulin's ongoing detention, and asked why the U.S. had not
joined many European countries in condemning the illegal
jailing and calling for Kozulin's release.)



9. (C) Olga Potemkina, Head of European Integration Studies
at the Institute of Europe, said Lukashenko's foreign policy
was unpredictable and interfered with forging stronger
economic ties. Lukashenko was a "bad ally for Russia" who
needed to be "put in his place." Eliminating subsidies to
the Belarusian economy would be the first step in doing that.
Potemkina saw no need for Western help in that effort,
terming U.S. and EU visa restrictions on GOB officials a
"violation of human rights." Potemkina thought there was not
enough support in Russia or Belarus for ratification of the
Union State treaty.

...Or Business As Usual in the CIS?


--------------------------





10. (C) CIS Institute Belarus Section Chief Aleksandr
Fadeyev told us he was not convinced Russia's Belarus policy
had entered a new phase. Two earlier gas rows with Belarus
had occurred, the Union State negotiations have already
dragged on for ten years, and the two countries have still
not reached an agreement even on common citizenship.

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Lukashenko wanted union only on his own terms, Fadeyev said,
and even in Russia there was little taste for genuine union,
since that would bring Lukashenko's entourage to Moscow and
give the odious dictator -- who is popular in the Russian
provinces -- entree into Russian politics. Council on
Foreign and Defense Policy head Sergey Karaganov told a
recent Washington visitor that all talk of a Union State
foundered on the key unresolved issue of what Lukashenko
would do the day after the Union State was formed. Until
that question was resolved, the Union State would not go
forward.



11. (C) CIS watcher Fadeyev acknowledged that raising gas
prices sharply would hurt the Belarusian economy, but the
impact could be undercut, he said, by possible Chinese
credits offered to Lukashenko during a trip to Beijing. In
any case, Lukashenko would be willing to sacrifice Belarusian
GDP for a continued hold on power -- a point on which Fadeyev
and Portnikov agreed. Unlike Russians or Ukrainians, Fadeyev
said, the Belarusian people still enjoy a high degree of
economic equality and tough times would hit everyone equally,
making unrest unlikely. Fadeyev also thought Western
sanctions would not bear fruit since, Lukashenko is already
quite accustomed to being isolated. Nor did Fadeyev believe
local elections this fall would provide further impetus to a
nascent revolutionary spirit in Belarus, as they will be
tightly controlled by the regime.

Comment


--------------------------





12. (C) Despite Putin's well-known personal antipathy to
Lukashenko, Russia supported his reelection this spring to
preclude any possibility of a Belarusian drift out of a
Moscow-centric orbit. With that danger temporarily removed,
the Kremlin has now stepped up the pressure on Lukashenko to
pay up. It is impossible to dismiss out of hand a Union
State succession scenario designed to keep Putin in power
after 2008, but that option would sharply raise the number of
variables the Kremlin would have to keep under control. It
would entail, e.g., convincing Lukashenko to go quietly (or
orchestrating his removal against his will) and organizing
"free and fair" -- and positive -- referenda in both Belarus
and Russia to dilute Western criticism. The
"retaining-power-via-a-Union-State" scenario also implicitly
presumes that Putin in fact wants to remain in office, which
we (and most analysts in Russia) do not assume.



13. (C) Our sense is that pressing for political integration
remains at this time primarily an instrument for eliciting
acquiescence to the maximum possible Russian influence over
the Belarusian economy, above all in the gas sector -- though
well-placed Russian officials and businesmen reportedly see
Belarusian state property (yet to be privatized) as cherries
ripe for picking. Achieving real movement toward political
integration would of course be an historic achievement in
Russian eyes if successful, but Putin would have to worry
that pushing Lukashenko to the wall could initiate an
unpredictable dynamic leading to chaos, anti-Russian
activities, or even the emergence of a Westward-leaning
government. That kind of high-risk undertaking seems
unlikely as Putin heads for the barn.



14. (C) Ideally, the Kremlin would like to squeeze
Lukashenko quietly, beyond the effective range of prying
Western eyes and wagging Western tongues. The GOR has
accordingly resisted a "Belarus" agenda item for G-8
discussion. We expect Moscow to continue to play a double
game, "protecting" Belarus from "outside interference" while
pressing to extract maximum economic concessions, without
creating a power vacuum in Minsk into which Western air could
seep or rush.
BURNS