Identifier
Created
Classification
Origin
07MINSK1032
2007-12-17 15:45:00
CONFIDENTIAL
Embassy Minsk
Cable title:  

PUTIN IN MINSK: MORE OR LESS THAN MEETS THE EYE?

Tags:  EPET PGOV PREL EFIN BO RS 
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VZCZCXRO3713
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSK #1032 3511545
ZNY CCCCC ZZH
P 171545Z DEC 07
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC PRIORITY 6734
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEHVEN/USMISSION USOSCE 1766
RUEHBS/USEU BRUSSELS
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
C O N F I D E N T I A L MINSK 001032 

SIPDIS

SIPDIS
DEPT FOR EB/ESC/IEC GALLOGLY
DOE FOR HARBERT/EKIMOFF/PISCITELLI/TILLER

E.O. 12958: DECL: 12/17/2017
TAGS: EPET PGOV PREL EFIN BO RS
SUBJECT: PUTIN IN MINSK: MORE OR LESS THAN MEETS THE EYE?

REF: A. MINSK 003


B. MINSK 935

C. MINSK 681

Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
-------

C O N F I D E N T I A L MINSK 001032

SIPDIS

SIPDIS
DEPT FOR EB/ESC/IEC GALLOGLY
DOE FOR HARBERT/EKIMOFF/PISCITELLI/TILLER

E.O. 12958: DECL: 12/17/2017
TAGS: EPET PGOV PREL EFIN BO RS
SUBJECT: PUTIN IN MINSK: MORE OR LESS THAN MEETS THE EYE?

REF: A. MINSK 003


B. MINSK 935

C. MINSK 681

Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
--------------


1. (C) After Putin's December 13-14 visit to Minsk, Belarus
appears to have secured attractive loan terms and a lower
than expected gas price increase beginning in January 2008.
Lukashenko did not appear particularly pleased, however,
suggesting that Putin presented unattractive conditions to
the Belarusian dictator behind closed doors. Even if the
loan and relatively low price come to pass with no strings
attached, Lukashenko still faces tough economic choices
ahead. End summary.

Economic Pronouncements Sound Good for Belarus
-------------- -


2. (U) On December 14, Putin told reporters that Russia would
stick to the previously agreed upon formula for gas prices
for Belarus (ref A),which Russian Ambassador Surikov
previously said would result in gas prices of about USD
125/tcm for 2008 (ref B). Gazprom's spokesman December 15
said for the first quarter the company would charge Belarus
USD 119/tcm. Furthermore, Putin finally brought news that
Russia would approve Belarus' request for a loan. While
Surikov earlier suggested Russia would not issue the loan at
below market rates (ref B),a spokesman for the Union State
Council of Ministers said Russia would charge Belarus just
LIBOR plus 0.75% over 15 years, a rate close to what Belarus
requested (ref C),and give Minsk a five-year grace period.

What Did They Talk About for Four Hours?
--------------


3. (C) Yelena Rakova, Economist for the Institute for
Privatization and Management, said that on the surface the
agreement seemed favorable for Belarus. However, she added
that Putin and Lukashenko met for a long time behind closed
doors and that Lukashenko did not look pleased in the press
conference. She also feared the offer of USD 119/tcm price
for the first quarter (as opposed to previous agreements for
a year or more) might presage an increase after Russian
presidential elections. Mises Research Center Director
Yaroslav Romanchuk said there was definitely a hidden
agreement, and both the failure to sign documents on 2008 gas
prices or the credit in Minsk, and the offer of a quarterly
agreement for gas prices mean Moscow wants to make sure Minsk
upholds its side of the as-yet-unknown bargain.

Russia Opts for a Waiting Game
--------------


4. (C) Romanchuk suggested that the relatively modest gas
price increase and the credit, if granted, would represent a
change in Moscow's tack. Whereas before the Kremlin sought
to push Lukashenko toward market reforms, now the GOR hopes
to encourage the GOB and Belarusian businesses to increase
their debt to Russia and Russian banks. Romanchuk said that
Putin did not have a strong enough hand to deal with the
Lukashenko problem now, but was trying to ensure that Russia
could buy its way into Belarus to pressure the dictator by

2011.

Comment: Room to Breathe, but Dependent on Moscow's Oxygen
-------------- --------------


5. (C) Even if there are no hidden economic costs resulting
from Putin and Lukashenko's discussions, and Gazprom will not
raise the proposed USD 119/tcm price after the first quarter,
Belarus still faces difficult challenges. Even after the USD
1.5 billion credit and the scheduled USD 625 million payment
from Gazprom for a further 12.5 percent of Beltransgaz
shares, Belarus will still be out over USD 440 million for
gas payments in 2008. Lukashenko will once again face the
choice of privatizing an attractive firm and ceding some
economic control or risking his popularity by passing on
costs to the population.
STEWART