ACTIVIST ACQUITTED AS GOB DIVIDES AND CONQUERS

C O N F I D E N T I A L SECTION 01 OF 02 MINSK 000013

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/09/2018
TAGS: ECON PGOV PINR BO
SUBJECT: ACTIVIST ACQUITTED AS GOB DIVIDES AND CONQUERS
ENTREPRENEURS

REF: 07 MINSK 1011

Classified By: Charge Jonathan Moore for reason 1.4 (d).

Summary
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1. (C) A court found for a pro-democracy activist on January
8, signaling last minute rearrangements in how authorities
will respond to a planned January 10 protest. Potentially
hundreds of market vendors affected by Presidential Order 760
could turn out, in part motivated by offensive remarks by
Lukashenko. Meanwhile, up to half of vendor stalls remain
closed, a few as part of a solidarity strike, some for
vacation and many because the new regulation makes business
unprofitable for sole proprietors. Leaders of the strike and
the demonstration demand dialogue with senior GOB officials
and the cancellation of restrictions on hiring by sole
proprietors. The GOB may choose to sit out the protests, as
skepticism over the possibility of a favorable solution means
many entrepreneurs will change their business practices
rather than take part in politics. Unless a compromise
allows sole proprietors to stay in business, the Presidential
Order will likely increase inflation and unofficial
unemployment. End summa
ry.

Demonstration Organizer Acquitted
--------------


2. (C) On January 8, authorities in Borisov, Minsk oblast,
arrested the leader of the organization "For the Free
Development of Entrepreneurship," Viktor Gorbachev, ahead of
a demonstration planned for January 10 on October Square.
(Note: Charge and at least one EU Charge plan to observe the
protest. End note.) Fellow Borisov entrepreneur Mikhail
Vasilyev told Deputy Pol/Econ Chief that police detained
Gorbachev and his family after an unidentified man provoked
an altercation by pushing Gorbachev, his wife and his teenage
son. Somewhat surprisingly, the local court acquitted
Gorbachev on the ensuing charge of petty hooliganism.


3. (C) Aleksandr Makayev, one of those arrested after the
last vendors' demonstration (reftel),believes turnout on
January 10 will easily exceed the several hundred who
attended the December 10 protest. Anatoliy Shumchenko,
leader of the Perspektiva NGO, said knowledge of the action
was high in markets and arrests of organizers would not
significantly dampen attendance. Aleksandr Potupa, the
recently retired Director of the Belarusian Union of
Entrepreneurs, foresaw several arrests, noting competition
between the Ministry of the Interior and the BKGB to
demonstrate their abilities to tamp down dissent.

Lukashenko Makes His Position Clear
--------------


4. (C) On December 29, Lukashenko made remarks to state
media denigrating sole proprietors. Lukashenko said they
paid insufficient taxes, created an atmosphere for criminal
activities and harmed Belarusian producers. Shumchenko said
that these insults would draw many proud business owners to
October Square. Potupa told Pol/Econ Chief that
unfortunately many Belarusians believe old Soviet-style
rhetoric against small business.

Alternate Form of Protest: Is It a Strike or Isn't It?
-------------- --------------


5. (C) Shumchenko announced vendors would close their stalls
the first two weeks in January to protest Presidential Order

760. Press reported anywhere from 40 to 90 percent of stalls
remained shuttered the first week of 2008. However, as
lawyer Sergey Balykin pointed out to Pol/Econ Chief, even
under normal conditions many vendors would not open because
of the difficultly in attracting customers after the New
Year's spending binge. Potupa termed the action a "strike
wrapped up like a vacation." He added that the GOB did not
see the strike as a threat. Erstwhile market shoppers would
make their purchases in large stores that paid more taxes.


6. (C) Shumchenko told Deputy Pol/Econ Chief that most of
those who had shuttered their businesses had not
re-registered and did not consider it profitable to open
under the new law. Those open for business (Shumchenko
estimates 40 percent) complied with Presidential Order 760
one way or another. Some laid off employees. Others
registered their employees as sole proprietors, a scheme that

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deprives owners of legal recourse if a de facto employee
absconds with merchandise.

Leaders of Entrepreneurs Fail in Dialogue with Regime
-------------- --------------


7. (C) A last-ditch effort by representatives of registered
sole proprietors to negotiate with authorities December 26
failed to bring any result. Balykin said civil society
representatives came across as weak. They could not even
come up with written proposals to present to officials.
Shumchenko, however, said authorities were well aware of
entrepreneurs' demand to annul the section of Presidential
Order 760 denying sole proprietors the ability to hire
non-relatives, and at this point only a meeting at the
ministerial level or higher could bring results.

Many Entrepreneurs Hedging their Bets
--------------


8. (C) Balykin estimates affected entrepreneurs in the
country number 40,000-45,000 (the number of valid
registrations for sole proprietorships totals approximately
200,000 but the figure includes many persons who went out of
business). Of those, 11,500 successfully re-registered as
corporations and approximately 5,000 as other forms of legal
entities. With two more months left to register as a
corporation for no fee, Balykin believes many sole
proprietors will re-register at the last minute. Thousands
of others registered their employees as sole proprietors and
will try to maintain the fiction that their employees work
independently, although Balykin doubts such efforts will
succeed in the long run. Even Shumchenko registered a
corporation under his wife's name, according to Balykin,
suggesting a lack of confidence that the government will back
down.


9. (C) Balykin predicts many sole proprietors will work
semi-legally for the rest of 2008, either trying to make
sales door-to-door, or pretending that employees are
relatives (sole proprietors may hire up to three close
relatives). Shumchenko predicted some owners would emigrate
to Russia.

Economic Impact: Further Inflation, Unemployment
-------------- ---


10. (C) Both Balykin and Potupa predicted Presidential Order
760 would add to inflation, with consumers having to make
purchases at stores with higher prices. However, neither
thought the population at large would attach blame to
Lukashenko's Presidential Order. Balykin noted prices had
been rising for the past few months anyway. Potupa suggested
rising energy prices would also cause further inflation in
any case.


11. (C) Potupa also predicted job losses as entrepreneurs
closed up shop and laid off employees. Deputy Economics
Minister Andrey Tur told press January 3 that he expected no
increase in unemployment because most affected business
people operated in Minsk, where job vacancies go unfilled.
Potupa correctly pointed out, however, that most vacant
positions require specialized skills.

Comment: Regime Dominance Through Division
--------------


12. (C) On the one hand, the apparent insistence by the GOB
on following through with Presidential Order 760 creates an
opportunity for the opposition to draw upon a newly
disenchanted group of tens of thousands for support.
Unfortunately, personal animosities between would-be leaders
of the entrepreneurs dilute their strength. We also suspect
that given their business acumen, many sole proprietors
currently in limbo will find a way to stay afloat, which
implies staying clear of overt participation in politics.
MOORE