UNION STATE AND JOINT AIR DEFENSE AT A CROSSROADS

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 003581 SIPDIS E.O. 12958: DECL: 12/11/2018 TAGS: PREL PGOV MARR MCAP BO RS SUBJECT: UNION STATE AND JOINT AIR DEFENSE AT A CROSSROADS Classified By: Acting Pol MC David Kostelancik for reasons 1.4 (b) and (d). Summary -------------- ¶1. (C) The Kremlin and Russian White House have provided no details on why the Union State has postponed, for the second time, the State Supreme Council meeting scheduled for December 1. Both sides reported that there is an ongoing dispute over the council's agenda, which will now require a meeting between Presidents Lukashenko and Medvedev to resolve. The Union's parliamentary assembly will meet in Minsk on December 16. Belarus continued to refuse to recognize South Ossetia and Abkhazia and to adopt the Russian ruble as its national currency; however, under the terms of a new loan, it will now use rubles to pay for Russian oil and gas imports. The formal signing of the Belarus-Russia joint air defense agreement has also been postponed, with the GOR saying it is a done deal and commentators pointing to outstanding issues on sovereignty. End summary. Council and Air Defense Agreement Delayed -------------- ¶2. (C) A tight-lipped Kremlin and Russian White House have provided little explanation for the postponement of the December 1 session of the Union State Supreme State Council and state visit of President Lukashenko. Lukashenko had raised expectations for the meeting by telling the AFP on November 24 that Russians and Belarusians are "one people," with some speculating that the two sides had finally come to an agreement on a Constitutional Act for the Union State and a single currency. This is the second delay in the session, originally scheduled for November 3. The delay also postponed the signing of a bilateral air defense agreement. While the date for the next council session has not been announced, the Parliamentary Assembly of the Belarus-Russia Union State will take place December 16 in Minsk. Argument of substance? -------------- ¶3. (C) The two sides generally agree on the formalities of the postponement, but have shared little on the substance. An anonymous Belarusian source told the press that they "suggested expanding the routine agenda," but that Russia countered that this should be done in a closed session, to which Belarus agreed. He continued that Russia changed its mind, attempted to scrap previous agreements, and proposed discussing only routine issues at the Council. On its side, the Kremlin's press service announced that the Belarusian "proposals to alter the coordinated agenda, as well as supplements to the earlier reached agreements" required further serious study for a to-be-scheduled session between the heads of state. Anonymous Russian sources quote PM Putin to say, "substantive discussion of issues" on the Union State are necessary. Federation Council Speaker Sergei Mironov told the press that "as soon as the Presidents of our countries wish to hold such a council, we will organize it." Ongoing Friction -------------- ¶4. (C) Belarus is widely viewed to lack leverage in its relationship with Russia -- a relationship where Russia is regularly doling out cash and providing subsidized oil and gas to its poorer cousin. On November 18, Russia dispersed the first USD 1 billion tranche of a USD 2 billion loan, at an interest rate of the London Interbank Offered Rate (LIBOR) plus 3 percent for a term of fifteen years. The funds are intended to help Belarus pay for its imports of Russian gas and oil and to help it handle the global financial crisis. One of the additional costs to Belarus in securing this year's loan was the commitment to use Russian rubles for all gas and oil imports from Russia -- partially meeting a Russian goal of having the ruble serve as a regional reserve currency. ¶5. (C) Despite this seeming goodwill, Russia resented Belarus's independent streak: the USD 2 billion reserve loan from the IMF, its rejection of the ruble as its national currency, and Lukashenko's refusal to join Russia in recognizing South Ossetia and Abkhazia are among the reasons. The terms of the most recent loan and the ruble payment demand are much steeper than the loan Russia gave to Belarus in 2007 -- LIBOR plus .75 percent for fifteen years. Commentators have also speculated that Russia will soon add trade pressure on Belarus to change its behavior. On November 7, Russia's phyto-sanitary inspection service (Rosselkhoznadzor) announced that it could no longer guarantee the safety of Belarusian agricultural products MOSCOW 00003581 002 OF 002 exported to Russia; a likely first step in banning them. ¶6. (C) Lukashenko has certainly fueled Russian resentment, lending some credence to the rumors of a personal dispute between he and PM Putin. In comments to the press, Lukashenko described the draft Constitutional Act favored by Moscow as "much weaker" than other draft versions, presumably because it reduced Lukashenko's leadership role within the Union State. Lukashenko has also so far resisted pressure for Belarus to recognize South Ossetia and Abkhazia. He told the press "if we make a decision regarding Abkhazia and South Ossetia, it will be our decision. We will not tolerate any pressure in this matter." Bilateral Air Defense Agreement -------------- ¶7. (C) On the agenda for Lukashenko's visit was the official signing of the bilateral air defense agreement, which would unite Russian and Belarusian air defense forces. While publicly, both sides are calling this a done deal, Russian commentators told us that there remain disputes over sovereignty. Deputy Editor-In-Chief of the Independent Military Overview Viktor Litovkin told us that problems arose because Lukashenko does not want to surrender any of Belarus's sovereignty. The joint air defense agreement would provide for unified command and control over the defense of Russian and Belarusian airspace. Most commentators argue that the system's headquarters should be in Moscow. According to Litovkin, Lukashenko does not want the decision of whether or not to shoot down aircraft overflying Belarusian airspace to be made in Moscow. Until Lukashenko is willing to surrender Belarus's sovereignty on this issue, Litovkin argued, the joint air defense system will exist only as an information sharing platform. Comment -------------- ¶8. (C) The development of the Union State continues its shaky progress, heavily influenced by events in the region and the personalities of its leaders. Despite the rhetoric, there is less and less in common between the countries' economic, educational, political, and social systems. The possibility of Belarus recognizing South Ossetia and Abkhazia and their potential membership in the Union State has renewed interest in and press coverage of the Union State. However, Russia is becoming increasingly disenchanted with Lukashenko's independent streak and perceived efforts to play "the West" off against Russia. RUBIN