BELARUS: REGIME DITHERING AS ECONOMIC CRISIS GROWS AND

UNCLAS SECTION 01 OF 02 VILNIUS 001007 SIPDIS SENSITIVE AMEMBASSY MINSK SENDS E.O. 12958: N/A TAGS: EFIN PGOV PREL CASC BO SUBJECT: BELARUS: REGIME DITHERING AS ECONOMIC CRISIS GROWS AND SANCTIONS DEADLINES APPROACH REF: A) VILNIUS 940, B) VILNIUS 941, C) VILNIUS 951 Summary -------------- ¶1. (SBU) Showing precious little understanding of the situation in which Europe's last dictatorship finds itself, the Belarusian regime is making only limited positive political gestures and is in denial regarding the depth of the financial crisis. While the fundamental stability of the Belarusian state is not now in question, there is a serious possibility that growing economic problems will complicate already limited GOB engagement with the U.S. and EU. End summary. Recent Steps -------------- ¶2. (SBU) After the USG suspended some sanctions for six months starting September 4, and the EU took analogous steps mid-October, the GOB announced a few gestures November 20: 1) an offer to work with OSCE/ODIHR on electoral reform; 2) permission to two major independent newspapers, "Narodnaya Volya" and "Nasha Niva" to be printed and distributed in Belarus; and 3) a November 24 roundtable on the media including GOB representatives, the OSCE Office in Minsk, the Belarusian Association of Journalists, and others. ¶3. (SBU) Of these, electoral reform is the most amorphous, with any conceivable result not being clear until the next presidential elections in 2010 or 2011. (Comment: ODIHR's Election Observation Mission released its final report on the September 2008 parliamentary elections November 28, noting a lack of political competition and other "serious concerns", and repeating the initial assessment that they "fell short of OSCE commitments for democratic elections." The existing electoral code, while imperfect, would have been largely sufficient for the September 2008 parliamentary elections if it had been better interpreted and enforced. End comment.) ¶4. (SBU) Distribution of the two newspapers is a welcome development, although many conditions are attached to that: they reportedly include down payments (USD 20,000 just for Narodnaya Volya) to the state distribution network for various preparations although the papers cannot be expected to hit the stands until about two months from now. The OSCE Office in Minsk reports that the media roundtable went well, with the GOB pledging that the internet will remain unrestricted, although the media law condemned by the international community is still on track for implementation in February 2009. Problems at Hand and on the Horizon -------------- ¶5. (SBU) We continue to be deeply concerned at the incarceration of an American citizen whose health is very poor, and our Embassy is still limited to five American staff. Meeting with Charge, Belarusian Presidential Foreign Policy Advisor Valentin Rybakov could only say November 26 that the AMCIT in question, in custody since March 12, "will be released" but gave no date for that event to take place; when asked about the AMCIT's health, Rybakov cynically added "we will be sure he doesn't die." On the subject of diplomatic staff, Rybakov said at the same meeting that restrictions on staff numbers would only be lifted once USG sanctions were ended. ¶6. (SBU) Charge also raised with Rybakov the case of opposition activist Alyaksandr Barazenka (Aleksandr Borozenko),due to be tried December 8. He has already been in custody since October 27 for violating the terms of a previous sentence -- house arrest for his role in a January 2008 entrepreneurs' protest. Should Barazenka be sent to jail for a prolonged period, he will be universally regarded as a political prisoner, the first such case since the releases of the previous political prisoners in August. On the positive side, we have heard hints that more political gestures may be in the offing, such as the registration of former presidential candidate Alyaksandr Milinkevich's "For Freedom" movement. ¶7. (SBU) Meanwhile, the economic news is worse every day: state-owned enterprises are cutting or stopping production, while the National Bank is allowing only minor slippage in the Belarusian ruble (BYR) against the U.S. dollar. The GOB is at pains to avoid public protests over the economy (such as hobbled the first post-independence government in the early 1990s) and is trying to delay the inevitable. National Bank Chair Pyotr Prokopovich, in a one-on-one meeting with Charge November 26, confirmed that the GOB needs USD 6 billion in addition to the USD 2 billion already secured from Russia. He complained that the IMF's conditionality -- including a 20-percent devaluation -- would have a bad effect "on the population" and said that the GOB would try to secure USD 6 billion from Russia if IFIs were not accommodating to Belarus' needs. In an aside, Prokopovich voiced concern about Russian VILNIUS 00001007 002 OF 002 conditions for such a loan, and opined that it would be better for Belarus to have multiple economic partners. ¶8. (SBU) Prokopovich admitted that that public mention of a previously unheard-of exchange rate "corridor" -- between BYR 2,100 and 2,200 to the USD -- was an attempt to recast the devaluation to date. He pledged that a further drop to BYR 2,350:USD 1 could follow January 1, 2009 as a gesture to the IMF (although that would only be about an eleven percent devaluation). Prokopovich, who became quite chummy over the course of the meeting, did not respond when Charge asked if GOB political leaders understood the depth of the economic crisis. Comment -------------- ¶9. (SBU) Professionals in the regime recognize that time is running out, but Lukashenka does not. As the deadlines for resumption of U.S. and EU sanctions approach -- March 4 and mid-April respectively -- and the economic crisis continues to worsen, the GOB may begin to link its ability (or lack thereof) to secure IFI loans to its relations with the West and lash out if they are rejected, or postpone further positive political steps. (Note: We been told that the IMF mission may return in mid-December; we do not expect that their views on conditionality will be different from those of the IMF mission here for several weeks in November. End note.) We would love to share the optimism of some Europeans that after 14 years Lukashenka will at last see the light and embark on concrete reforms. However, we fear that a dictator in denial is no engine for positive change. MOORE CLOUD