BELARUS: OFFICIALS DOWNPLAY SANCTIONS IMPACT

UNCLAS SECTION 01 OF 02 VILNIUS 000408 AMEMBASSY MINSK SENDS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL PGOV PHUM SOCI BO SUBJECT: BELARUS: OFFICIALS DOWNPLAY SANCTIONS IMPACT Summary -------------- ¶1. (U) A number of GOB officials commented in the media on the May 15 designation of three Belarusian firms by the U.S. Treasury Department, dismissing any significant impact. They claimed that subsidiaries of the Belarusian energy conglomerate "Belneftekhim" had already converted financial transactions from U.S. dollars to Euros and taken steps to diversify their exports. A Belneftekhim representative did not disclose any concrete measures to alleviate losses saying he was afraid "countermeasures could follow". The superficially assertive tone of the officials hinted that even if the sanctions were not a critical blow at the regime, they caused certain inconveniences while the GOB continues to avoid taking democratic and market reforms. End summary. MFA Claims The USG Ignores Lukashenko -------------- ¶2. (U) MFA Spokesperson Andrey Popov disingenuously reproached the USG over most recent U.S. Treasury sanctions clarification in a May 16 statement saying that the USG had disregarded Lukashenko's remarks of "unambiguous" stance favoring "mutually equal and respectful dialogue" in order to "normalize" bilateral relations. Popov emphasized this clarification was "nothing new" and expressed no doubt the repressive sanctions targeted common Belarusians and interests of the designated companies' employees. According to the spokesperson, even "non-experts" now understand "what is actually behind the U.S. declarations", and the USG steps clearly indicate "who works in positive terms and who is after the negative". Sanctions Jeopardize Investment Image -------------- ¶3. (U) National Bank Chairperson Pyotr Prokopovich said at a press conference on May 15 that the economic sanctions "damage the image of Belarus" and entail "restraints" for monetary inflow from "potential Western investors". He also noted Belarus' image deteriorated only in the eyes of those who remain unaware of current prospects in Belarus and lack accurate information about its economy while foreign companies already in the market continue to expand their investments. According to Prokopovich, Belarus is interested in "accelerating" the level of foreign investment and called it "a mutual interest" citing the fact that the Western companies enjoy "money surplus" and can provide their resources to Belarus. The sanctions "scare them off", he added, and maintained Belarus does not welcome "investment-deterring" elements. GOB Pledges To Further Diversify Exports -------------- ¶4. (U) While no GOB official has overtly spoken about a scale of losses in monetary terms, First Deputy Prime Minister Vladimir Semashko reiterated on May 16 that the sanctions would "insignificantly" effect operations of the designated enterprises. However, he pointed to possible complications unless the enterprises "diversified" their export markets "to a greater extent". Semashko stressed the U.S. was not the only importer of Belneftekhim subsidiaries' manufactured products, and that the GOB had already taken "preventative" steps to alleviate sanctions' impact and burden on the companies. ¶5. (U) According to Semashko, Polotsk Steklovolokno (PS) reported the largest exports out of the three designated companies. Deputy PS CEO Sergey Svershchov informed the media that the enterprise exports reached USD 5 million or 4.5 percent of total exports in ¶2007. Svershchov also maintained the PS sold out all the stocks from their U.S. customs warehouses. He said it was "wrong" to punish them and they felt "offended". The PS management committed to continue regular operations, but acknowledged they would have to "put a lot of effort" to minimize the losses following export markets diversification. Svershchov was reluctant to disclose any details, so "no countermeasures could follow". He called the sanctions "politically motivated" and expressed hope the politicians would come to a compromise. He also added they "naturally understand" why the U.S. introduced the sanctions, but "had no clue" why it was done against their enterprise. ¶6. (U) An unnamed source at the Energy Ministry echoed Semashko's statement, saying the sanctions would not "seriously effect" the Belneftekhim subsidiaries. The source stated the Belarusian Oil Trade House (BOTH) as well as other companies changed all the foreign transactions to Euros. Moreover, BOTH had introduced an electronic trading platform for oil and chemical products sales. The Ministry representative asserted that "no U.S. sanctions could affect Internet trading". On May 20, Belneftekhim Deputy Chairperson Mikhail Osipenko also endorsed to Semashko's assertion and confirmed the company had already transferred its financial operations from U.S. dollars to euros and taken measures to diversify export markets. Osipenko firmly dismissed speculations about significant damages inflicted by the sanctions and claimed VILNIUS 00000408 002 OF 002 they were "absolutely marginal". Chief Ideology Officer Blames Opposition -------------- ¶7. (U) When approached by media, newly appointed Head of the Presidential Administration's Chief Ideology Department Vsevolod Yanchevskiy refused to comment on the sanctions. He referred to Lukashenko, who "never wastes his words", that Belarus would "survive" the sanctions and "life would go on". Yanchevskiy underlined "with sadness" that the opposition as he expected did not "picket American Embassy to protest the sanctions", which he believed would "cause repercussions" for common Belarusian residents. He also denied commenting on independent analysts' estimates the GOB would lose USD 600-700 million on blocked foreign bank accounts belonging to the Belneftekhim. Comment -------------- ¶8. (SBU) Dismissive public statements by GOB officials echo other indications we have received privately. Most Belarusians interpreted the March 6 clarification of U.S. sanctions by the Treasury Department's Office of Foreign Assets Control as affecting all Belneftekhim companies. In that context, designating three of about an estimated 80 Belneftekhim subsidiaries is a source of annoyance for the regime -- and serves to emphasize continued U.S. interest in human rights in Belarus -- but is not interpreted as a stark expansion of sanctions. MOORE CLOUD