BELARUS: REGIME CRYING OVER SPILT MILK AS SPAT WITH MOSCOW

UNCLAS SECTION 01 OF 02 MINSK 000173

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PINR BO RS
SUBJECT: BELARUS: REGIME CRYING OVER SPILT MILK AS SPAT WITH MOSCOW
WIDENS

MINSK 00000173 001.2 OF 002


Summary
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1. (SBU) While there is no break between the countries, a
Russian block on Belarusian dairy exports is just the latest
manifestation of a vitriolic conflict between Minsk and Moscow
as traditional Kremlin disdain for President Lukashenka (and the
formerly-vaunted "Belarusian economic miracle") reaches higher
levels. Growing GOB panic about the consequences of the global
financial crisis plays a factor in negative reactions to Russian
comments about the weaknesses of the Belarusian economy. The
dispute has political antecedents as well, including the
continued Belarusian non-recognition of South Ossetia and
Abkhazia. End summary.

Ratcheted Rhetoric...
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2. (SBU) While there are other reasons for differences of
opinion, including Lukashenka's now-dead ambition to become the
President of a true Russian-Belarusian union, the move by Russia
to raise the price of natural gas and crude oil for Belarus in
2007 is generally cited as the beginning of the current spat.
The Belarusians had cashed in the profits for grandiose projects
for years and crowed about a more successful economic model than
Russia or other neighbors had.


3. (SBU) Recent competing public comments between Minsk and
Moscow have a petty "he-said-she-said" quality about them, as
well as roots in past differences of opinion, but some of them
bear mentioning. During the Union State Ministerial Meeting in
Minsk May 28, Russian Finance Minister Aleksey Kudrin stated
that Belarus may soon be unable to service its skyrocketing
foreign debt and become insolvent due to shortage of gold and
foreign currency reserves. According to Kudrin, the Russian
government would continue to issue loans to the GOB if the
latter makes "adequate efforts" to balance and stabilize the
economic situation and ensure "financial solvency and
stability". Kudrin also stressed that the GOB refused to accept
the $500 million tranche of the $2 billion stabilization loan in
Russian rubles. Russian Prime Minister Vladimir Putin initially
mitigated Kudrin's assessment, downplaying "extreme" evaluations
of Belarus economy.


4. (SBU) In his turn, Lukashenka accused Kudrin of inciting
"panic" and advised GOB officials against "begging" Russia for
any further assistance. Belarus Finance Minister Andrey
Kharkovets called Kudrin's remarks "superficial" and "biased."
Russian President Dmitriy Medvedev chimed in June 3 on
Lukashenka's criticism, calling his harsh statements
"unacceptable" and expressing expectation for Russia's "closest
partners to share" common positions. Medvedev emphasized
Russia's "right to comment on the efficiency of policies" of the
countries financially supported by Russia. Meanwhile,
Belarusian Prime Minister Sergey Sidorskiy labeled Kudrin "a
storekeeper" and asserted that the GOB had been "investing"
Russian loans "in an efficient economy" and energy-saving
projects. Kudrin asserted that his assessment was "justified,"
while committing to pursuing negotiations with the GOB on
further loans for Belarus.


5. (SBU) Neutral observers agree that Kudrin, for his part, did
no more than speak the truth: as reported previously, the
effects of the effects of the global financial crisis are
deepening in Belarus. The GOB now turns off all street lights
at midnight and reports of layoffs at state enterprises -- still
over 70% of the economy -- are growing. Although the regime
seems to have complied with the latest IMF call for further
devaluation of about 5% -- accomplished gradually -- and will
likely get the next tranche of $400 million from the IMF soon,
the National Bank is hoping that a significant new credit of $5
billion or more will magically appear.

...Leads to Specific Action
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6. (SBU) As a more concrete step, Russian Federal Consumer
Protection Service head Gennadiy Onishchenko banned the
importation of some Belarusian dairy products June 6, citing
quality concerns. This is a tried-and-true tactic (which the
Belarusians have used on occasion as well),but the impact is
just beginning to be absorbed by official Minsk: production in
this area has virtually no other export markets and by some
accounts is valued in the billions of U.S. dollars on an annual
basis.

GOB Avoids Recognition of Abkhazia, South Ossetia
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7. (SBU) We defer to Embassy Moscow to determine how important
recognition of Abkhazia and South Ossetia is to the Kremlin. It

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is evident here that having been warned by the USG and EU, the
GOB is loath to embark on such a step (although the right amount
of Russian money would alleviate that reluctance). Instead, the
regime has embarked upon extensive political kabuki with regard
to see what it can get or what it would lose. Although
Lukashenka has met with the territories' "presidents" on more
than one occasion since the August 2008 conflict, he has "asked"
the rubber-stamp Belarusian parliament to consider the issue.
(Comment: Without success, we have looked for evidence that
Lukashenka has ever previously relied on the parliament's
guidance when addressing any key issue. End comment.)


8. (SBU) It seems plausible that Minsk will try some
semi-official step, such as the opening of a trade office(s);
Head of the Presidential Administration (PA) Vladimir Makey told
Charge May 22 that the reason for his May 12-13 visit to
Abkhazia was "purely economic." Makey, who is the rough
equivalent of vice president and consigliere to Lukashenka,
noted that Abkhazia would need trucks and tractors -- "even if
it becomes part of Georgia again" -- and claimed that Abkhazia
offered the best gravel (!) for Belarusian construction projects
tied to the 2014 Olympic games in Sochi, Russia.


9. (SBU) At the same time, Makey previewed with the Charge a
gesture he planned to make in the Georgians' favor: although
since becoming PA head in 2008 he has never attended diplomatic
receptions, he appeared at the Georgians' national day reception
in Minsk May 26 to deliver a personal message of congratulations
to the Georgian Ambassador from Lukashenka. Makey's appearance
surprised the EU diplomats present, and was matched by
participation of Deputy Foreign Minister Andrey Yevdochenko and
parliamentarians including International Relations Committee
Chair Sergey Maskevich. In contrast, Makey skipped the
Italians' June 2 reception -- despite Lukashenka's recent visit
to Rome -- and is not expected to appear at the Russians' event
June 12.

Comment
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10. (SBU) Because of near-total dependence on Russian energy
supplies, and a largely integrated military, Belarus does not
want and cannot sustain a complete economic or political break
with its largest neighbor: a visit of Russian President
Medvedev, allegedly in the works for July 2-3, is further
evidence of that. It is worth noting that despite Minsk's
interest in a "multi-vector" foreign policy, problems with
Moscow have failed to motivate any positive reforms as sought by
the U.S. and EU: the GOB is exercising some restraint in dealing
with civil society but has avoided creating any new political
opportunities, and talk of privatization has not yielded any
results. Given its economic problems, the GOB continues to be
interested in the removal of U.S. sanctions as well as in
augmented dialogue with the USG. Whatever the situation with
Russia, those interests offer some hope for improved relations
between Minsk and Washington.
MOORE