BELARUS POL/ECON REPORT - JULY 10, 2009

UNCLAS SECTION 01 OF 03 MINSK 000228 SIPDIS E.O. 12958: N/A TAGS: PGOV PREL PHUM ECON BO SUBJECT: BELARUS POL/ECON REPORT - JULY 10, 2009 MINSK 00000228 001.2 OF 003 ¶1. The following are brief items of interest compiled by Embassy Minsk. TABLE OF CONTENTS Civil Society -------------- - Investigation Against Volkovysk Activists Extended (para. 2) - Jailed Volkovysk Activist's Associate and Employer Detained (para. 3) - Opposition Youth Fined (para. 4) - Opposition Activists Fined (para.5) - Unification Church of Moon Activist Charged (para. 6) - Opposition Activist Fined (para.7) - Opposition Youth Fined (para.8) - Police Confiscate Opposition Communist Newspaper (para.9) - Convicted Malady Front Member Sentenced to a Year in Jail (para.10) Domestic Economy -------------- - Economy Ministry Posts 7.3 Percent Inflation Through June (para. 11) - Belarus' mid-year reserves down 13.5 percent (para. 12) - GOB Approached EU for Financial Support (para. 13) - GOB and European Commission Exchanged Texts of Energy Declaration (para. 14) - IMF Hails the Widening of Exchange Rate Band (para. 15) - IMF Increases Financial Support to Belarus (para. 16) Foreign Trade -------------- - Belarus and Russia at Odds Over Payments for Natural Gas (para. 17) - Putin: Russia to Preserve Trade Preferences for Belarus (para. 18) Quote of the Week (para. 19) -------------- -------------- Civil Society -------------- ¶2. Investigation Against Volkovysk Activists Extended According to their defense lawyer, the period for the investigation into the criminal charges brought against Volkovysk activists Nikolay Avtukhovich, Yuriy Leonov, and Vladimir Osipenko was once again indefinitely extended starting July 3. Avtukhovich, hunger striking in jail since April 16, 2009, is reportedly suffering from ailing health. ¶3. Jailed Volkovysk Activist's Associate and Employer Detained Riot police detained Lyudmila Parenskaya, Nikolay Avtukhovich's employer and small business owner, in Volkovysk on July 7. In a separate incident July 7, law enforcement officers apprehended Avtukhovich's associate Konstantin Ulanov during a raid on his residence in Minsk. Ulanov and Avtukhovich belong to the same Afghan war veterans association, and human rights advocates linked the arrest with the ongoing criminal investigation against Avtukhovich. ¶4. Opposition Youth Fined A Vitebsk district court fined June 22 opposition youth Aleksey Pilevich and Konstantin Ivanov $250 for defying police orders. The two were apprehended before the "Chernobyl March" demonstration on April 26. The youth dismissed the charges and called the fines "illegal". ¶5. Opposition Activists Fined On June 25, a Gomel district court fined four local opposition activists $250 and sentenced "For Freedom" movement coordinator Vladimir Katsora to three days in jail. All were charged with participating May 7 in an unsanctioned demonstration to commemorate the disappearance anniversary of former Interior Minister Yuriy Zakharenko. Katsora announced a hunger strike to protest his confinement. ¶6. Unification Church of Moon Activist Charged Independent media reported June 30 that the Minsk city prosecutor's office opened a criminal case against Unification Church of Moon activist Evgeniy Volkov for allegedly acting on behalf of an unregistered religious organization. Human rights advocates expressed their serious concerns over criminal MINSK 00000228 002.2 OF 003 persecution of members of unregistered religious groups. ¶7. Opposition Activist Fined An Ostrovets town court fined opposition activist Ivan Kruk $250 June 26 for alleged distribution of "illegal printed media". The charged stemmed from Kruk's neighbor reportedly borrowing a few copies of independent publications. ¶8. Opposition Youth Fined A Minsk district court sentenced July 1 "European Belarus" civil campaign activists Maksim Vinyarskiy and Vladimir Kumets to a $125 fine each for posting a political banner. Police apprehended the two June 30 and held them at prison facilities overnight. In a separate incident, campaign activist Maksim Sergiyets was fined June 24 $305 on similar charges. ¶9. Police Confiscate Opposition Communist Newspaper On July 9, police briefly detained two opposition communist party members in Gomel over distribution of their party's newspaper Tovarisch. In two separate incidents July 8, law enforcement officers searched opposition activist Svetlana Mikhalchenko's residence in Svetlogorsk allegedly searching for the same newspaper and seized independent economic publications. Also, they apprehended for three hours another opposition communist Vladimir Zhogla in Kalinkovichy and confiscated 300 copies of the Tovarisch newspaper. ¶10. Convicted Malady Front Member Sentenced to a Year in Jail An Osipovichy regional court sentenced July 7 Malady Front member Artyom Dubskiy, convicted in April 2008 over participating in unsanctioned entrepreneurs demonstrations, to one year in a low security jail for allegedly violating his partial house arrest regulations. Dubskiy, recognized as "a prisoner of conscience" by Amnesty International, fled to Ukraine for political asylum in October 2008 and failed to timely report to the sheriff. Police apprehended him upon arrival to Belarus in February 2009. Dubskiy was taken into custody in the court room and will appeal his sentence to a higher court. -------------- Domestic Economy -------------- ¶11. Economy Ministry Posts 7.3 Percent Inflation Through June Economy Minister Nikolai Zaichenko told reporters June 1 that the country's through June inflation was 7.3 percent. He expects it to rise to 11 percent in the second half of the year - still within the scheduled limits - and was reassuring that the government is doing its best to keep it under tight control. ¶12. Belarus' mid-year reserves down 13.5 percent According to media reports, Belarus' gold and hard currency reserves dropped through June by 13.5 percent to $2.6 billion. The National Bank of Belarus (NBB) nevertheless still plans to increase the country's reserves to the equivalent of $10 billion by January 2011, the level that would equal the country's three-month volume of imports. ¶13. GOB Approached EU for Financial Support According to the media, Finance Minister Andrei Kharkovets announced at a news conference June 24 that the GOB approached the EU for financial assistance and expects an interim reply within the next ten days. He specified that Belarus is seeking to receive assistance under the EU mechanism for the provision of macroeconomic financing. The amount of financing among other things depends on the volume of the IMF's operations in a requesting country. ¶14. GOB and European Commission Exchanged Texts of Energy Declaration According to press reports, the visiting EU external relations commissioner Benita Ferrero-Waldner told journalists in Minsk June 22 that the GOB and the European Commission exchanged texts of an Energy Declaration, which, when signed, will become a framework document enabling Belarus and the EU to discuss all energy issues. In particular, both sides agreed that energy cooperation will include information exchange, energy sector reform, use of renewable energy sources and efforts to ensure safety of nuclear facilities and energy transit. The parties allegedly established an expert-level early warning system, which will be activated in case of an energy supply problem and/or transit disruption. The commissioner also announced the EU decision to allocate Euro 10 million to Belarus to heighten MINSK 00000228 003.2 OF 003 its food safety standards. ¶15. IMF Hails the Widening of Exchange Rate Band According to media reports, the National Bank (NB) issued a formal decision June 22 to widen from 15 percent to 110 percent the band of the Belarusian Ruble (BYR) exchange rate against the currency basket, which comprises in equal weights the U.S. dollar, the Euro and the Russian ruble. The decision, supported on the same day by Mr. Chris Jarvis, Head of the International Monetary Fund (IMF) mission to Belarus, is expected to increase the flexibility of the exchange rate regime and thus help absorb the growing external shocks. He also opined that the gradual depreciation of the exchange rate within the widened band will improve Belarus's balance of payments. According to the NB press release, at the moment the NB does not plan any sharp fluctuations of the national currency as the country's banking system operates steadily and the situation on the currency market is under control. ¶16. IMF Increases Financial Support to Belarus According to media reports, the Executive Board of the International Monetary Fund (IMF) completed June 29 its first review of Belarus' performance under a Stand-By Arrangement (SBA) and increased the financial support to $3.52 billion. The decision enabled the disbursement of $679.2 million, bringing total disbursements so far to $1.48 billion. The Board also granted a waiver of nonobservance of the end-of-March performance criteria on net international reserves, and approved a modification of the end-of-June performance criteria. The arrangement was revised allegedly to help the GOB "contain the effects of a greater than expected impact from the global financial crisis". IMF Deputy Managing Director and Acting Chair Mr. Takatoshi Kato, on the same day, hailed the GOB's measures to depreciate the Belarusian ruble (BYR),widen the exchange rate band and tighten monetary policy. He opined that the GOB's strengthened adjustment strategy under the revised program will step up economic liberalization in the country and bolster growth prospects over the medium term. He was hopeful Belarus will enact a privatization law, which would conform to best practices, increase the National Bank's independence and do other things to improve governance and the business climate. -------------- Foreign Trade -------------- ¶17. Belarus and Russia at Odds Over Payments for Natural Gas Various media outlets carried reports June 22 of Beltransgaz General Director Vladimir Mayorov's firm assurances that Belarus has no debts to pay for Russian natural gas supplied through May as Beltransgaz has paid an average yearly price of $150 per one thousand cubic meters (tcm) in full conformity with the verbal agreement of the presidents of two countries and is committed to proceed with such payments throughout the year. According to media reports last week, Russia's Gazprom sent a letter to Beltransgaz to require payment of $230 million in debt for gas supplied through April and to pay for May supplies before June ¶23. Gazprom referred to the contract with Beltransgaz under which the latter was expected to pay $210 per tcm in the first quarter and $158 in the second quarter. The Presidential verbal agreement became a stumbling bloc as it was never put on paper. The dispute, viewed by many as a potential continuation of the "milk war", is not over and post will report accordingly. ¶18. Putin: Russia to Preserve Trade Preferences for Belarus Various media carry reports of Russia's Prime Minister Vladimir Putin announcing at the meeting with Duma factions' leaders June 29 that the Russian government intends to continue granting preferences to Belarus in mutual trade. He opined that no other Russia's trade partner enjoys the benefit of oil and gas prices as low as granted to Belarus and stressed the GOR's ultimate goal is to charge its closest ally the world price though provided no timeline. -------------- Quote of the Week -------------- ¶19. Answering the question of Austria's Die Presse daily July 6 on what would be a priority for Belarus - Customs Union with Russia and Kazakhstan or a free trade zone with the European Union Lukashenka said: "Time is a priority for us. We will never reject the Customs Union because it is highly beneficial to us. We would also never say no to a free trade zone with the EU if we had a chance to join and make a good use of it." MILLER