BELARUS WEEKLY POL/ECON REPORT - SEPTEMBER 4, 2009

UNCLAS SECTION 01 OF 06 MINSK 000297 SIPDIS E.O. 12958: N/A TAGS: PGOV PREL PHUM ECON BO SUBJECT: BELARUS WEEKLY POL/ECON REPORT - SEPTEMBER 4, 2009 MINSK 00000297 001.2 OF 006 ¶1. The following are brief items of interest compiled by Embassy Minsk. TABLE OF CONTENTS Civil Society -------------- - United Democratic Forces Finalized Procedures for Nominating Democratic Presidential Candidate (para. 2) - Supreme Court Upheld Registration Denial to the Party of Freedom and Progress (para. 3) - Belarusian Party of Working People Applied to Justice Ministry for Registration (para. 4) - Two Malady Front Activists Detained and Written up In Central Minsk (para. 5) - Opposition Activists Fined, Detained (para. 6) - Artyom Dubskiy Transferred to a Jail in Mogilyov (para. 7) - GOB Continues to Harass and Dismiss Opposition Activists (para. 8) - Minsk City Authorities Ban a Rally to Commemorate Disappearances (para. 9) New Life Church -------------- - Moral Support Shown to Defending New Life Community (para. 10) - Minsk City Government Steps up Its Confiscation Efforts (para. 11) Nuclear Power Plant -------------- - GOB: NPP is Safe / Ecological Activists: No, It Is Not (para. 12) - Atomstroiexport to Sign Cooperation Agreement with Belarus in October (para. 13) Russia-Belarus Relations -------------- - Lukashenka Pleased with Frank Discussion and Full Understanding on Major Issues of Cooperation with Russia (para. 14) IMF Mission -------------- - IMF Concerned Over Belarus' Low Foreign Reserves (para. 15) - GOB Claims Economy on the Rise and Undertakes More Obligations (para. 16) - IMF Official: No Depreciation of BYR in the Foreseeable Future (para. 17) - IMF Mission Reaches Staff-Level Agreement on Second Review of SBA (para. 18) - IMF Mission Issues Statement Following Its Article IV Consultations with GOB (para. 19) Domestic Economy -------------- - Lukashenka Cautiously Praised His Government (para. 20) - Lukashenka: Belarus on a search for new routes of energy imports (para. 21) - Credit History Law Came Into Effect (para. 22) - Lukashenka Simplified Customs Procedures for FEZ Residents (para. 23) - Average Belarusian Household's Monthly Consumption $389 (para. 24) Quote of the Week (para. 25) -------------- -------------- Civil Society �A; -------------- ¶2. United Democratic Forces Finalized Procedures for Nominating Democratic Presidential Candidate Head of the United Democratic Forces (UDF) working group on drafting nomination procedures for a democratic presidential candidate, Lev Margolin, told Belapan on August 21 that the procedures are almost finished. The nomination process will include a campaign period (October 2009 - April 2010) and primaries to be held in April 2010. Ballots will be cast in large cities only. Mr. Margolin expects to have 5-7 nomination hopefuls and about 100,000 voters. If no hopeful secures more than 50% of the votes, UDF will hold a Congress of Democratic Forces. The number of seats that each hopeful will be allowed to reserve for his supporters will be proportionate to the percentage of votes he/she receives in the primaries. MINSK 00000297 002.2 OF 006 ¶3. Supreme Court Upheld Registration Denial to the Party of Freedom and Progress According to independent media reports, on August 26, the Supreme Court denied the appeal of the Organizing Committee on the establishment of the Party of Freedom and Progress, which sought to overrule the registration denial issued by the Justice Ministry. Supreme Court Judge Nikolai Bobkov opined that the Ministry had appropriate legal rights to deny registration because the Committee violated the procedures of party establishment and some of the submitted statements were false. The Chairman of the Committee Vladimir Novosyad told Belapan that the Court denial will not stop them from further political activities. ¶4. Belarusian Party of Working People Applied to Justice Ministry for Registration The Chairman of the Belarusian Party of Working People (BPWP) Alexander Bukhvostov told Belapan August 24 that the party's Organizing Committee applied on the same day to the Justice Ministry for registration. The party's founding congress, with 65 delegates attending from all over the country, was held on July 26. The BPWP was established when the Belarusian Party of Labor was liquidated by the Supreme Court in 2004 as a part of what Bukhvostov calls "a political order of the authorities." ¶5. Two Malady Front Activists Detained and Written up In Central Minsk According to media reports, Malady Front activists Nikolai Demidenko and Anna Bunko were detained in central Minsk on August 23 after attaching a banner "Communism = Fascism" to the monument of Lenin on Independence Square in central Minsk. They were taken to a nearby police station, written up for "anti-sanitation" and released to be tried under the Administrative Code some time in the future. ¶6. Opposition Activists Fined, Detained On September 3, a Gorodok district court fined "Young Belarus" activist Taras Surganov $125 for displaying an opposition white-red-white flag on July 27. Police detained Surganov during a demonstration on the occasion of the 19th anniversary of the Belarus' sovereignty declaration and charged him with violating mass events regulations. In separate incidents in Brest, six Belarusian Social Democratic Party Gramada members were detained and questioned on September 1 for two hours over staging an unsanctioned demonstration to mark the 70th anniversary of the start of WWII. All were released with no charge. On August 30, police detained Malady Front activist Ivan Stasyuk for distributing printed materials and confiscated 18 information bulletins titled "Human Rights." Officers warned him over possible liabilities for disseminating illegal materials and released him two hours later with no charge. ¶7. Artyom Dubskiy Transferred to a Jail in Mogilyov Malady Front (MF) press office informed the media on September 1 that MF activist Artyom Dubskiy was transferred from pretrial holding facilities in Bobruisk to a minimum security jail in Mogilyov on August 28 to serve his one-year prison sentence. Dubskiy, a criminal "Case 14" participant, was convicted on July 7, 2009, for violating his previous two-year partial house arrest on charges of participating in unsanctioned entrepreneur demonstrations on January 10, 2008. ¶8. GOB Continues to Harass and Dismiss Opposition Activists Independent media reported on September 1 that a private company dismissed "Young Belarus" member Kasya Galitskaya from her job as a translator. Galitskaya, a prominent youth movement activist, was fired after a Belarus KGB officer pressured her employer and threatened the company with repercussions. She linked the dismissal with her political and civil society activities but refused to elaborate further. As of September 1, 2009 in a separate case, a Minsk high school principal repudiated a labor contract with Tatyana Ulanova, an astronomy teacher with 30+ years of professional experience who is also a member of the Conservative Christian Party. Ulanova explained that a BKGB agent questioned her over participation in a campaign to promote the Belarusian language and forced the school administration to fire her. Moreover, she claimed that security services had barred all Minsk-based schools from hiring her. ¶9. Minsk City Authorities Ban a Rally to Commemorate Disappearances On September 3, Minsk city authorities denied an application for staging on September 16 a demonstration to mark the 10th anniversary since the disappearance of opposition politician Viktor Gonchar and his associate, businessman Anatoliy MINSK 00000297 003.2 OF 006 Krasovskiy. Fifty United Civic Party and other opposition members sought to rally in southeastern part of Minsk at an ostensible site of the disappearance. Anatoliy Pavlov, UCP Minsk office Chairperson and one of the applicants, believes that authorities rejected the request, citing that the official application on UCP letterhead called for "a party's stamp," a "requirement" never voiced by officials before. -------------- New Life Church -------------- ¶10. Moral Support Shown to Defending New Life Community The lawyer of the Full Gospel Church New Life, Sergei Lukanin, told Belapan news agency August 21 that their community started a marathon of prayers at 7:00pm on August 20 to last through 9:00pm on August 21 for the purpose of keeping the building of the church, which the Minsk City Government has consistently tried to confiscate since October 2005. He added that pastors of 50 evangelical churches have signed a letter to Lukashenka asking for his "immediate involvement to reestablish the rule of law and secure the constitutional rights of believers." The Bishop of the Association of Full Gospel Christians and Chief Pastor of the New Life Church Vyacheslav Goncharenko met with EU Ambassadors in Minsk August 25 and was asked questions on the new land and temporary venue for church services as well as the amount of suggested compensation. Pastor Goncharenko was hopeful that his meeting with the diplomats was evidence of the EU's commitment to the support of democratic values in Belarus, including freedom of religion, which, he believes, is heavily jeopardized in this country. Belarusian democratic activists, including the leader of the For Freedom movement Alexander Milinkevich, the leader of Malady Front Dmitry Dashkevich, Chairman of the Party of the Belarusian Popular Front Lyavon Barshchevsky and others forwarded an open letter to the Presidential Administration, Minsk city government, National Assembly and the Council of Ministers urging them to stop the harassment of the church and to show solidarity with the community in their "spiritual struggle." ¶11. Minsk City Government Steps up Its Confiscation Efforts According to media reports, representatives of the Minsk City Government came to Sergei Lukanin's residence August 24 and brought to his parents an Acceptance-Transfer Report on the controversial church building. This formality enables the authorities to legally get a hold of the building, despite the fact that church representatives refused to sign the report and did not physically vacate the building. On the same day two Emergency Situations Ministry officials tried to enter the church building to inspect fire safety issues but parishioners denied them entry. On the same day the church sent 37.5 million Belarusian Rubles (BYR),which it received from the Minsk City Government for the confiscated building, back to the government. Mr. Lukanin called the amount of compensation ridiculous as it does not reimburse parishioners even a small fraction of the cost of turning an old cattle farm into a refurbished church building. This was the third return of money to the city government over the last three years. In addition, the Minsk City Government reportedly forwarded a formal letter to the EU Ambassadors in Belarus so that they see the authorities' perspective of the ongoing conflict. -------------- Nuclear Power Plant -------------- ¶12. GOB: NPP is Safe / Ecological Activists: No, It Is Not According to press reports, August 25, Belarus' Ministry of Natural Resources and Environment Protection forwarded a short report to Austria, Lithuania, Latvia, Poland and Ukraine on the potential damage to the environment which might be caused by the construction and operation of a Nuclear Power Plant (NPP) in Belarus. First Deputy Minister Alexander Apatski was quoted as saying at an international seminar in June that in the third quarter of 2009 the GOB will set the date and format for public hearings on ecological problems related to the construction and operation of the NPP. Suggestions and recommendations voiced during the hearings will be taken into consideration as the final version of the report is drafted. Nikolai Ulasevich, activist of the Belarusian Anti-nuclear Campaign, told Belapan news agency August 25 that ecological activists plan to stage a few protests and flash mobs in the Grodno region in late August to protest the potential construction of the NPP in this part of the country. They also plan to voice their concerns at the public hearings. On August 23, the activists along with ecologists and anarchists from Minsk, Grodno and Moscow staged an Anti-nuclear Day of Action in four villages located in the vicinity of the potential NPP site to express public protest against the construction of the plant. The activists claimed that local residents oppose the construction as well. MINSK 00000297 004.2 OF 006 ¶13. Atomstroiexport to Sign Cooperation Agreement with Belarus in October According to the media, Russian nuclear company Atomstroiexport released a statement on September 2, saying that Russia and Belarus will likely sign an agreement in October 2009 on cooperation in the construction of the NPP in Belarus and endorse a construction contract in December 2009. The company will act as the primary contractor, and the first unit of the NPP is scheduled to be opened in 2016. -------------- Russia-Belarus Relations -------------- ¶14. Lukashenka Pleased with Frank Discussion and Full Understanding on Major Issues of Cooperation with Russia Following his three-hour meeting with Russian president Dmitry Medvedev August 27 Lukashenka said that they had never had such "open" and "very frank, in my spirit" discussions before, adding that "we have decided to intensify our meetings~ we are not allergic to each other." Lukashenka's press service quoted him as saying: "I am almost convinced that we are not going to have any more of such sharp exacerbations (in mutual relations) ~ because neither Russians, nor we benefited from them." He assured that major economic and political decisions will be made in the near future to "resolve problems" in bilateral relations. According to Lukashenka, both presidents discussed in general terms Belarus' relations with the West and allegedly Medvedev understood Belarus' interests in the West, particularly in Europe. According to an anonymous source of RIA Novosti news agency, the recognition of Abkhazia and South Ossetia was not on the agenda. Lukashenka assured that Belarus "cannot but join" the agreement of the Collective Security Treaty Organization (CSTO) members on the establishment of the Collective Rapid Deployment Forces (CRDF) because Russia and Belarus ostensibly initiated the agreement as a frame document and "we have nothing to worry about here." In addition, he promised Belarus will take office as CSTO chairman in the next term because Belarus "did not work as a chairman for six month." Lukashenka claimed he secured Medvedev's support in an effort to intensify modernization of Belarus' armed forces and anti-aircraft units. Belarusian and Russian leaders allegedly agreed that Russia will open a credit line in 2010 to construct the Nuclear Power Plant (NPP) in Belarus. He also assured that "Belarus will have no problems with payment for the natural gas" but did not elaborate any further. The parties also discussed customs tariffs on oil, Russia's loan to Belarus and joint steps to mitigate the effects of the global crisis. "We decided that our governments will negotiate and resolve all these problems in September. That was a promise of the President of Russia," asserted Lukashenka. "We agreed to intensify our relation within the framework of the Union of Belarus and Russia~. I believe by December (time period of Moscow session of the Supreme State Council of the Union State) we will have some results" concluded Lukashenka. -------------- IMF Mission -------------- ¶15. IMF Concerned Over Belarus' Low Foreign Reserves According to media reports, the visiting Director of the IMF's European Department, Marek Belka, told Prime Minister Sergei Sidorsky August 25 that "the problem of low foreign reserves~ that may threaten the country's stability" is of major concern in the short term. Mr. Belka nevertheless noted that "by and large we are satisfied with the general trend of the Belarusian government's economic policy." He stressed that the current IMF mission will conduct a second review of Belarus' compliance with the $3.52 billion SBA and will focus mostly on short-term issues. The mission's other goal is to hold regular Article 4 consultations with the GOB on Belarus' long-term economic prospects. ¶16. GOB Claims Economy on the Rise and Undertakes More Obligations Prime Minister Sergei Sidorsky told the visiting Director of the IMF's European Department August 25 that during this past spring and summer the Belarusian economy was on a steady rise. Everything manufactured during this time has been sold without delay and inventories of unsold products manufactured earlier are reducing gradually. The country lost a lot of traditional markets but found new ones in 13 countries. Despite considerable budget cuts, the government has allegedly secured economic growth, more investment and an inflation rate as low as 0.3-0.4% per month. On August 26, the IMF's official website posted the Letter of Intent signed by Prime Minister Sergei MINSK 00000297 005.2 OF 006 Sidorsky and the Chairman of the Board of the National Bank (NB) Pyotr Prokopovich. The letter lists obligations, to which the GOB committed itself in order to comply with the IMF's $3.52 billion Stand-By Arrangement (SBA.) The GOB expects 2009 GDP to decrease 3% and inflation to not exceed 11%. The government urges Belarusian banks to offer interest of no less than 21.6% on deposits of individuals in Belarusian rubles (BYR). It plans to cancel two special and one local tax on retail sales and to reduce the profit tax from 24% to 20%. VAT will be increased from 18% to 22% to compensate for lower revenues. The GOB plans to reduce subsidies paid to monopoly suppliers of communal services provided to households. The government is also on a search for strategic investors, who, market permitting, would be willing to purchase a controlling interest in two state-owned banks Belpromstroibank and Belinveestbank as well as minority stocks in Belarusbank and Belagroprombank. In addition, it will submit to the parliament the privatization bill before September ¶30. Besides, all businesses with minority stocks owned by the state will be exempt from meeting all statistical indices, including the ones on the volume of production and employment. The rights of the state in such businesses will be exactly the same as the ones enjoyed by other minority shareholders. ¶17. IMF Official: No Depreciation of BYR in the Foreseeable Future Following his talks with the GOB officials August 26, the IMF's Director of European Department Mark Belka opined that the existing mechanism of establishing the exchange rate of Belarus' national currency towards the world's currencies is correct as it is sufficiently flexible and ensures necessary stability. "To put it directly, there will be no depreciation (of the national currency). At least not in the foreseeable future," asserted the IMF official. He also noted that the new Belarus-IMF cooperation program, if adopted, will focus on long-term structural reforms and strengthening the country's economic potential in the post-crisis time. ¶18. IMF Mission Reaches Staff-Level Agreement on Second Review of SBA According to numerous media reports, following the completion of the IMF mission to Belarus, August 18 - September 2, head of the IMF's Mission to Belarus Chris Jarvis issued a statement September 2 to summarize discussions on the second review under the Stand-By Arrangement (SBA) with Belarus. He informed that "the IMF mission today reached staff-level agreement with the Belarusian authorities on the conclusion of the second review under the SBA. The authorities' Letter of Intent will now be submitted to IMF Management with a view to allowing the IMF Executive Board to consider the completion of the second review of the arrangement soon after the annual IMF-World Bank meetings in October. The completion of this review would release a tranche of SDR 437.93 (about $683 million)." The IMF official also underscored that "macroeconomic and financial policies in Belarus are on track. All end-June quantitative performance criteria have been met and the authorities have been making good progress in meeting structural targets under the program, including the preparation of the draft decree on establishing of a Privatization Agency." According to the statement, "the mission and the authorities agreed on a tightening of credit policy, which will control domestic demand and improve Belarus's external position." The IMF allegedly supports the GOB's efforts under the program claiming that its "current exchange rate and fiscal policies appear to be consistent with the objectives of the program." ¶19. IMF Mission Issues Statement Following Its Article 4 Consultations with GOB Following its Article 4 Consultations with the GOB, the IMF Mission posted on its website August 26 the Statement to suggest long-term economic policies, which can secure Belarus' high and sustainable growth in the years to come. The Statement urged the GOB to curtail lending programs because they "boosted domestic demand, which increased the trade deficit and has led to the loss of reserves in recent weeks;" defer public wage increases, "while providing targeted social assistance to shield the poorest from the impact of the crisis;" continue tax reforms and raise utility tariffs toward cost recovery levels. The Statement strongly suggested that Belarus carry out structural reforms, which "can focus on yielding state control to market forces, and steadfastly pushing ahead with privatization." It listed concrete steps that the GOB should take to reduce state intervention in the economy. The key item is "an ambitious and transparent privatization agenda that is open to foreign investors." This includes "the enactment of a modern Privatization Law and establishment of a Privatization Agency." The statement ended with a suggestion to "eventually" move to a more flexible exchange rate regime. -------------- MINSK 00000297 006.2 OF 006 Domestic Economy -------------- ¶20. Lukashenka Cautiously Praised His Government During his working trip to the Vitebsk region on August 20 Lukashenka expressed cautious optimism over the GOB's efforts to sell huge inventories of unsold products manufactured by crisis-hit industrial enterprises. He pledged to keep a close eye on the government's progress and said he is ready to get rid of unsuccessful government and industry officials in no time. ¶21. Lukashenka: Belarus on a search for new routes of energy imports Lukashenka told the press during his working trip to the Gomel region on September 2 that the GOB is looking for alternative routes to import energy as Belarus "cannot depend on a single supplier, for instance, Russia, as we used to have problems." He kept saying that "we will have alternative ways if it is not lucrative [to import energy from Russia]" and that the GOB is considering participation in the Odessa-Brody pipeline project in Ukraine. Lukashenka praised diversification of energy supplies, mentioning the Eastern Partnership Program with its "lucrative energy transit projects." ¶22. Credit History Law Came Into Effect According to the presidential press service, the bill on credit history signed into law by Lukashenka last November came into effect on August 21. Under the law, starting as of January 1, 2009 the National Bank has kept credit history files of all credit/loan takers and can provide credit history information, for a fee, to any and all private inquirers (including foreign ones) given that the individual credit subject grants permission. Information is provided to government agencies for free and presumably no permission is needed. ¶23. Lukashenka Simplified Customs Procedures for FEZ Residents On August 25, Lukashenka signed edict 430, which amended his other two edicts signed in 2005 and 2006 to simplify customs procedures for residents of the Free Economic Zones (FEZ). According to the edict, samples of raw materials and components used for laboratory tests in the course of a continuous production process will be exempt from customs clearance. The edict also provides for simpler clearance of goods used by the FEZ residents for constructing and renovating real estate. The edict is expected to facilitate implementation by FEZ residents of large investment projects and boost their exports. ¶24. Average Belarusian Household's Monthly Consumption $389 According to data posted by the National Statistics Committee on August 26, a Belarusian households' average monthly consumption through June totaled the equivalent of $389. In Belarusian rubles (BYR) the year-on-year increase was 12.4% but in US dollars the households reduced their consumption considerably because of the 20% plus depreciation of the BYR this past January. According to the same statistics, an average household spent monthly $160 on food products, $8.5 on alcohol, $128 on non-food products, $93 on utility and other services. The share of households with incomes below the minimum subsistence level was 4% in cities, 3.2% in small towns and 6.2% in villages. A year ago the figures were 4.4%, 3.6% and 6.1% respectively. -------------- Quote of the Week -------------- ¶25. On August 27, Russia's daily Izvestia published on its front-page an interview with Lukashenka by the First Deputy General Director of ITAR-TASS news agency Mikhail Gusman from August 13. Speaking about the 2006 presidential election Lukashenka confessed to rigging the election results. "Yes, we did rig it. I ordered not to have a number of 93% but something like 80%... I cannot remember~ because 90% plus cannot be accepted psychologically. But that was true." The Chairperson of the Central Election Commission Lidia Yermoshina dismissed Lukashenka's revelations on August 27 arguing that the CEC "is not aware" of any rigging. MILLER