BELARUS BI-WEEKLY POL/ECON REPORT - OCTOBER 9, 2009

UNCLAS SECTION 01 OF 04 MINSK 000345

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL PHUM ECON BO
SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - OCTOBER 9, 2009

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1. (U) The following are brief items of interest compiled by
Embassy Minsk.

TABLE OF CONTENTS

Civil Society
--------------
- IISEPS Survey: Despite Growing Pro-European Sentiments,
Lukashenka Favored In Elections (para. 2)
- GOB Continues to Try to Block Registered Parties from Getting
Out Their Message (para. 3)
- Opposition Youth to Run a Joint Get Out the Vote Campaign but
See It as a Up Hill Battle (para. 4)
- GOB Continues to Limit Citizens Access to Independent Media
(para. 5)
- GOB Claims Private and State Media Have Equal Playing Field
(para. 6)
- Opposition Leaders Delayed From Leaving the Country (para. 7)

Economy
--------------
- Russia's Flip Flop on the $500M Could Spell Trouble for
Belarus with the IMF (para. 8)
- Price Caps to Be Abolished, But Informal Controls Appear to
Continue (para. 9)
- Lukashenka: State Will Not Withdraw From the Economy (para. 10)
- GOB Must Maintain the Social Contract: Full Employment and
Subsidies of the Utilities (para. 11)
- Lukashenka Is Private Sector Friendly - For a Year - To Combat
Collapsing Export Statistics (para. 12)
- Foreign Direct Investment on the Decline (para. 13)
- Belarusians Buying Hard Currency As a Cushion Against the
Unknown (para. 14)
- Belarus' Commodity Trade, Yet Another Sector Where Imports
Exceed Exports (para. 15)

International Security
--------------
- Russia, Belarus Conclude "Successful" Military Exercises Zapad
2009 (para. 16)

Religion
--------------
- Russian Orthodox Patriarch Hails Good Relations with GOB, But
Surprised About the Pope (para. 17)

Quote of the Week (para. 18)
--------------

--------------
Civil Society
--------------


2. (U) IISEPS Survey: Despite Growing Pro-European Sentiments,
Lukashenka Favored In Elections

The September survey of the Vilnius-based Independent Institute
for Social, Economic and Political Studies (IISEPS) showed that
pro-European sentiments are growing in Belarus; 44 percent
surveyed support EU membership while 39 percent support a merger
with Russia. Nevertheless, 71 percent have a "good attitude"
towards Russia, and 46.8 percent support the GOB recognizing
South Ossetia and Abkhazia. If the elections were held
tomorrow, Lukashenka would receive 39.4 percent of the votes,
Alyaksandr Milinkevich 3.4 percent, and Alyaksandr Kazulin 2
percent. 34.1 percent of those interviewed believe that the
current regime represents the interests of "officials and
bureaucrats," while 25 percent and 12 percent, respectively,
believe the regime cares for "the people like me" and "poor and
socially vulnerable" persons. Approximately 45 percent express
dissatisfaction with their living standards, in particular,
rising housing, educational, healthcare, and groceries costs.
43 percent blame Lukashenka, 8 percent Russia and 4 percent the
West for the poor economic situation, and 47 percent expressed
hope that foreign investment would improve the situation.
Nevertheless, 62 percent credit Lukashenka "for maintaining
stability in society" and 37 percent for "cracking down on
corruption."


3. (SBU) GOB Continues to Try to Block Registered Parties from
Getting Out Their Message

On September 30, police detained United Civic Party (UCP) leader
Anatoliy Lebedko, opposition Communist Party leader Sergey
Kalyakin and some of their colleagues for distributing in the
center of Minsk copies of the United Democratic Forces' (UDF)
anti-crisis platform. Their materials were confiscated, and
after being held for a couple of hours, they were released
without charges. Lebedko told Charge that the police who drove
him home told him he should have waited until October 1 to
handout the pamphlets because the police would have been
pre-occupied with crowd control for the UEFA Cup soccer match

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between Everton and BETA. Nevertheless, Lebedko said that as it
turned out most of his colleagues handing out pamphlets on the
streets throughout Belarus had not been detained. He said that
UDF had initially appealed to multiple city governments for
permission to set up 450 booths to conduct the information
campaign, but only two booths had been approved.


4. (SBU) Opposition Youth to Run a Joint Get Out the Vote
Campaign but See It as a Up Hill Battle

During their meeting with EUR/ACE Daniel Rosenblum in Minsk on
October 2, the opposition youth leaders, who have come together
in a common coalition, expressed their plans to conduct "youth
mobilization" campaigns in the run up to the next presidential
elections, which could be scheduled as early as November 2010
but no later than February 2011. The representatives of the
Right Alliance NGO, the Belarusian Popular Front Youth, the
Young Belarus, the United Civic Party's Young Democrats and the
Young Christian Democrats stated that despite the economic
turbulences and "high level of discontent in the society," the
regime's "safety factor" of controlling people through the
economy continued. They complained that Lukashenka has not yet
introduced real economic reforms, including privatization. The
youth leaders called upon the USG to set out clear timeframes by
which the GOB must meet its democratic obligations. They also
argued that foreign lending to Belarus should be conditioned to
political reform and not only to offset an economic crisis as
that would just perpetuate the behavior of the current regime.


5. (U) GOB Continues to Limit Citizens Access to Independent
Media

On September 30, the Ministry of Information warned the private
radio station Avtoradio that it would be shut down if it
continued to AIR an international, political, and cultural news
and music show produced jointly with European Radio. On October
1, Avtoradio discontinued broadcasting the show. Journalists
operating for external media reporting into Belarus on Belarus;
e.g., Belsat and Radio Racya, continue to receive warnings from
the prosecutor's office for operating without accreditation.
Journalist who receive three warnings can be fined. There have
been thirteen warnings issued against Belarusian independent
journalists since the enactment of the new media law on February
8, 2009. For the journalist it is a catch twenty two as they
are consistently denied accreditation. In a separate incident,
the state network Belsoyuzpechat denied a request from the
independent bi-weekly Narodnaya Volya to increase its
circulation from twice a week to three times a week claiming
that it was "not possible to distribute additional copies due to
the massive output of [other] periodicals" on that specific day
of the week.


6. (U) GOB Claims Private and State Media Have Equal Playing
Field

An international team of media experts visited Belarus from
September 21-24. In their concluding statement they urged the
GOB to ensure the rights of independent journalists, ensure fair
economic conditions and equal access to information for both
independent and state-owned outlets, and strengthen the
transparency of the accreditation process. They also called on
the GOB to remove distribution and other economic restrictions
against the independent media outlets. On September 22,
Nataliya Petkevich, First Deputy Head of the Presidential
Administration, told the media team that the GOB would
"liberalize" the procedure for frequency allocation for the
electronic media outlets "in the near future." Moreover, she
praised the media situation in Belarus as "improving" be it
slow. However, she refused to acknowledge that the state and
independent media do not enjoy equal conditions in Belarus.


7. (U) Opposition Leaders Delayed From Leaving the Country

On October 4, Belarusian Popular Front Chairperson Alyaksey
Yanukevich was searched for two and a half hours at Minsk
airport. As a result, he missed his flight to London and had to
travel the next day. On October 7, Belarus border guards at the
crossing point on the road to Vilnius searched United Civic
Party leader Anatoliy Lebedko for two hours before allowing to
cross into Lithuania.

--------------
Economy
--------------


8. (SBU) Russia's Flip Flop on the $500M Could Spell Trouble for
Belarus with the IMF

Russian Finance Minister Kudrin told reporters at the IMF-World
Bank meeting in Istanbul on October 5 that his government will
not issue the final $500-million tranche of the $2-billion loan
to Belarus, but will help the GOB receive additional financing

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from the IMF and the Eurasian Economic Community anti-crisis
fund, the latter which has yet to be established. Belarus
Finance Minister Kharkovets said that the GOB will continue to
talk with Russia regarding the final $500 million tranche.
(Note: According to the IMF Res Rep, Belarus has a $1 billion
dollar financing gap for 2009, and for the Stand By Agreement to
stay on track, in addition to the $200M World Bank DPL and EC
$300M MFA, Belarus must receive $500M by the end of the year
from Russia or identify a second source of funds. End Note)


9. (SBU) Price Caps to Be Abolished, But Informal Controls
Appear to Continue

The Ministry of Economy sources have told the media that the
government will soon announce that it will abolish price caps on
most products as October 28 or 29. The Ministry sites the
measure as "another step" towards price liberalization.
However, 50 product categories will be excluded, including
medicines, food staples, and products for children, as well as
to goods that are imported for production purposes in Belarus.
Commenting on the resolution, a Ministry of Economy official
warned companies against prices hikes implying that companies
should police themselves versus being guided by market
indicators. Recently, the Mayor of Minsk said companies should
focus on selling Belarusian products. The Regional Manager for
Coca Cola told Charge that many local companies were reluctant
to continue to stock Coca Cola's imported juices, implying that
the Mayor's statement was being taken as a signal by local
outlets as to what was acceptable behavior to the government.


10. (U) Lukashenka: State Will Not Withdraw From the Economy

During his interview with the Russian press on October 2,
Lukashenka declared that the state should not "withdraw from the
economy." Moreover, he blamed private companies for the trade
dispute between Belarus and Russia claiming that private
companies "never worry about the people and the state" but only
want to "pocket huge revenues." Nevertheless, this did not
stop Lukashenka from urging private businesses to help sell off
the huge inventories that have accumulated over the last six to
nine months at most state enterprises.


11. (U) GOB Must Maintain the Social Contract: Full Employment
and Subsidies of the Utilities

Deputy PM Semashko told the media on October 2 that the GOB's
top economic priorities are to develop the manufacturing sector
and to secure decent living standards for people. "However hard
it may be today, people must have a job," underscored Semashko,
adding that households had to only pay 32% of the cost of
natural gas with the government subsidizing the rest.


12. (U) Lukashenka Is Private Sector Friendly - For a Year - To
Combat Collapsing Export Statistics

On September 25, a Presidential decree extended preferential
conditions through July 1, 2010 to entrepreneurs engaged in
exporting Belarus-made goods. The decree relaxed taxation
procedures and simplified the handling of foreign currency
proceeds.


13. (U) Foreign Direct Investment on the Decline

A source in the National Bank told the Prime-TASS news agency
that net inflows of foreign direct investment (FDI) in Belarus
dropped 4.7% y-o-y for January-June 2009 to $1.155 billion, with
$898.5 million or 63% of total FDI coming from Russia.


14. (U) Belarusians Buying Hard Currency As a Cushion Against
the Unknown

According to September 29 media reports, the National Bank (NB)
registered a 17.07 percent depreciation of the Belarusian ruble
against the basket of currencies of Belarus' main trade partners
in real terms for January-August 2009. The Belarusian ruble
depreciated 13.22 percent against the Russian ruble, 21.09
percent against the Ukrainian hryvna, 22.11 percent against the
euro, and 19.17 percent against the USD in the same period.
According to the NB, from January-July 2009, Belarus residents
purchased from the Belarusian banks $3.893 billion in foreign
currency cash, 22.8% in the same period in 2008. (Note: Hard
currency is a historical safe haven for Belarusians in time of
economic uncertainty. End Note)


15. (U) Belarus' Commodity Trade, Yet Another Sector Where
Imports Exceed Exports

Belarus' foreign commodity trade deficit reached $4.7 billion in
January-August 2009, compared to $3.7 billion in the same period
in 2008. Exports dropped 44.5 percent y-o-y and imports 34.7
percent over this period. Belarus' exports to Russia, its major
trading partner, fell by 46 percent y-o-y while its imports from

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Russia decreased only by 39.2 percent.

--------------
International Security
--------------


16. (U) Russia, Belarus Conclude "Successful" Military Exercises
Zapad 2009

Russian President Medvedev stated on September 28 that the
Belarus-Russia joint military drills Zapad 2009 were not
"threatening anyone" and were "of a defensive nature." He
furthermore praised "high-level" organization of the exercises
that keep the armed forces "in proper shape." Attending with
President Lukashenka the last day of maneuvers in Belarus,
Medvedev assessed the drills as "successful" and said similar
large-scale, international military exercises would be held
alternately in Belarus and Russia every two years to help both
states enhance a "reliable" defense system for the Union State.
Lukashenka echoed his Medvedev's remarks

--------------
Religion
--------------


17. (U) Russian Orthodox Patriarch Hails GOB's Relations with
the Church, But Surprised About the Pope

Russian Orthodox Patriarch Kirill I paid his first official
visit to Belarus on September 25-28. Lukashenka wholeheartedly
welcomed the Patriarch on September 25, citing that the GOB
"will always support not only the Orthodox Church" but also his
"patriarchal service." The President emphasized that religious
laws in Belarus recognize "the Church's determining role in the
development of spiritual, cultural, and state traditions" and
added that "the state cannot exist without the Church." The
Patriarch concurred and said that Belarus remained Russia's
"most reliable ally." He argued that "the Patriarch of all Rus
is not the Patriarch of Russia only as Holy Rus spreads to other
states" which made "our people united by a system of values."
The Patriarch attributed Belarus facing political and other
challenges to its location on the "turbulent" borders between
European civilizations. Kirill lauded "peace" and lack of
tension between various Christian denominations in Belarus, in
particular, "fruitful cooperation" between the Roman Catholic
and Orthodox Churches. Additionally, he welcomed a dialogue
between the Christians and the Moslems, explaining that "people
of Islamic guidance may be closer by their faith than Western
people who are secularized to the core." Unexpectedly for the
GOB, the Patriarch dismissed speculations that he might be
meeting with Pope Benedict XVI in Belarus and claimed that he
was "unaware" of the GOB's efforts to arrange such a meeting.

--------------
Quote of the Week
--------------


18. (U) Answering questions of Russian journalists in Minsk on
October 2 Lukashenka said:

"We held these (military) exercise (West 2009) not with
Americans, not with NATO but with our Russians. And only an
idiot can say after that that Lukashenka turned to the West or
some other directions and abandoned Russia."
SCANLAN