BELARUS BI-WEEKLY POL/ECON REPORT - OCTOBER 23, 2009

UNCLAS SECTION 01 OF 05 MINSK 000360 SENSITIVE SIPDIS DEPT FOR EUR/UMB (JOE WANG) E.O. 12958: N/A TAGS: PGOV PREL PHUM ECON BO SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - OCTOBER 23, 2009 MINSK 00000360 001.3 OF 005 ¶1. (U) The following are brief items of interest compiled by Embassy Minsk. TABLE OF CONTENTS Elections -------------- - "Honest" Presidential Elections to be Held in Early 2011, so Says the CEC (para. 2) Civil Society -------------- - Opposition Parties Denied Registration, Evicted (para. 3) - Police Forcefully Disperse "Solidarity Day" Demonstration, Arrest Activists (para. 4) - Gomel Activists Heavily Fined for "Plotting" a Demonstration (para. 5) - GOB Criticized for Not Holding Transparent Hearings on Proposed Nuclear Plant (para. 6) Domestic Economy -------------- - IMF Disburses Another SBA Tranche to Belarus, But GOB's 2009 Financing Gap May Not Be Filled (para. 7) - Gazprom Expects Belarus to Meet its Obligations and Pay European Gas Prices by 2011 (para. 8) - National Bank Chief: Banking System Facing "Significant Threat" (para. 9) - NB Official: Bad Loans on the Rise? No Worries! My Boss is Wrong (para. 10) - Lukashenka Sets $7 Ceiling for 2010 Utility Rates Increase, thus Downplays the Actual Increase (para. 11) - Lukashenka Signs Edict to Streamline Auditing of Businesses (para. 12) - Belarus' Exports Continue to Fall Faster Than Imports Through August (para. 13) Security -------------- - Collective Security Treaty Organization, Belarus is a Member, But Does it Matter (para. 14) Quote of the Week (para. 15) -------------- -------------- Elections -------------- ¶2. (SBU) "Honest" Presidential Elections to be Held in Early 2011, so Says the CEC During his October 20 meeting with Lidiya Yermoshina, Chairperson of the Central Election Commission (CEC),Lukashenka announced that the presidential elections will be held in early 2011 and that they will made "[more] honest" and that local elections will be scheduled separately in April 2010. The CEC will submit to Lukashenka and the Parliament this fall amendments to be made to the electoral law. In her October 22 press interview, Yermoshina elaborated that "the amendments are the work to correct shortcomings as proposed by the OSCE." The reasons for reforming the electoral code, she argued, is to advance "public relations" and change the "alignment of political forces." She said the CEC is seeking to ensure broader electoral commission representation for the political parties and NGOs ("no less than a third of the seats") and to limit the number of seats for state officials. CEC said presidential elections will include "thousands of observers," a simplified signature collection process for nominating candidates to avoid "technical" errors, and perhaps a somewhat more relaxed parameters on election observers. The latter may be "allowed to monitor the vote counting" from a relevant distance whereas in the past, they could only observe the backs of the commission members ostensibly counting ballots. As for the early voting, precinct commissions might be required to produce daily reports on the number of voters who cast early ballots. As for the local elections, the CEC said it might abolish the 50 percent threshold since many voters, especially in large cities, opt not to vote in local elections. In addition, the CEC might permit candidates to open individual election funds but they will still be banned from accepting money from foreign sources. Despite the fanfare surrounding what ultimately could be "revolutionary" amendments, electoral lawyers, such as Vladimir Labkovich, expressed skepticism over Yermoshina's proposals, saying that "it is not what we have expected" and the announced changes "will not fundamentally eliminate falsification practices." Belarusian Christian MINSK 00000360 002.3 OF 005 Democracy Co-Chair Vital Rymasheuski echoed the critical remarks to EMBOFF, saying that even if the amendments are not "peripheral," the enforcement practices are more important than the actual legislature, especially due to the lack of a fair and transparent appeal procedures. Belarus National Front Chairman Aleksey Yanukevich told Charge that at the moment everything is speculation. He said there are many theories as to what the changes might be, but the reality is no one has seen them yet and were just commenting on general press accounts. . -------------- Civil Society -------------- ¶3. (U) Opposition Parties Denied Registration, Evicted On October 20, the Justice Ministry (MOJ) denied registration to the Belarusian Party of Working People (BPWP) for failing to meet membership requirements of 1,000 persons and providing false information, among other charges. The BPWP leadership claimed that their founders were pressured to recant their membership and stated that they would appeal to the Supreme Court. The BPWP is the successor of the Belarusian Party of Labor, which was shut down by authorities in 2004. In a separate case, on October 15, the Minsk City Economic Court evicted the registered Belarusian Social Democratic Party Gramada from its offices for failing to come to terms with its landlord over a rent increase. In order for the party to maintain its official registration, it must have a new "a legal address." Gramada Chairperson Anatoliy Levkovich noted that it was most likely going to have to rent more affordable premises outside of Minsk. ¶4. (SBU) Police Forcefully Disperse "Solidarity Day" Demonstration, Arrest Activists Police forcefully dispersed a "Solidarity Day" demonstration in downtown Minsk on October 16. An EMBOFF observed that three minutes into the rally, police officers surrounded about 30 opposition activists and manhandled them into awaiting buses. Although about 22 of the detained activists were released three hours later with no charge, United Civic Party Chair Anatoliy Lebedko reported that he was beaten in a police bus and abused while in custody. Additionally, police prevented independent journalists from covering the demonstration. The Belarusian Association of Journalists condemned the "direct ban on the journalists' professional activities" and called for a fair investigation into the incident. On the eve of the rally, "European Belarus" campaigner Maksim Vinyarskiy was sentenced to two days of detention for the distribution of political leaflets. His associate, Alesya Yasyuk, was released after a five-hour interrogation. ¶5. (U) Gomel Activists Heavily Fined for "Plotting" a Demonstration On October 13, seven opposition activists were fined a total of $2,740 for merely attempting to stage a "Solidarity Day" demonstration in Gomel on September 16. The court dismissed their arguments that they were only walking to the demonstration venue and were not carrying any images or banners. Police officers stated otherwise. The court also fined two more activists $510 and $250 on October 15 and a local opposition leader $640 on October 19 in absentia on the same charges. Because the GOB continues to deny opposition requests for public rallies, democratic activists face multiple charges for participating in such events, including for purported violations of mass events regulations and alleged minor and severe hooliganism. ¶6. (U) GOB Criticized for Not Holding Transparent Hearings on Proposed Nuclear Plant Independent experts and anti-nuclear campaigners publicly criticized the GOB for failing to hold open and transparent public hearings in Ostrovets on October 9 concerning GOB's interim Environmental Impact Assessment Report (EIAR) regarding the construction of a nuclear power plant (NPP) in Belarus. Police and security personnel denied access to a number of civil society and environmental specialists as well as journalists. At the same time inside the meeting hall, government moderators interrupted the presentations of the independent experts who sought to voice their critical evaluations. United Civic Party Chair Anatoliy Lebedko was banned from the hearings, and police arrested Russian environmental expert and nuclear physicist Andrey Ozharovskiy and detained him for seven days on charges of minor hooliganism. Police also confiscated copies of MINSK 00000360 003.3 OF 005 Ozharovskiy's remarks about the GOB's EIAR. -------------- Domestic Economy -------------- ¶7. (SBU) IMF Disburses Another SBA Tranche to Belarus, But GOB's 2009 Financing Gap May Not Be Filled IMF Executive Board Completed Second Review Under Stand-By Arrangement (SBA) on October 21 and approved the disbursement of approx. $699.5 million, bringing total disbursements under the program so far to about $2.23 billion. In its October 21 press release the Executive Board welcomed good progress that Belarus made in adjusting its policies to the global crisis despite a substantial decline in exports, but noted that excessive lending, unless reduced, would put pressure on the country's international reserves. The disbursement presupposed the GOB limiting lending under government programs for the remainder of ¶2009. The Board also praised the GOB for progress in improving the business climate and facilitating private sector development, but again it presupposed that privatization would proceed. IMF press statement concluded with "securing sufficient financial resources from the international community is essential for Belarus' reform efforts. In this context, the authorities stand ready to implement contingency measures should a financing gap emerge." The latter phrase refers to the continued uncertainty whether Russia will extend to Belarus the final $500 million tranche of funds it had proposed a year ago, either bilaterally, as the first $1.5 billion had been conveyed, or through the recently established Eurasian Economic Community (EURASEC)'s Anti-Crisis Fund. The IMF's initial calculations on how GOB would close its $1 billion financing gap in 2009, presupposed Russia transferring a final $500 million tranche, according to the IMF Resident Representative. ¶8. (U) Gazprom Expects Belarus to Meet its Contractual Obligations and Pay European Gas Prices in 2011 The CEO of the Russian gas monopoly Gazprom, Aleksey Miller, yet again stated in his October 12 interview to Russian television that the natural gas price for Belarus will rise in accordance to the contract, which "we must honor." He added that the GOB "signed the document, and it must meet its contractual obligations." Belarus Energy Minister Aleksandr Ozerets told the media that a GOB delegation will negotiate with Gazprom to push back the timeline for the gradual increase in gas prices for Belarus to European prices from 2011 to 2014. (Note: Under a five-year contract, signed with Gazprom on December 31, 2006, the gas price for Belarus was to gradually increase to the European market level by 2011. It was to be 67 percent of the level, excluding delivery costs, in 2008, 80 percent in 2009, 90 percent in 2010, and 100 percent in 2011. End Note.) ¶9. (U) National Bank Chief: Banking System Facing "Significant Threat" According to independent media reports published on October 12, the National Bank (NB) Chairperson Pyotr Prokopovich warns in his letter to the Council of Ministers that the Belarus banking system is facing a "significant threat" due to the rising number of troubled loans, up 3.3 times since January, and a deterioration of the state banks' liquidity. The state banks increased 1.4 times y-o-y in January-September 2009 the volume of lending to finance GOB programs, primarily for agriculture initiatives and apartment construction. Subsequently, large state-owned banks, including the Belarusbank, have delayed their tax payments. Prokopovich urged the GOB to limit state bank's financing of the GOB programs and delegate these function to the State Development Agency as outlined in the IMF's Stand-By Arrangement (SBA). ¶10. (SBU) NB Official: Bad Loans on the Rise? No Worries! My Boss is Wrong The head of the NB's Information Department Anatoly Drozdov told the media on October 13 that, in January-August, the share of troubled loans in the total loan portfolio of Belarus' banking system went up 230%; however, it remains "insignificant" at 2.6% of the overall portfolios. The NB has projected a 5%-limit for the troubled loans' share this year, and most of those account for funding provided under GOB programs. The NB official also dismissed as "not objective" the letter to the Council of Ministers by his boss, NB Chairperson Pyotr Prokopovich. (Note: IMF Resident Representative told Charge that the criteria the GOB uses to assess bad loans does not comport with international standards and thus under reports the figure. End Note) MINSK 00000360 004.3 OF 005 ¶11. (SBU) Lukashenka Sets $7 Ceiling for 2010 Utility Rates Increase, thus Downplays the Actual Increase Lukashenka told Belarus' Energy Minister Aleksandr Ozerets on October 15 that gas and electricity rates for households will not be increased by more than seven USD in 2010, and increases can be imposed in increments no higher than $1/month as "the people can't pay more today." He also opined that pensions and salaries should be raised prior to any utility rate hike. Nevertheless, "people should understand that if we ruin the power generation industry" [which receives heavy subsidies from the state and whose losses are also covered by the much higher energy prices paid by industrial enterprises], there will be "no payments at all," Lukashenka stressed, implying that the gradual increase of the utility rates will be eventually justified. (Note - IMF Resident Representative told Charge that increases utility rates was a precondition of the IMF's for releasing its latest tranche and thus the GOB had committed to instituting the price increase by November 1, 2010. End Note.) ¶12. (SBU) Lukashenka Signs Edict to Streamline Auditing of Businesses Presidential press services reported on October 16 that Lukashenka signed an edict, which established uniform procedures for the GOB's control and supervision of enterprises and businesses. The edict imposes a two-year moratorium on inspections of newly-created businesses and provides an exhaustive list of the controlling and supervision agencies and their powers. According to the document, all economic entities will be divided into three groups depending on the potential risks, and the highest-risk group of businesses will be not be inspected more than once a year. The State Control Committee remains the main controlling agency, also in charge of coordinating inspections. Some business leaders, who shared with Embassy their views on the edict, referred to the paper as "a progressive document" but noted that much will depend on its enforcement, as biased enforcement may eliminate any benefit. (Note: World Bank Resident Representative told Charge that the edict was one of WB's preconditions for the release of its $200 million Development Policy Loan). ¶13. Belarus' Exports Continue to Fall Faster Than Imports Through August According to the data of the National Statistics Committee posted on October 19, through-August Belarus exports dropped 44.5 percent year-on-year. Imports fell 34.7 percent in the same time period. -------------- Security -------------- ¶14. (U) Collective Security Treaty Organization, Belarus is a Member, But Does it Matter The Spokesperson for the Collective Security Treaty Organization (CSTO) Secretariat announced on October 20 that President Lukashenka had signed "a package of documents," including the CSTO's Rapid Response Forces (RRF) agreement. Initially, Lukashenka boycotted the June 14 CSTO meeting that adopted the accords because of a dairy dispute with Russia. Lukashenka's ultimate endorsement of the RRF commits Belarusian military forces to a Russian-based unified command with the ostensible purpose of countering "military aggression," international terrorism and extremism, transnational organized crime and drug trafficking as well as ensuring the CSTO's efficient participation in the maintenance of international peace and security. The Russian daily Kommersant speculated on October 21 that Belarus will "become a key RFF member-state" and has committed to deploying about 5,000 Belarusian servicemen. A number of the Belarusian human rights advocates expressed concerns that the RFF may be used to suppress opposition demonstrations in CSTO member-states. A Vilnius-based Belarusian Institute for Strategic Studies think-tanker suggested that because the Belarusian Constitution prohibits the stationing of troops beyond Belarus borders, this is merely a non-binding agreement meant to appease Russia. -------------- Quote of the Week -------------- ¶15. In his remarks made at the celebration of the presidential security service' 15th anniversary Lukashenka said: MINSK 00000360 005.3 OF 005 "We cannot underestimate, as it often happened in the history of our Motherland, foreign policy aspects, which can influence the situation in Belarus in the worst possible way~ Now, in the first place, these are the consequences of the global economic crisis, which hit the USA and other major world nations. There are some people both inside and outside Belarus who are trying to use the existing difficulties to achieve their own unfair goals, make people lose trust in the government and sow the seeds of discord and unrest in the country. SCANLAN