BELARUS BI-WEEKLY POL/ECON REPORT - DECEMBER 18, 2009

UNCLAS SECTION 01 OF 04 MINSK 000413 SIPDIS FOR EUR/UMB (ASHEMA) FOR DRL (DNADEL) FOR EUR/ACE (KSALINGER AND NKRYSTEL) EMBASSY KYIV FOR USAID (JRIORDAN AND KMONAGHAN) E.O. 12958: N/A TAGS: PGOV PREL PHUM ECON EFIN ETRD EINV BO SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - DECEMBER 18, 2009 MINSK 00000413 001.3 OF 004 ¶1. The following are brief items of interest compiled by Embassy Minsk. TABLE OF CONTENTS Civil Society -------------- - Christian Democracy Party Denied Registration, Members Harassed and Discredited (para. 2) - State TV Criticizes Opposition Activists over Abduction Allegations (para. 3) - President's Bill Amending Electoral Code, Passed by Parliament, Now Awaits President's Signature (para. 4) Domestic Economy -------------- - Russia's Sberbank buys Belarus' fourth largest bank and becomes a credit line for GOB and state industry (para. 5) - Belarus secures 2010 oil supplies on favorable terms; gas supply deal to be resolved (para. 6) - Russia, Belarus and Kazakhstan introduce uniform non-tariff standards (para. 7) - WB increased the financial assistance limit for Belarus (para. 8) - GOB projects 11-13 percent GDP growth in 2010 (para. 9) - NB likely to fall short of its IMF undertaking to restrict budget subsidies (para. 10) Quote of the Week (para. 11) -------------- -------------- Civil Society -------------- ¶2. Christian Democracy Party Denied Registration, Members Harassed and Discredited On December 9, the Justice Ministry (MOJ) released an online statement that the Belarusian Christian Democracy (BCD) party had been denied its second registration application in 2009. The MOJ alleged the BCD had provided fraudulent information related to founding members ostensibly employed in Russia and not residing in Belarus. The BCD called the MOJ's decision "predictable" and would appeal it to the Supreme Court. The founders in question were reportedly pressured by the Belarusian KGB, employers, and local authorities to renounce their party membership. Authorities continue to harass BCD members and discredit its leadership in TV programs and state newspaper articles, calling the BCD "a phantom" and "a fiasco." According to Co-Chair Paval Sevyarynets, criticism from the EU prompted the MOJ to initiate another inquiry to justify its actions in connection with the BCD's October 31 founding conference. Sevyarynets also stated that an activist from Vitsyebsk, Ales Halavan, who had been subjected to harassment, decided not to return to Belarus after attending a seminar for young Christian Democrats in Riga. ¶3. State TV Criticizes Opposition Activists over Abduction Allegations State-controlled First National TV aired a program December 13 claiming the alleged kidnappings of a number of opposition youth leaders by security services were fabricated, labeling the allegations as "provocations" and "a travesty." The TV station said its investigation showed the activists "masterminded" their abductions to attract "attention and foreign grants." The activists dismissed these findings and stood by their account that the abductions took place and included "mock executions." Between November 27 and December 6 three opposition youths, including Malady Front leader Zmitser Dashkevich, claimed they were shoved into vehicles and released hours later in the woods outside of Minsk as part of an effort to deter them from engaging in political activities. After Dashkevich filed a complaint to the prosecutor's office, police searched his apartment and confiscated printed materials. In previous incidents, law enforcement agencies failed to investigate and punish perpetrators, including the alleged abduction of Young Belarus leader Artur Finkevich in December 2008 and March 2009, ¶4. President's Bill Amending Electoral Code, Passed by MINSK 00000413 002.3 OF 004 Parliament, Now Awaits President's Signature On December 17, the Council of the Republic, Belarus' upper parliamentary chamber, voted unanimously to approve a bill of amendments to the Electoral Code. On December 11, the lower chamber of the parliament had adopted the bill without any substantive amendments (reftel Minsk 394). President Lukashenka is expected to sign the bill into law before the end of the year. In early December, spokesman for the OSCE Office for Democratic Institutions and Human Rights (ODIHR),Jens Eschenbaecher, stated that the agency had not received the amendments for review despite an earlier agreement with the GOB. Central Election Commission (CEC) Chairwoman Lidziya Yarmoshyna defended GOB's refusal, saying that "if one wants to lay an idea to rest, one should not hold public discussions" and that submitting the edited draft for examination by international experts would be "international humiliation." She said that "90 percent" of the ODIHR recommendations are reflected in the bill of amendments. In a conversation with the Chargi, CEC Secretary Mikalai Lazavik said that the GOB was "speeding up" adoption of the amendments in advance of local elections scheduled for April 2010. When pressed, Lazavik acknowledged the GOB had backed away from an earlier understanding on accepting ODIHR input during the amendment process but echoed the CEC Chair's assertion that the amended bill had taken OSCE recommendations into account, and that in any event the outcome was more important than the process. He also tried to deflect criticism over the GOB's decision not to use transparent ballot boxes, saying that "equating that issue with the transparency of elections themselves distorts the notion of transparency." In further reaction carried December 10 by First National TV, Presidential Chief of Staff Uladzimir Makey called the Western stance on Belarusian election campaigns "offensive." Electoral experts are voicing skepticism regarding procedures in place for election observers and the vote count, but welcoming measures aimed at simplifying the candidate nomination and registration process. -------------- Domestic Economy -------------- ¶5. Russia's Sberbank buys Belarus' fourth largest bank and becomes a credit line for GOB and state industry According to press reports, the GOB agreed on December 11 to sell a 93.3% stake in Belarus' BPS-Bank to Russia's government-controlled Sberbank for $280.8 million. BPS-Bank, the country's fourth largest, is 95.9% GOB-owned. Under the agreement, Sberbank will provide BPS-Bank with up to $2 billion for direct lending to industry, which is with rare exception state owned. Part of the agreement calls for Belarus to give Sberbank a mandate to place $2 billion in Eurobonds and up to 15 billion Russian rubles worth of GOB loans on the Russian market, according to Belarus First Deputy Prime Minister Vladimir Semashko. Sberbank will also arrange syndicated loans for Belarus totaling $300 million and 5 billion Russian rubles. The GOB and Sberbank also signed a joint action plan that empowered Sberbank to act as the GOB's privatization consultant from 2010 to 2014. ¶6. Belarus secures 2010 oil supplies on favorable terms; gas supply deal to be resolved According to media sources, Belarus will get 8-9 million tons of duty-free crude oil from Russia in 2010. Belarus' Deputy Prime Minister Vladimir Semashko made the announcement December 11 following Belarusian-Russian presidential talks in Moscow the previous day. Belarus expects to import an additional 21 million tons in 2010 "not subject to Russian export duties, but at a price to be determined later." According to Semashko, the presidents instructed their governments to settle the issue of gas supplies by the end of 2009. But, Union State Secretary Pavel Borodin said the same day that "the presidents of the two states gave instructions to have additional price coordination talks and leave gas and oil prices unchanged at the 2009 level." According to Deputy PM Semashko, Belarus and Russia agree to reach a compromise on introducing "equal profit" prices (European price) for domestic consumers by 2014-2015. ¶7. Russia, Belarus and Kazakhstan introduce uniform non-tariff standards MINSK 00000413 003.3 OF 004 According to the media, Belarusian Prime Minister Syarhey Sidorski announced in St. Petersburg on December 12 that the Premiers of Russia, Belarus and Kazakhstan signed a package of documents for the introduction of uniform technical, sanitary and phyto-sanitary standards, and procedures to remove barriers to the free movement of goods within their common economic zone. Kazakh Prime Minister Karim Masimov announced at a news conference on the same day that the three countries will establish a common economic zone no later than by January 1, ¶2012. Earlier reports had suggested the zone would be established some time in 2010. ¶8. WB increased the financial assistance limit for Belarus According to press reports, Country Director for Belarus, Moldova and Ukraine, Martin Raiser, announced on December 4 that the World Bank (WB) had increased its financial assistance limit for Belarus to $250 million annually, up from $100 million. Announcement came during discussions about the WB's cooperation strategy for 2008-2011. On the question of how much borrowing will be required, Belarus Finance Minister Andrey Kharkavets said on December 7 that the GOB will not need foreign loans to finance the state budget deficit in 2010 because there are "enough domestic sources, including funds that remain from previous years." ¶9. GOB projects 11-13 percent GDP growth in 2010 According to media reports, the GOB is optimistic about the economy's prospects in 2010. The Lower House approved on December 9 the draft 2010 national budget, which Belarus' Finance Minister Andrey Kharkavets described as "balanced" and "capable of contributing to economic growth." The budget provides for the abolition of four taxes while increasing the VAT from 18 to 20 percent. Prime Minister Syarhey Sidorski stated on December 7 that despite the expected economic difficulties, Belarus' GDP is projected to grow by 11 to 13 percent in 2010. "The targets we have set ourselves are very high and ambitious. But to achieve them is a matter of honor," Lukashenko state publicly on December 14. "We must understand that only by reaching the targets we will be able to make up for the setback brought about by the global crisis and restore the high expansion rates." He said the targets adopted by a presidential ordinance are considered a law in Belarus, and they must be performed, not discussed. Through November of 2009 the GDP decreased 0.4 percent year-on-year, despite original GOB plans to have 10-12 percent growth and the IMF's prediction of 3.3 percent this fall. IMF's projection for GDP growth in Belarus for 2010 ranges from 3-4%. ¶10. NB likely to fall short of its IMF undertaking to restrict budget subsidies. According to press reports, Belarus' Finance Ministry and the National Bank (NB) are at variance over the needed increase in charter capital for the country's two largest banks, Belarusbank and Belagroprombank. While the country's Finance Minister Andrey Kharkavets told reporters in the Lower House on December 9 that it would not be expedient to provide state banks with public funds, Deputy National Bank (NB) Chairman Nikolai Luzgin said on December 10 that a total of $714 million needs to be injected from the state budget to fill a $6.86 billion gap between the banks' long-term assets and liabilities caused by the "involvement in preferential housing construction programs." Under the current SBA with the IMF, Belarus undertook to cease injections from the budget starting in 2010 and restrict injections in 2009 to $125 million, but the NB hopes to negotiate the issue with the IMF. -------------- Quote of the Week -------------- ¶11. During December 14 GOB meeting on topical issues of Belarus' social and economic development in 2010 Lukashenka harshly criticized the country's media, both print and electronic. He said: "Mass media do not work at all today. As for the television, there is nothing to watch both here and, luckily for us, abroad. Nobody listens to the radio in Belarus. People, not even all of them, watch only music videos. Amusement - that all is not interesting." In that context, Lukashenka drew the attention of MINSK 00000413 004.3 OF 004 the Head of his administration Uladzimir Makey to the insufficient ideological work in the entire country. SCANLAN