BELARUS BI-WEEKLY POL/ECON REPORT - APRIL 10, 2009

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SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - APRIL 10, 2009

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

TABLE OF CONTENTS

Elections
--------------
- Lukashenka Approves Election Law Amendments (para. 2)

Civil Society
--------------
- GOB Continues to Prosecute Democratic Activists (para. 3)
- Enforcement of Controversial Internet Regulations on Hold
(para. 4)

Religious Freedom
--------------
- Protestant New Life Church Fined; Two Catholic Priests Banned
(para. 5)

Economy
--------------
- Russia and Belarus Still at Variance over Duties on
Belarus-Bound Crude Oil (para. 6)
- Gazprom Claims Gas Price for Belarus in Q1 to Near $168 per
1,000 Cubic Meters (para. 7)
- Lukashenka pledges Belarus independence within the Customs
Union (para. 8)
- International Reserves Grew in 2009 Thanks to Foreign Loans
and Privatization (para. 9)
- Lukashenka's instructions to National Bank defy IMF
recommendations (para. 10)

Quote of the Week (para. 11)
--------------

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Elections
--------------


2. Lukashenka Approves Election Law Amendments

On January 6, President Lukashenka signed into law a bill of
amendments to the Electoral Code. It was approved by the
parliament on December 17 (reftel Minsk 413). Lukashenka is
expected to issue an edict within a week to schedule a date for
the local elections in April and, subsequently, a timeframe for
the campaign. In her remarks to the press on January 2, Central
Election Commission Chairwoman Lidziya Yarmoshyna indicated that
there would unlikely be large numbers of candidates contesting
the 24,000 positions at stake in the local elections, "five" per
district in Minsk and an average of "1.5" per district in rural
areas. She said that more funding ($13 million) had been
allocated for the 2011 presidential polls, "assuming there would
be a total of 10 registered candidates." Yarmoshyna yet again
asserted that international observers would not be invited to
monitor local elections and urged local political parties, which
she said lack a will to win, be more "active" and play "a more
prominent role in election campaigns."

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


3. GOB Continues to Prosecute Democratic Activists

In an apparent bid to further crackdown on opposition symbols,
police apprehended Syarhey Kavalenka, a Conservative Christian
Party member, for posting a white-red-white flag (an
independence era symbol that is now illegal in Belarus) on a
Christmas tree in Vitsyebsk on January 7. He was originally
jailed for two months pending his trail and unexpectedly
released on January 12. Kavalenka has been banned from
traveling abroad and is facing hooliganism charges that carry a
maximum prison sentence of six years. He expressed no regret
over displaying the flag and no doubts that it would "ultimately
regain its official status." In connection to this case, police
raided on January 13 the residence of Syarhey Serabro, a local
journalist who took and disseminated pictures of the posted
flag, and confiscated his computers and a camera. In a separate
incident, a Navahrudak town court fined Belarusian Christian
Democracy party activist Yury Kazak $3,050 for allegedly
splashing green paint on a bust of Lenin in the town center on

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November 6. The party condemned the fine as "a humiliating
judgment."


4. Enforcement of Controversial Internet Regulations on Hold

A proposed bill authorizing tight regulation of the internet in
Belarus may not be adopted in the near future, according to
reports sourced to a media expert Yury Zizer, who owns the
"tut.by" news portal. The bill was drafted by the Council of
Ministers at the end of 2009 without open public debate. Members
of the independent media have voiced criticism of the bill
(reftel Minsk 426). Ziser suggested that the Presidential
Administration may substantially rewrite the bill "to soften"
some of its repressive provisions and clarify ambiguities. He
explained that the GOB appeared to have rushed to draft a bill
in the run-up to local elections, leaving the proposed
legislation with inconsistent requirements. He expects the
administration to study the matter further before putting
forward an alternative draft.

--------------
Religious Freedom
--------------


5. Protestant New Life Church Fined; Two Catholic Priests Banned

Authorities continued to pressure the New Life Full Gospel
Church (NLC) in Minsk, while moving to limit services conducted
by Polish Roman Catholic (RC) clergy in Belarus. On January 4,
the NLC received a summons from the Minsk city government's
natural resources and environmental protection department and
were fined more than $91,000 for allegedly polluting the ground
around its building with traces of oil, causing extensive
damage. Church leaders said the action was aimed at evicting
them from their premises. In the Hrodna region, authorities
denied two Polish priests permission to continue religious work
in 2010. Priest Jan Bonkowski, who has served in the village of
Mizhevitsi for 20 years, and priest Edward Smaga, who worked in
Indura, have been required to halt their activities and leave
Belarus. Almost half of the Catholic priests in Belarus are
Polish, as it remains difficult to train and educate a
sufficient number of clergy in Belarus, according to RC leaders.
The GOB has a record of expelling Polish clergymen in recent
years, claiming they fail to preach in Belarusian or Russian. A
senior religious and minority affairs official, Leanid Hulyaka,
stated on January 14 that the GOB "has a right to require
Catholic priests to adhere rigorously to Belarusian laws."

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


6. Russia and Belarus Still at Variance over Duties on
Belarus-Bound Crude Oil

Meetings in early January between officials from Belarus and
Russia have failed thus far in forging agreement on terms for
Russian oil supplies to Belarus. Under the previous 2007-09
agreement, crude oil exported to Belarus was subject to reduced
export duties set at 35.6% of the rate applied to other
countries. In December, Russian deputy PM Igor Sechin announced
that Russia would supply up to six million tons of oil to
Belarus duty free to help cover domestic needs. Total oil
exports to Belarus in 2010 are projected at 21.5 million tons,
with Belarus expected to pay full duty rates for amounts over
the six million ton figure. Responding to Moscow's warnings
that failure to reach a new agreement could lead to imposition
of full duty rates on all deliveries, the GOB issued a statement
on January 1 saying that Russia was departing from the spirit of
Customs Union terms. Earlier the GOB had allegedly warned it
would raise transit fees tenfold for Russian oil deliveries to
Poland and Germany to $45 per ton if Russia refused to ship all
oil to Belarus free of export duties. Pending formal
establishment of the Customs Union, scheduled for July 2010, the
GOB has proposed an extension of existing 2009 terms for oil
deliveries. Lukashenka reportedly sent a letter to Medvedev on
January 13 on the issue but its content has not been disclosed
to public. Belarus reportedly continues receiving oil from
Russia in volumes "previously agreed upon" for transit of
Russian oil to consumers in the EU, but supplies for Belarus'
domestic needs may be halted shortly. In a related move, the
Belarusian state energy monopoly Belenerha issued a statement on
January 4, saying that Russian electricity suppliers had failed

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to agree with the GOB on 2010 terms for the transit of electric
power through Belarus to Kaliningrad and the Baltic countries.
No decision has been reached as of January 14. The Guardian
reported on January 4 that the oil dispute between Russia and
Belarus could again raise concerns across Europe about
dependence on Russian energy and the leverage it provides the
Kremlin.


7. Gazprom Claims Gas Price for Belarus in Q1 to Near $168 per
1,000 Cubic Meters

On December 30, Russia's gas monopoly Gazprom reported that CEO
Alexei Miller and Belarus' First Deputy PM Uladzimir Syamashka
had discussed gas supplies to Belarus in 2009, as well as
transit through Belarus' territory and prospects for cooperation
in 2010. CEO Miller announced that "under the contract the
formula-calculated gas price for Belarus in Q1 2010 will be
close to $168 per 1,000 cubic meters." In 2009, it had averaged
$150.


8. Lukashenka pledges Belarus independence within the Customs
Union

According to media reports, Lukashenka stated in his December
30, 4-hour press conference that the GOB would withdraw from the
Customs Union with Kazakhstan and Russia if necessary to protect
Belarus' independence. The Union is scheduled to come into force
on July 1, 2010. He refuted as "unfounded" fears that Belarus
will leave decision-making up to Russia or lose its sovereignty.
In characteristic fashion the President warned that "these
monsters [Russia and Kazakhstan] may collude," and he said the
GOB will "watch carefully" because those two countries "have
similar economies, similar interests, gas, oil; they have it
all, and we do not." He said the GOB will take "additional
precautions" and stressed that "we have independent positions on
all issues." According to Lukashenka, "there should be no fear
or loss, only benefits" as the GOB "will not do what does not
benefit us." At the same press conference Lukashenka cited the
need to improve ties with the West and accelerate modernization
of the economy, two major lessons Belarus learned in 2009.


9. International Reserves Grew in 2009 Thanks to Foreign Loans
and Privatization

According to media reports, the Belarus' National Bank (NB)
reported on January 8 that according to IMF calculations,
Belarus' international reserves increased by $1,053.1 million or
22.9% in December 2009 to $5,644.9 million. Overall reserves in
2009 increased by $2,583.8 million over the 2008 end of year
level. However, exports earnings were a very small percentage
of the accumulated reserves. In 2009, Belarus received loans of
$2.855 billion from the IMF, $500 million from GOR, $200 million
from the World Bank, and $200 million from Russian banks, which
also plan to organize a Belarus' sovereign bond issue on the
Russian market of up to $498 million. Belarus also received a
one-time increase of $448.7 million in IMF Special Drawing
Rights (SDRs). It also received $625 million from Russia's
Gazprom for the sale of a stake in the Beltranshaz gas pipeline,
as well as approximately $400 million in other privatization
revenues. In short, the increase in Belarus's foreign exchange
reserves resulted from loans totaling more than $5 billion as
well as earnings from sales of state enterprises. In 2007, the
GOB had set a target of increasing its international reserves to
$10 billion by 2010.


10. Lukashenka's instructions to National Bank defy IMF
recommendations

According to the media, Lukashenka instructed the National Bank
(NB) on January 5 to open credit lines for state-owned
Belarusbank and Belahraprambank totaling approximately $1.4
billion. The loans will be extended for five years at the
refinancing rate of the NB, currently at 13.5%, to permit banks
to finance "priority projects for the national economy." IMF
Resident Representative in Belarus Natalia Kolyadina said on
January 12 that the Lukashenka-approved decision to provide $1.4
billion in loans to the two largest state-controlled banks had
not been discussed with the IMF and might affect programs under
the IMF Stand-By Arrangement for Belarus. She pointed out that
long-term lending is not a function of the NB but said the IMF
shares the GOB's concerns over the liquidity gap in
state-controlled banks. The IMF has suggested alternative ways
to address the situation, including the establishment of a

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Specialized Development Agency to manage loans issued to support
state programs and credit sources. Kolyadina confirmed that the
IMF had recommended the GOB not make budget injections into
state-owned banks. Commenting on directed lending, Koliadina
said Belarusian authorities and IMF had agreed that Belarus
would curtail lending for state programs. Nevertheless, the GOB
has directed state banks to provide $2.4 billion in preferential
housing loans in 2010, a move which Kolyadina explained could
"drive out financing on market terms and make regular loans more
expensive."

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


11. While presenting 2009 Awards for Spiritual Revival and
other awards at a ceremony in Minsk on January 8.
Lukashenka reiterated his claim that the ongoing global economic
crisis was the result of "a spiritual crisis."

"Human envy, stealing, deception, financial market fraud,
corruption had been piling up for years and swept through the
entire world. A spiritual crisis is much more dangerous than any
economic shocks, because it is much more difficult and takes
much more time to overcome it. Treachery, meanness, lies corrode
the soul, undermine the physical and moral health of not only a
certain individual but of entire nations and peoples," concluded
Lukashenka.
SCANLAN