BELARUS BI-WEEKLY POL/ECON REPORT - JANUARY 29, 2010

UNCLAS SECTION 01 OF 03 MINSK 000032

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SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - JANUARY 29, 2010

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

TABLE OF CONTENTS

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

- GOB Increases Harassment and Pressure Against Unrecognized
Union of Poles (para. 2)
- United Democratic Forces Pledge to Continue Activities Amid
Uncertainty and Defection (para. 3)
- Another Activist of the "Case of 14" is Amnestied, Dubski
Remains in Jail (para. 4)

Domestic Economy
--------------

- Belarus Signs Oil Deal With Russia, But Belarus Claims It Is
Only Temporary (para. 5)
- EU and Belarus Officials Discuss Customs Union, Resumption of
GSP and Belarus' WTO Accession
(para. 6)
- China to Open $5.7-Billion Credit Line for Belarus (para. 7)
- Belarus Ranked 150th Freest Economy among 179 Countries
(para. 8)

Quote of the Week (para. 9)
--------------

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Civil Society
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2. GOB Increases Harassment and Pressure Against Unrecognized
Union of Poles

As part of an effort to keep them from attending a January 21
meeting in Ivyanets, police detained for several hours up to 46
members of the Warsaw-backed Union of Poles in Belarus (UPB),an
organization not recognized by the GOB. All were released with
no charges filed after a Polish diplomat intervened on their
behalf. The Ivyanets local chapter of the state-controlled
Union of Belarusian Poles was scheduled to elect a new
chairperson to replace Teresa Sobal, longstanding prominent
manager of the local Polish House. The UPB members succeeded in
reelecting Sobal. However, the GOB moved at the same time to
engineer the appointment of a more pliant candidate to chair the
local chapter. Confrontation resulting from the split between
the two Unions has deepened since 2005, with pressure on the UPB
increasing. Police opened on December 18, 2009 a criminal case
against Sobal over alleged misappropriation of funds in 2004.
She has been banned from traveling abroad during the
investigation. In addition, UPB leader Anzhelika Borys is
facing charges of purported tax evasion. The Polish Embassy in
Minsk expressed concern about the detentions and "escalation of
the conflict" and warned that "all existing agreements on the
status of this organization [UPB] are now in jeopardy." The
European Parliament President, Jerzy Buzek, stated on January 22
that "we should respond decisively and firmly." The GOB
countered by informing the Polish Embassy on December 26 that
certain Polish diplomats in Belarus had failed to comply with
"international agreements regulating activities of foreign
diplomats in host countries."


3. United Democratic Forces Pledge to Continue Activities Amid
Uncertainty and Defection

The United Democratic Forces' (UDF) Political Council held a
meeting on January 24 to discuss the group's membership and
overall strategy in advance of the April 25 local election and
2011 presidential poll. Leader of the United Civic Party and
UDF Co-chair Anatol Lyabedzka refuted speculation that there
would be no viable political opposition to contest these
elections. "Despite different opinions," he said, the UDF
"would work as one team during the local elections," including
fielding candidates, campaigning, and monitoring the vote
count." However, the UDF decided to postpone its presidential
primaries until at least April 2010 due to elevated pressure by
the GOB on a number of teachers in the Minsk region who had been
threatened with dismissals for their affiliation with opposition
groups. UDF Co-chair and Belarusian Party of the Left
Spravedlivy Mir leader Syarhey Kalyakin echoed Lyabedzka's
remarks on the need for opposition unity, saying that "under
conditions of a dictatorship" there could be "no alternative to
the UDF" and those "trying to destroy this platform" were acting
"irresponsibly." He urged the UDF to review its strategy, have

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more members represented in the leadership, and make activities
more effective. Belarusian Social Democratic Party Hramada
Chairman and UDF Co-Chair Anatol Lyaukovich called upon UDF
members to nominate one candidate per district to run for local
polls. An independent political expert with the UDF, Vatslau
Areshka, opined that the coalition would suspend attempts to
establish a dialogue with the GOB until authorities demonstrate
willingness to engage on an equal basis. He also suggested
streamlining efforts to forge more unity among opposition
groups, in particular, between the recently established
Belarusian Independent Bloc (BIB) and the UDF. However, the
BIB's core member For Freedom movement announced its withdrawal
from the UDF on January 26, but stated that it might cooperate
with "separate" UDF members because in its view "the coalition
does not exist anymore."


4. Another Activist of the "Case of 14" is Amnestied, Dubski
Remains in Jail

On January 15, police notified Ales Charnyshou that he had been
granted amnesty. Charnyshou is one of the 14 opposition youths
who had participated in the January 2008 unsanctioned
entrepreneur demonstrations in Minsk. He had been serving a
"correctional labor" sentence under which he was required to pay
15% of his salary to the state and banned from traveling abroad.
In the "case of 14," 1) nine have been amnestied or have paid
their fines; 2) two continue to serve sentences; Artsyom Dubski
is serving a one year prison sentence for violating his partial
house arrest, and Maksim Dashuk remains under an extended
partial house arrest; and 3) three fled overseas and face
criminal evasion charges if they return to Belarus. Dubski has
been denied an early release due to alleged violations of the
"prison regime," deemed ineligible for the 2009 amnesty
procedure because he is serving a consecutive term, and has not
received an answer to his appeal to the Supreme Court following
a denial by the Mahilyou Regional Court.

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Domestic Economy
--------------


5. Belarus Signs Oil Deal With Russia, But Belarus Claims It Is
Only Temporary

Belarus' Vice Premier Uladzimir Syamashka and his Russian
counterpart Igor Sechin signed a package of documents on January
27 that will govern Russian oil deliveries to Belarus and oil
transit across Belarusian territory in 2010. According to
initial readings, Belarus agreed to Russia's conditions that
duty-free deliveries will be limited to the 6.3 million tons a
year needed for domestic purposes. (Amounts above that imported
by Belarus for refining and transshipment will no longer enjoy
preferential duty rates). Syamashka said the parties also
agreed that oil used to make refined oil products for export to
Russia will not be subject to Russian export duties. There is
scope in the agreement for the total volume of duty-free
deliveries for domestic needs to increase in proportion to
Belarus' GDP growth, which is projected by the GOB to rise by up
to 11 percent this year (Note: IMF projections fall within a 3-4
percent range. End Note). Syamashka claimed that "Belarus'
budget losses will not be as heavy as had been expected." The
parties also signed a joint declaration pledging uninterrupted
transit of Russian oil across Belarus to third countries.
Syamashka told the press that Belarus's fee charged for the
transit of Russian oil will increase by 11 percent. The fee was
set previously at $3.9 per ton. Minsk also reserves the right
to annually raise the fee "by the rate of inflation in Russia
plus three percent," Syamashka said. Russian DPM Sechin
reportedly told Russian President Dmitry Medvedev later on the
same day that the signed agreements "represent a compromise" and
are "well balanced." Sechin said, "We agreed to a number of
compromises, bearing in mind the special relationship with our
brotherly republic, with the people of Belarus." Medvedev was
quoted as saying that Russia's position was to "give our
Belarusian partners benefits by providing delivery for internal
use at a reduced price and, on the other side, to guarantee
transit." The Chairperson of Belarus' National Bank (NBB) Petr
Prakapovich stated that because Russian crude oil supplied to
the country (for refining and onward sale) is going to be
subject to full export duties, Belarus will need additional
external financing. In this regard, he does not rule out the
possibility of signing a new long-term agreement with the IMF,
an issue to be addressed later. Also Syamashka announced that
Belarus will continue insisting on abolishing export duty on
crude oil within the Customs Union. The signed agreement "will
not live for long," Syamashka said, and added that "goods should
move freely within the customs union. I think the Russian side

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realizes this. We should return to this matter once again and I
think there will be considerable radical changes."


6. EU and Belarus Officials Discuss Customs Union, Resumption of
GSP and Belarus' WTO Accession

According to the media, the office of the European Commission in
Minsk issued a statement on January 27 to express concern about
the possible negative effects that the establishment of the
Customs Union of Belarus, Kazakhstan and Russia may have for
Belarus-EU trade. The visiting European Commission's trade
delegation urged their Belarusian counterparts on January 25-26
to "support the removal of adverse measures introduced by the
Customs Union that brought about increased tariffs for numerous
important EU export product~ and resist protectionist pressure
by refraining from imposing new de-liberalization measures."
With reference to the potential resumption of trade benefits for
Belarus under the EU Generalized System of Preferences (GSP),
the EU officials noted without elaboration that "Belarus has the
possibility to create the necessary conditions to restore such a
preferential regime." (Note: To obtain access to GSP it must
receive a good score card on union activity in Belarus from the
International Labor Organization, and last fall the ILO reported
backtracking versus progress by the GOB) Belarus, also, did not
succeed in gaining EU support for its WTO accession efforts.
According to the EU statement, the delegation "sought to better
understand recent developments in Belarus's economic and trade
policies, including effects of the introduction of Customs Union
rules, and emphasized the need to receive from Belarus updated
information (on implementation of those rules)."


7. China to Open $5.7-Billion Credit Line for Belarus

The Chairman of Belarus' National Bank of (NBB) Pyotr
Prakapovich told reporters in Minsk on January 27 that "Belarus
and China have very good relations in the financial sphere. We
and China have signed an agreement on the opening of a
$5.7-billion credit line and we are working on implementing
(projects)." (Note: This follows a three-year swap deal struck
by Belarus and China in March 2009. Under the deal, China is to
give 20 billion yuans (some $3 billion) to Belarus and in return
receive eight trillion Belarusian rubles. As a result of the
deal, Chinese importers will pay for Belarusian-made goods in
rubles and vice versa.)


8. Belarus Ranked 150th Freest Economy among 179 Countries

According to media reports, Belarus was ranked 150th freest
economy among 179 states in the 2010 Index of the Heritage
Foundation and The Wall Street Journal released last week.
Belarus is ranked 42nd among 43 European countries. According
to the report "Belarus's economy is still characterized by
pervasive state involvement and control, the small private
sector remains marginalized~ The government controls many
financial institutions, directly or partially. Beside insecure
property rights and corruption, foreign investment faces
restrictions and bureaucratic inefficiency."

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Quote of the Week
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9. Commenting on the new appointments made in the Belarusian
Committee on State Security (BKGB) on January 22 Lukashenka
noted that the KGB is "in the first place required to provide
thoroughly verified information of a preventive nature, based on
which major managerial decisions can be made."
SCANLAN