BELARUS BI-WEEKLY POL/ECON REPORT - FEBRUARY 12, 2010

UNCLAS SECTION 01 OF 04 MINSK 000047

SIPDIS

FOR EUR/UMB (ASHEMA)
FOR DRL (DNADEL)
FOR EUR/ACE (KSALINGER)
EMBASSY KYIV FOR USAID (JRIORDAN AND KMONAGHAN)

E.O. 12958: N/A
TAGS: PGOV PREL PHUM ECON ENRG BO
SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - FEBRUARY 12, 2010

REF: A. A: MINSK 032

B. REF: B: 09 MINSK 426

MINSK 00000047 001.3 OF 004



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

TABLE OF CONTENTS

Civil Society
--------------
- GOB Crackdown on Polish Minority Group Raises Tensions
- One Year of Pretrial Detention for Two Vaukavysk Activists
- Presidential Edict: Possible Move To Control the Internet
- Despite the Constitution Alternative Service Is Not An Option

Economy
--------------
- Belarus Coming to Grips with Limited Duty-Free Russian Oil
- GOB Satisfied with Russian Electric Supply and Transit
Agreement
- IMF: Economy is Fragile, Some Encouraging Signs, But What Next?
- Gazprom Contract Remains Unchanged Despite GOB's Expectations

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

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


2. GOB Crackdown on Polish Minority Group Raises Tensions

A series of moves by authorities against a Polish minority group
in Belarus not recognized by the GOB has triggered a diplomatic
response by the Polish government. According to press reports,
the Polish MFA conveyed its "serious concerns" through the
Belarus ambassador in Warsaw, while recalling its ambassador
from Minsk for two days of consultations. These actions
followed a police raid, February 8, on the Polish House in the
Ivyanets of the local Warsaw-backed Union of Poles of Belarus
(UPB). Management of the Polish House (educational and cultural
center) was cited for "illegal possession of property" (Ref A).
Seizure of the Ivyanets facility leaves only two of the original
16 UPB-run Polish Houses remaining in Belarus, one in Barysau,
the other in Baranavichy. Press reports also quoted Polish FM
Radoslaw Sikorski as saying that "respect for the rights of
national minorities and the opposition are conditions for
rapprochement between Belarus and the EU." In related actions,
a Hrodna-based company Polonica, headed by UPB leader Anzhelika
Borys, was fined $25,000 on February 5 over purported tax
evasion in connection with receiving money from the Polish
organization "Wspolnota Polska." Polonica has provided support
for Polish Houses that promote Polish culture and language in
Belarus. Also on the same day, the court fined Borys $1,500 in
absentia. In a separate incident on February 5, Borys' car was
vandalized in Hrodna. On February 10, over 200 UPB activists
and supporters held a peaceful unsanctioned demonstration of
solidarity to remember Polish victims of Stalinist purges in the
1930's. Police closely observed and recorded the meeting but
did not interfere, and no detentions were reported.


3. One Year of Pretrial Detention for Two Vaukavysk Activists

Two Vaukavysk activists, Mikalay Autukhovich and Uladzimir
Asipenka, have now spent more than a year in pretrial detention
awaiting conclusion of criminal investigations against them and
a Supreme Court decision for scheduling a hearing date. The
court is also expected to rule on whether the two defendants
will be tried in open or closed session. The two were arrested
on February 8, 2009 on charges of arson and later elevated to
terrorism allegedly targeting local officials in the Hrodna
region. Interior Minister Anatol Kulyashou said the case would
not have been sent to the Supreme Court without substantial
evidence, but he expects the case to be tried in open court.
Autukhovich and Asipenka remain in custody at a pretrial
detention center in Minsk. An associate, Yury Lyavonau, also
arrested February 8, 2009, was unexpectedly released in August
2009 and cleared of charges on September 24, 2009.


4. Presidential Edict: Possible Move To Control the Internet


MINSK 00000047 002.3 OF 004


President Lukashenka signed on February 1 an edict on use of the
Belarus national segment of the internet. Officially described
as aiming to improve usage of the internet, the Presidential
Operational and Analytical Center (OAC),an agency in charge of
maintaining information security, stated that the edict was
adopted "for people and the care for people." According to
official claims, the document is based on "the experience of
leading countries, including Germany, Sweden, the U.S. and
France," as well as "Kazakhstan which is well advanced in this
area." Communications Minister Mikalay Pantsyaley asserted that
"every user will have the right to ask his or her provider to
limit access to certain sites." The CEO of a software company
and owner of the popular TUT.by news portal, Yury Ziser,
commended the GOB for significantly amending the original
"repressive" version of the edict (Ref B),saying the proposed
regulations have been "changed for the better." However, Ziser
underscored that "much will depend on how the proposed measures
are implemented by the GOB." The edict, not yet in final form,
awaits cabinet review by the Council of Ministers and issuance
of specific provisions and regulations. Activists and
independent media fear the edict will permit the GOB to block
access to opposition web sites, especially important in the
run-up to the presidential 2011 elections. Civil society
representatives continue to express concern about provisions
that will require internet service providers to identify
subscriber devises and services provided to clients, describing
the edict as a means of "controlling information that is
distributed over internet." Belarusian Association of
Journalists Chairwoman Zhana Litvina called upon the GOB to
submit the edict to international experts for their assessment
to establish whether it is consistent with international
standards.


5. Despite the Constitution Alternative Service Is Not An Option

GOB continues to deny youth their right to alternative civilian
military service as guaranteed by the Article 57 of the Belarus
Constitution. Despite Belarus' international human rights
commitments, the GOB has failed to enforce a mechanism of an
alternative service for those army recruits who seek civilian
service due to their religious beliefs. On February 1, a court
in Minsk sentenced Ivan Mikhaylau, a member of a Messianic
Jewish community, to three months in jail for allegedly avoiding
compulsory draft. Mikhaylau had been in pretrial detention
since his arrest on December 15 after he refused to appear at a
conscription office. In addition, Mikhaylau's sister was
expelled from a vocational school on February 10 for missing
classes on February 1 when she attended her brother's trial. In
a separate case in Homyel, a local court fined opposition
activist Yauhen Yakavenka $60 for failing to comply with
enlistment office summons to appear on January 29. Yakavenka
filed his third application for civilian service on February 2,
citing that he was not "a draft-dodger and only wanted to
exercise constitutional rights." Opposition youth and civil
society remain committed to promote their campaign For
Alternative Civilian Services and urge the GOB to respect
religious rights of recruits.

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


6. Belarus Coming to Grips with Limited Duty-Free Russian Oil

According to the media, Russian Energy Minister Sergei Shmatko
said at a news conference in Helsinki on January 29 that this
year overall subsidies on Russian crude oil supplies to Belarus
will amount to $2 billion. Citing new limits on the amount of
Russian oil imported duty free under the recent oil agreement,
Belarus' First Deputy PM Vladimir Semashko stated on February 2
that terms for oil supply have changed "for the worse" for
Belarus. The GOB has begun dividing the 6.3 million ton quota
between Belarus' two oil refineries and the Belarusian Oil
Company. Applications by Russian companies that operate
networks of filling stations in Belarus for allocations under
the new terms were reportedly denied. Those companies are being
directed to buy oil products from Belorusneft to supply their
outlets. According to various media reports, as of February 11
duty free oil is not yet being provided to Belarus, which is yet
to ratify the January 27 oil-supply agreement with Russia.

MINSK 00000047 003.3 OF 004


Belarusian officials are reportedly worried that as soon as the
agreement is ratified, it will be harder to insist on an upward
adjustment of oil delivery terms. Russian Ambassador to Belarus
Aleksandr Surikov told reporters in Minsk on February 10 that
the duty-free oil supply quota for Belarus will not be increased
above 6.3 million tons this year, adding that, if the signed
agreement fails to be ratified, Belarus will lose the quota and
will have to pay the full price for all supplies.


7. GOB Satisfied With Russian Electric Supply and Transit
Agreement

According to media reports, Belarusian energy monopoly Belenerha
and Russia's Inter RAO UES signed a contract on Russian power
supplies to Belarus and power transit via Belarus to the Baltic
countries and the Kaliningrad Region in 2010. The two sides
have reportedly agreed on "a well-balanced approach regarding
both the supply and transit" of energy. "We are satisfied with
the price, and they are satisfied with the transit terms," the
General Director of Belenerha Alexei Shirma maintained on
February 1 without elaborating on the details of prices and
transit fees, referring to terms as "a commercial secret." The
transit of Russian electricity via Belarus is expected to
increase in 2010.


8. IMF: Economy is Fragile, Some Encouraging Signs, But What
Next?

According to the IMF staff report released on February 1, the
country's macroeconomic stability remains fragile and needs to
be reinforced as Belarus remains highly vulnerable to external
shocks, given its high current account deficit and low level of
reserves. In 2010, it estimates that Belarus' external
financing gap will be $2 billion. Russia is no longer committed
to providing the final $500 million tranche of a bilateral loan,
but Belarus intends to apply to EurAsEC Stability Fund. The IMF
report adds that "the financing gap for 2010 beyond the program
period could be filled by additional financial support from the
Fund, if a successor arrangement is agreed upon." The European
Union could also provide $290 million in financial assistance if
a follow on Stand By Agreement is adopted, but unlike in
previous years the European Parliament, because of the Lisbon
Treaty, must also give its consent as well. The World Bank must
also have the new IMF Stand By Agreement in place if it is to
release $100-150 million dollars in 2010. The GOB is also
considering the possible issuance of a Eurobond, but IMF has
advised the GOB not to seek too large an issuance as the number
of buyers may be limited. The Chairman of the National Bank,
Pyotr Prakapovich, admitted in late January that Belarus would
need additional external financing. In preparing the ground
work, although not having committed, the GOB and the National
Bank have already sent a letter of intent to the IMF promising
to maintain a tight credit policy in 2010 by limiting loans
under government programs. The IMF report notes several
encouraging signs in the economy. Export volumes have
stabilized and are projected to recover. The exchange rate
depreciation during the year has improved competitiveness, while
confidence appears to be growing among households, as evidenced
by the partial reversal of currency substitution. Fiscal policy
has been consistent and strong, and the inconsistencies in the
authorities' credit policies are being addressed. The Head of
the IMF mission to Belarus Chris Jarvis stated at a conference
on Belarus' integration into Europe, which was held in Minsk on
February 10, that Belarus is capable of managing the losses and
external economic shocks caused by oil price increase if the
country takes firm measures. He also noted that keeping
Belarus' national currency stable will be a major challenge for
the country's banking sector this year. To stimulate economic
growth and reform, the GOB will need to continue cutting costs
and reduce interference in economic processes. Profitability
and not government orders should be the basis for banks' lending
decisions, Jarvis concluded. The end of its visit, the IMF
delegation concluded that it will recommend that the final
tranche under the current SBA be released to Belarus this April.
However, the IMF Board's sentiments, according to Chris Jarvis,
would be that any follow on SBA would have to include
significant structural reforms with clear commitments by the
GOB.


9. Gazprom Contract Remains Unchanged Despite GOB's Expectations

MINSK 00000047 004.3 OF 004



According to press reports, Prime Minister Sergei Sidorski said
on February 3 that Belarus expects to reach an agreement with
Russia's Gazprom that the price of Belarus-bound natural gas
will remain this year at the 2009 level. Russian Ambassador to
Belarus Alexander Surikov told the press in Minsk on February 10
that Russia is not considering the possibility of reducing the
gas price for Belarus this year. "The contract between Belarus
and Gazprom was signed in 2006 and covers this year's gas trade,
he said. The contract is effective, and no changes are
considered now," he continued, but he did not completely rule
out the possibility of new talks. Commenting on speculation in
Belarus about Gazprom's possible participation in investment
projects in the country, the ambassador declined to offer
details, saying that "thus far we have (seen) only declarations
(of interest)."

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


10. The Chairman of the Chief Council of Warsaw-backed Union of
Poles Andjei Pochobut told the press on February 10 that the
Belarusian authorities should discontinue interference in the
operations of the Union of Poles.

"The conflict with the authorities emerged when, violating its
own law, the Belarusian authorities tried to put "their people"
at the head of our organizations and our members did not agree
to it."
SCANLAN