VZCZCXRO3096
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSK #0173/01 1591251
ZNR UUUUU ZZH
P R 081251Z JUN 09
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC PRIORITY 0285
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHSK/AMEMBASSY MINSK 0289

UNCLAS SECTION 01 OF 02 MINSK 000173 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PINR BO RS
SUBJECT: BELARUS: REGIME CRYING OVER SPILT MILK AS SPAT WITH MOSCOW 
WIDENS 
 
MINSK 00000173  001.2 OF 002 
 
 
Summary 
------- 
 
¶1.  (SBU) While there is no break between the countries, a 
Russian block on Belarusian dairy exports is just the latest 
manifestation of a vitriolic conflict between Minsk and Moscow 
as traditional Kremlin disdain for President Lukashenka (and the 
formerly-vaunted "Belarusian economic miracle") reaches higher 
levels.  Growing GOB panic about the consequences of the global 
financial crisis plays a factor in negative reactions to Russian 
comments about the weaknesses of the Belarusian economy.  The 
dispute has political antecedents as well, including the 
continued Belarusian non-recognition of South Ossetia and 
Abkhazia.  End summary. 
 
Ratcheted Rhetoric... 
--------------------- 
 
¶2.  (SBU) While there are other reasons for differences of 
opinion, including Lukashenka's now-dead ambition to become the 
President of a true Russian-Belarusian union, the move by Russia 
to raise the price of natural gas and crude oil for Belarus in 
2007 is generally cited as the beginning of the current spat. 
The Belarusians had cashed in the profits for grandiose projects 
for years and crowed about a more successful economic model than 
Russia or other neighbors had. 
 
¶3.  (SBU) Recent competing public comments between Minsk and 
Moscow have a petty "he-said-she-said" quality about them, as 
well as roots in past differences of opinion, but some of them 
bear mentioning.  During the Union State Ministerial Meeting in 
Minsk May 28, Russian Finance Minister Aleksey Kudrin stated 
that Belarus may soon be unable to service its skyrocketing 
foreign debt and become insolvent due to shortage of gold and 
foreign currency reserves.  According to Kudrin, the Russian 
government would continue to issue loans to the GOB if the 
latter makes "adequate efforts" to balance and stabilize the 
economic situation and ensure "financial solvency and 
stability".  Kudrin also stressed that the GOB refused to accept 
the $500 million tranche of the $2 billion stabilization loan in 
Russian rubles.  Russian Prime Minister Vladimir Putin initially 
mitigated Kudrin's assessment, downplaying "extreme" evaluations 
of Belarus economy. 
 
¶4.  (SBU) In his turn, Lukashenka accused Kudrin of inciting 
"panic" and advised GOB officials against "begging" Russia for 
any further assistance.  Belarus Finance Minister Andrey 
Kharkovets called Kudrin's remarks "superficial" and "biased." 
Russian President Dmitriy Medvedev chimed in June 3 on 
Lukashenka's criticism, calling his harsh statements 
"unacceptable" and expressing expectation for Russia's "closest 
partners to share" common positions.  Medvedev emphasized 
Russia's "right to comment on the efficiency of policies" of the 
countries financially supported by Russia.  Meanwhile, 
Belarusian Prime Minister Sergey Sidorskiy labeled Kudrin "a 
storekeeper" and asserted that the GOB had been "investing" 
Russian loans "in an efficient economy" and energy-saving 
projects.  Kudrin asserted that his assessment was "justified," 
while committing to pursuing negotiations with the GOB on 
further loans for Belarus. 
 
¶5.  (SBU) Neutral observers agree that Kudrin, for his part, did 
no more than speak the truth: as reported previously, the 
effects of the effects of the global financial crisis are 
deepening in Belarus.  The GOB now turns off all street lights 
at midnight and reports of layoffs at state enterprises -- still 
over 70% of the economy -- are growing.  Although the regime 
seems to have complied with the latest IMF call for further 
devaluation of about 5% -- accomplished gradually -- and will 
likely get the next tranche of $400 million from the IMF soon, 
the National Bank is hoping that a significant new credit of $5 
billion or more will magically appear. 
 
...Leads to Specific Action 
--------------------------- 
 
¶6.  (SBU) As a more concrete step, Russian Federal Consumer 
Protection Service head Gennadiy Onishchenko banned the 
importation of some Belarusian dairy products June 6, citing 
quality concerns.  This is a tried-and-true tactic (which the 
Belarusians have used on occasion as well), but the impact is 
just beginning to be absorbed by official Minsk: production in 
this area has virtually no other export markets and by some 
accounts is valued in the billions of U.S. dollars on an annual 
basis. 
 
GOB Avoids Recognition of Abkhazia, South Ossetia 
--------------------------------------------- ---- 
 
¶7.  (SBU) We defer to Embassy Moscow to determine how important 
recognition of Abkhazia and South Ossetia is to the Kremlin.  It 
 
MINSK 00000173  002.2 OF 002 
 
 
is evident here that having been warned by the USG and EU, the 
GOB is loath to embark on such a step (although the right amount 
of Russian money would alleviate that reluctance).  Instead, the 
regime has embarked upon extensive political kabuki with regard 
to see what it can get or what it would lose.  Although 
Lukashenka has met with the territories' "presidents" on more 
than one occasion since the August 2008 conflict, he has "asked" 
the rubber-stamp Belarusian parliament to consider the issue. 
(Comment: Without success, we have looked for evidence that 
Lukashenka has ever previously relied on the parliament's 
guidance when addressing any key issue.  End comment.) 
 
¶8.  (SBU) It seems plausible that Minsk will try some 
semi-official step, such as the opening of a trade office(s); 
Head of the Presidential Administration (PA) Vladimir Makey told 
Charge May 22 that the reason for his May 12-13 visit to 
Abkhazia was "purely economic."  Makey, who is the rough 
equivalent of vice president and consigliere to Lukashenka, 
noted that Abkhazia would need trucks and tractors -- "even if 
it becomes part of Georgia again" --  and claimed that Abkhazia 
offered the best gravel (!) for Belarusian construction projects 
tied to the 2014 Olympic games in Sochi, Russia. 
 
¶9.  (SBU) At the same time, Makey previewed with the Charge a 
gesture he planned to make in the Georgians' favor: although 
since becoming PA head in 2008 he has never attended diplomatic 
receptions, he appeared at the Georgians' national day reception 
in Minsk May 26 to deliver a personal message of congratulations 
to the Georgian Ambassador from Lukashenka.  Makey's appearance 
surprised the EU diplomats present, and was matched by 
participation of Deputy Foreign Minister Andrey Yevdochenko and 
parliamentarians including International Relations Committee 
Chair Sergey Maskevich.   In contrast, Makey skipped the 
Italians' June 2 reception -- despite Lukashenka's recent visit 
to Rome -- and is not expected to appear at the Russians' event 
June 12. 
 
Comment 
------- 
 
¶10.  (SBU) Because of near-total dependence on Russian energy 
supplies, and a largely integrated military, Belarus does not 
want and cannot sustain a complete economic or political break 
with its largest neighbor: a visit of Russian President 
Medvedev, allegedly in the works for July 2-3, is further 
evidence of that.  It is worth noting that despite Minsk's 
interest in a "multi-vector" foreign policy, problems with 
Moscow have failed to motivate any positive reforms as sought by 
the U.S. and EU: the GOB is exercising some restraint in dealing 
with civil society but has avoided creating any new political 
opportunities, and talk of privatization has not yielded any 
results.  Given its economic problems, the GOB continues to be 
interested in the removal of U.S. sanctions as well as in 
augmented dialogue with the USG.  Whatever the situation with 
Russia, those interests offer some hope for improved relations 
between Minsk and Washington. 
MOORE