VZCZCXRO5196
RR RUEHDA RUEHDF RUEHFL RUEHKW RUEHLA RUEHLN RUEHLZ RUEHROV RUEHSR
RUEHVK RUEHYG
DE RUEHSK #1499/01 3481307
ZNR UUUUU ZZH
R 141307Z DEC 05
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 3464
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHGV/USMISSION GENEVA 0284
RUEHVEN/USMISSION USOSCE 0790
RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 02 MINSK 001499 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
PASS USTR FOR ALLGEIER AND DWOSKIN 
 
E.O. 12958: N/A 
TAGS: ECON EINV WTRO PGOV USTR BO
SUBJECT: Lukashenko to Rule Economy 
 
Ref: Minsk 1383 
 
¶1. (U) Summary: In recent months President Lukashenko has issued 
several presidential decrees that put vast powers over the economy 
into his hands.  Most egregiously, Decree 520 specifically gives 
Lukashenko expansive authorities, and baldly states that any 
legislation that contradicts the decree will expire in June 2006. 
From that date, Lukashenko will essentially be the law when it 
comes to economic matters.  End summary. 
 
¶2. (U) On November 3, Lukashenko signed Presidential Decree 520, 
"On Improving Legal Regulation of Certain Economic Relations." 
This decree gives the President of Belarus broad powers over the 
entire economy, and takes authority away from parliament, the 
National bank, and even market forces.  More telling, it concludes, 
"Legislative acts, signed prior to this decree coming into force... 
which stipulate other regulations than set in this decree, remain 
in force until June 1, 2006."  From that date, Lukashenko will be 
above the law when it comes to economic regulation. 
 
¶3. (U) This decree gives the president the power to manage, dispose 
of, and privatize all state owned property.  [Note: the state 
controls an estimated 80% of all economic activity.]  Furthermore, 
the decree states, "The president and (or) laws shall:" 
 
--establish, introduce or change all taxes and duties; 
--establish tax, duty and other budgetary payments, as well as 
dismiss from tax and other obligations "certain [undisclosed] 
categories of legal entities and individuals"; 
--provide customs and income tax benefits to individuals; 
--create state non-budgetary funds and determine their sources and 
usage; 
--adopt general monetary policy guidelines, including exchange 
rates, growth of the money supply, levels of international 
reserves, and the growth rate of credit and investment; 
--"regulate other budget, tax and monetary policy issues"; 
--create regulations for the provision of budget loans and grants; 
--and regulate the setting of prices for "socially significant 
goods, such as housing, natural gas, electricity, heating, fuel and 
diesel." 
 
¶4. (U) The decree gives the president sole jurisdiction over the 
following, as they relate to legal entities and individual 
entrepreneurs: 
 
--changing deadlines for the payments of taxes and duties 
--allocation of subsidies and resources for financing capital 
investment from the republic budget; 
--providing complete or partial acquittal from economic liability; 
--relief from transferring profits received from using state 
property to the republic budget; 
--regulating the seizure and granting of land plots; 
--deciding on the seizure and granting of land plots, underground 
areas, and forests. 
 
¶5. (U) The decree also gives the president sole authority to 
approve legislation that will result in a decrease to the state 
budget, or the creation or expansion of expenditures. 
 
¶6. (SBU) Vladimir Karyagin, head of the Minsk Association of 
Entrepreneurs and Employers (which functions as a proto-chamber of 
commerce), commented to Econoff that his association's lawyers 
examined this decree and concluded it essentially gives all 
economic power to the president.  Business members of his group are 
worried that, after all economic legislation expires on June 1, the 
management of the economy will depend on Lukashenko's whim.  Lack 
of legislative continuity is already a marked feature of the 
Belarusian economy.  This decree is likely to decrease 
predictability and continuity of rules and regulations even 
further. 
 
 
As if that Wasn't Enough 
------------------------ 
 
¶7. (U) In recent months Lukashenko has signed several decrees 
greatly increasing his personal power over the economy.  In 
October, Lukashenko signed Decree 481, giving the president sole 
authority to exempt companies from economic penalties, including 
those imposed by court order.  This includes penalties for tax and 
customs violations, or any other fine issued by the government. 
 
MINSK 00001499  002 OF 002 
 
 
 
¶8. (U) In late November Lukashenko signed Decree 545, setting 
procedures to regulate the importation and sales of all cars in 
Belarus.  According to this decree, any company that wants to 
import and sell automobiles must be Belarusian owned, have at least 
USD 13.5 million in assets, have a warehouse of at least 1,000 
square meters, and be licensed by the GOB.  The decree states the 
president has to personally approve each license. 
 
 
So Much for Rule of Law 
----------------------- 
 
¶9. (U) In addition to the above decrees, a Belarusian judge 
recently demonstrated the further erosion of the rule of economic 
law in Belarus.  In January, the GOB took control of the oil 
refinery shareholder company MNPZ Plus using the Golden Share 
mechanism (reftel).  The presidential decrees regulating the Golden 
Share claim it can only be used against a company in which the GOB 
at some point owned at least one share.  The GOB has never owned a 
single share of MNPZ Plus.  Therefore, MNPZ Plus' shareholders took 
the GOB to court for illegally using the Golden Share against them. 
GOB representative Vyacheslav Pernikov argued to the court that, 
despite what was written in the presidential decrees, the GOB used 
the Golden Share "to protect state interests."  The judge from the 
Gomel Regional Economic Court agreed with the GOB and threw out the 
shareholders' case. 
 
 
Comment 
------- 
 
¶10. (U) These decrees simply continue trends begun long ago, 
concentrating all power in Lukashenko's hands.  Lukashenko 
continues to give his diktat the facade of legality.  However, in 
practice, such decrees can only increase uncertainty and 
instability, and further ensure investors stay away from Belarus. 
Furthermore, these decrees are indisputable evidence that Belarus 
is becoming less, rather than more, prepared for WTO accession. 
 
 
KROL