VZCZCXRO5063
RR RUEHAG RUEHAST RUEHBW RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVL #0408/01 1491413
ZNR UUUUU ZZH
R 281413Z MAY 08
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC 2346
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 VILNIUS 000408 
 
AMEMBASSY MINSK SENDS 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM SOCI BO
SUBJECT: BELARUS: OFFICIALS DOWNPLAY SANCTIONS IMPACT 
 
Summary 
------- 
 
¶1.  (U) A number of GOB officials commented in the media on the May 
15 designation of three Belarusian firms by the U.S. Treasury 
Department, dismissing any significant impact.  They claimed that 
subsidiaries of the Belarusian energy conglomerate "Belneftekhim" 
had already converted financial transactions from U.S. dollars to 
Euros and taken steps to diversify their exports.  A Belneftekhim 
representative did not disclose any concrete measures to alleviate 
losses saying he was afraid "countermeasures could follow".  The 
superficially assertive tone of the officials hinted that even if 
the sanctions were not a critical blow at the regime, they caused 
certain inconveniences while the GOB continues to avoid taking 
democratic and market reforms.  End summary. 
 
MFA Claims The USG Ignores Lukashenko 
------------------------------------- 
 
¶2.  (U) MFA Spokesperson Andrey Popov disingenuously reproached the 
USG over most recent U.S. Treasury sanctions clarification in a May 
16 statement saying that the USG had disregarded Lukashenko's 
remarks of "unambiguous" stance favoring "mutually equal and 
respectful dialogue" in order to "normalize" bilateral relations. 
Popov emphasized this clarification was "nothing new" and expressed 
no doubt the repressive sanctions targeted common Belarusians and 
interests of the designated companies' employees.  According to the 
spokesperson, even "non-experts" now understand "what is actually 
behind the U.S. declarations", and the USG steps clearly indicate 
"who works in positive terms and who is after the negative". 
 
Sanctions Jeopardize Investment Image 
------------------------------------- 
 
¶3.  (U) National Bank Chairperson Pyotr Prokopovich said at a press 
conference on May 15 that the economic sanctions "damage the image 
of Belarus" and entail "restraints" for monetary inflow from 
"potential Western investors".  He also noted Belarus' image 
deteriorated only in the eyes of those who remain unaware of current 
prospects in Belarus and lack accurate information about its economy 
while foreign companies already in the market continue to expand 
their investments.  According to Prokopovich, Belarus is interested 
in "accelerating" the level of foreign investment and called it "a 
mutual interest" citing the fact that the Western companies enjoy 
"money surplus" and can provide their resources to Belarus.  The 
sanctions "scare them off", he added, and maintained Belarus does 
not welcome "investment-deterring" elements. 
 
GOB Pledges To Further Diversify Exports 
---------------------------------------- 
 
¶4.  (U) While no GOB official has overtly spoken about a scale of 
losses in monetary terms, First Deputy Prime Minister Vladimir 
Semashko reiterated on May 16 that the sanctions would 
"insignificantly" effect operations of the designated enterprises. 
However, he pointed to possible complications unless the enterprises 
"diversified" their export markets "to a greater extent".  Semashko 
stressed the U.S. was not the only importer of Belneftekhim 
subsidiaries' manufactured products, and that the GOB had already 
taken "preventative" steps to alleviate sanctions' impact and burden 
on the companies. 
 
¶5.  (U) According to Semashko, Polotsk Steklovolokno (PS) reported 
the largest exports out of the three designated companies.  Deputy 
PS CEO Sergey Svershchov informed the media that the enterprise 
exports reached USD 5 million or 4.5 percent of total exports in 
¶2007.  Svershchov also maintained the PS sold out all the stocks 
from their U.S. customs warehouses.  He said it was "wrong" to 
punish them and they felt "offended".  The PS management committed 
to continue regular operations, but acknowledged they would have to 
"put a lot of effort" to minimize the losses following export 
markets diversification.  Svershchov was reluctant to disclose any 
details, so "no countermeasures could follow".  He called the 
sanctions "politically motivated" and expressed hope the politicians 
would come to a compromise.  He also added they "naturally 
understand" why the U.S. introduced the sanctions, but "had no clue" 
why it was done against their enterprise. 
 
¶6.  (U) An unnamed source at the Energy Ministry echoed Semashko's 
statement, saying the sanctions would not "seriously effect" the 
Belneftekhim subsidiaries.  The source stated the Belarusian Oil 
Trade House (BOTH) as well as other companies changed all the 
foreign transactions to Euros.  Moreover, BOTH had introduced an 
electronic trading platform for oil and chemical products sales. 
The Ministry representative asserted that "no U.S. sanctions could 
affect Internet trading".  On May 20, Belneftekhim Deputy 
Chairperson Mikhail Osipenko also endorsed to Semashko's assertion 
and confirmed the company had already transferred its financial 
operations from U.S. dollars to euros and taken measures to 
diversify export markets.  Osipenko firmly dismissed speculations 
about significant damages inflicted by the sanctions and claimed 
 
VILNIUS 00000408  002 OF 002 
 
 
they were "absolutely marginal". 
 
Chief Ideology Officer Blames Opposition 
---------------------------------------- 
 
¶7.  (U) When approached by media, newly appointed Head of the 
Presidential Administration's Chief Ideology Department Vsevolod 
Yanchevskiy refused to comment on the sanctions.  He referred to 
Lukashenko, who "never wastes his words", that Belarus would 
"survive" the sanctions and "life would go on".  Yanchevskiy 
underlined "with sadness" that the opposition as he expected did not 
"picket American Embassy to protest the sanctions", which he 
believed would "cause repercussions" for common Belarusian 
residents.  He also denied commenting on independent analysts' 
estimates the GOB would lose USD 600-700 million on blocked foreign 
bank accounts belonging to the Belneftekhim. 
 
Comment 
------- 
 
¶8.  (SBU) Dismissive public statements by GOB officials echo other 
indications we have received privately.  Most Belarusians 
interpreted the March 6 clarification of U.S. sanctions by the 
Treasury Department's Office of Foreign Assets Control as affecting 
all Belneftekhim companies.  In that context, designating three of 
about an estimated 80 Belneftekhim subsidiaries is a source of 
annoyance for the regime -- and serves to emphasize continued U.S. 
interest in human rights in Belarus -- but is not interpreted as a 
stark expansion of sanctions. 
 
MOORE 
CLOUD