VZCZCXRO3126
OO RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVL #1007/01 3361524
ZNR UUUUU ZZH
O 011524Z DEC 08
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3123
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 VILNIUS 001007 
 
SIPDIS 
SENSITIVE 
AMEMBASSY MINSK SENDS 
 
E.O. 12958: N/A 
TAGS: EFIN PGOV PREL CASC BO
SUBJECT: BELARUS: REGIME DITHERING AS ECONOMIC CRISIS GROWS AND 
SANCTIONS DEADLINES APPROACH 
 
REF: A) VILNIUS 940, B) VILNIUS 941, C) VILNIUS 951 
 
Summary 
------- 
 
¶1.  (SBU) Showing precious little understanding of the situation in 
which Europe's last dictatorship finds itself, the Belarusian regime 
is making only limited positive political gestures and is in denial 
regarding the depth of the financial crisis.  While the fundamental 
stability of the Belarusian state is not now in question, there is a 
serious possibility that growing economic problems will complicate 
already limited GOB engagement with the U.S. and EU.  End summary. 
 
Recent Steps 
------------ 
 
¶2.  (SBU) After the USG suspended some sanctions for six months 
starting September 4, and the EU took analogous steps mid-October, 
the GOB announced a few gestures November 20: 1) an offer to work 
with OSCE/ODIHR on electoral reform; 2) permission to two major 
independent newspapers, "Narodnaya Volya" and "Nasha Niva" to be 
printed and distributed in Belarus; and 3) a November 24 roundtable 
on the media including GOB representatives, the OSCE Office in 
Minsk, the Belarusian Association of Journalists, and others. 
 
¶3.  (SBU) Of these, electoral reform is the most amorphous, with any 
conceivable result not being clear until the next presidential 
elections in 2010 or 2011.  (Comment: ODIHR's Election Observation 
Mission released its final report on the September 2008 
parliamentary elections November 28, noting a lack of political 
competition and other "serious concerns", and repeating the initial 
assessment that they "fell short of OSCE commitments for democratic 
elections."  The existing electoral code, while imperfect, would 
have been largely sufficient for the September 2008 parliamentary 
elections if it had been better interpreted and enforced.  End 
comment.) 
 
¶4.  (SBU) Distribution of the two newspapers is a welcome 
development, although many conditions are attached to that: they 
reportedly include down payments (USD 20,000 just for Narodnaya 
Volya) to the state distribution network for various preparations 
although the papers cannot be expected to hit the stands until about 
two months from now.  The OSCE Office in Minsk reports that the 
media roundtable went well, with the GOB pledging that the internet 
will remain unrestricted, although the media law condemned by the 
international community is still on track for implementation in 
February 2009. 
 
Problems at Hand and on the Horizon 
----------------------------------- 
 
¶5.  (SBU) We continue to be deeply concerned at the incarceration of 
an American citizen whose health is very poor, and our Embassy is 
still limited to five American staff.  Meeting with Charge, 
Belarusian Presidential Foreign Policy Advisor Valentin Rybakov 
could only say November 26 that the AMCIT in question, in custody 
since March 12, "will be released" but gave no date for that event 
to take place; when asked about the AMCIT's health, Rybakov 
cynically added "we will be sure he doesn't die."  On the subject of 
diplomatic staff, Rybakov said at the same meeting that restrictions 
on staff numbers would only be lifted once USG sanctions were ended. 
 
 
¶6.  (SBU) Charge also raised with Rybakov the case of opposition 
activist Alyaksandr Barazenka (Aleksandr Borozenko), due to be tried 
December 8.  He has already been in custody since October 27 for 
violating the terms of a previous sentence -- house arrest for his 
role in a January 2008 entrepreneurs' protest.  Should Barazenka be 
sent to jail for a prolonged period, he will be universally regarded 
as a political prisoner, the first such case since the releases of 
the previous political prisoners in August.  On the positive side, 
we have heard hints that more political gestures may be in the 
offing, such as the registration of former presidential candidate 
Alyaksandr Milinkevich's "For Freedom" movement. 
 
¶7.  (SBU) Meanwhile, the economic news is worse every day: 
state-owned enterprises are cutting or stopping production, while 
the National Bank is allowing only minor slippage in the Belarusian 
ruble (BYR) against the U.S. dollar.   The GOB is at pains to avoid 
public protests over the economy (such as hobbled the first 
post-independence government in the early 1990s) and is trying to 
delay the inevitable.  National Bank Chair Pyotr Prokopovich, in a 
one-on-one meeting with Charge November 26, confirmed that the GOB 
needs USD 6 billion in addition to the USD 2 billion already secured 
from Russia.  He complained that the IMF's conditionality -- 
including a 20-percent devaluation -- would have a bad effect "on 
the population" and said that the GOB would try to secure USD 6 
billion from Russia if IFIs were not accommodating to Belarus' 
needs.  In an aside, Prokopovich voiced concern about Russian 
 
VILNIUS 00001007  002 OF 002 
 
 
conditions for such a loan, and opined that it would be better for 
Belarus to have multiple economic partners. 
 
¶8.  (SBU) Prokopovich admitted that that public mention of a 
previously unheard-of exchange rate "corridor" -- between BYR 2,100 
and 2,200 to the USD -- was an attempt to recast the devaluation to 
date.  He pledged that a further drop to BYR 2,350:USD 1 could 
follow January 1, 2009 as a gesture to the IMF (although that would 
only be about an eleven percent devaluation).  Prokopovich, who 
became quite chummy over the course of the meeting, did not respond 
when Charge asked if GOB political leaders understood the depth of 
the economic crisis. 
 
Comment 
------- 
 
¶9.  (SBU) Professionals in the regime recognize that time is running 
out, but Lukashenka does not.  As the deadlines for resumption of 
U.S. and EU sanctions approach -- March 4 and mid-April respectively 
-- and the economic crisis continues to worsen, the GOB may begin to 
link its ability (or lack thereof) to secure IFI loans to its 
relations with the West and lash out if they are rejected, or 
postpone further positive political steps.  (Note: We been told that 
the IMF mission may return in mid-December; we do not expect that 
their views on conditionality will be different from those of the 
IMF mission here for several weeks in November.  End note.)  We 
would love to share the optimism of some Europeans that after 14 
years Lukashenka will at last see the light and embark on concrete 
reforms.  However, we fear that a dictator in denial is no engine 
for positive change. 
 
MOORE 
CLOUD