VZCZCXRO9594
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DE RUEHSK #0013/01 0151515
ZNR UUUUU ZZH
R 151515Z JAN 10
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 0631
INFO RUEHZG/NATO EU COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHVEN/USMISSION USOSCE 0035
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHSK/AMEMBASSY MINSK 0641

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SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - APRIL 10, 2009 
 
MINSK 00000013  001.3 OF 004 
 
 
¶1.  The following are brief items of interest compiled by 
Embassy Minsk. 
 
TABLE OF CONTENTS 
 
Elections 
--------- 
- Lukashenka Approves Election Law Amendments (para. 2) 
 
Civil Society 
------------- 
- GOB Continues to Prosecute Democratic Activists (para. 3) 
- Enforcement of Controversial Internet Regulations on Hold 
(para. 4) 
 
Religious Freedom 
----------------- 
- Protestant New Life Church Fined; Two Catholic Priests Banned 
(para. 5) 
 
Economy 
------- 
- Russia and Belarus Still at Variance over Duties on 
Belarus-Bound Crude Oil (para. 6) 
- Gazprom Claims Gas Price for Belarus in Q1 to Near $168 per 
1,000 Cubic Meters (para. 7) 
- Lukashenka pledges Belarus independence within the Customs 
Union (para. 8) 
- International Reserves Grew in 2009 Thanks to Foreign Loans 
and Privatization (para. 9) 
- Lukashenka's instructions to National Bank defy IMF 
recommendations (para. 10) 
 
Quote of the Week (para. 11) 
--------------------------- 
 
--------- 
Elections 
--------- 
 
¶2. Lukashenka Approves Election Law Amendments 
 
On January 6, President Lukashenka signed into law a bill of 
amendments to the Electoral Code.  It was approved by the 
parliament on December 17 (reftel Minsk 413).  Lukashenka is 
expected to issue an edict within a week to schedule a date for 
the local elections in April and, subsequently, a timeframe for 
the campaign.  In her remarks to the press on January 2, Central 
Election Commission Chairwoman Lidziya Yarmoshyna indicated that 
there would unlikely be large numbers of candidates contesting 
the 24,000 positions at stake in the local elections, "five" per 
district in Minsk and an average of "1.5" per district in rural 
areas.  She said that more funding ($13 million) had been 
allocated for the 2011 presidential polls, "assuming there would 
be a total of 10 registered candidates."  Yarmoshyna yet again 
asserted that international observers would not be invited to 
monitor local elections and urged local political parties, which 
she said lack a will to win, be more "active" and play "a more 
prominent role in election campaigns." 
 
------------- 
Civil Society 
------------- 
 
¶3. GOB Continues to Prosecute Democratic Activists 
 
In an apparent bid to further crackdown on opposition symbols, 
police apprehended Syarhey Kavalenka, a Conservative Christian 
Party member, for posting a white-red-white flag (an 
independence era symbol that is now illegal in Belarus) on a 
Christmas tree in Vitsyebsk on January 7.  He was originally 
jailed for two months pending his trail and unexpectedly 
released on January 12.  Kavalenka has been banned from 
traveling abroad and is facing hooliganism charges that carry a 
maximum prison sentence of six years.  He expressed no regret 
over displaying the flag and no doubts that it would "ultimately 
regain its official status."  In connection to this case, police 
raided on January 13 the residence of Syarhey Serabro, a local 
journalist who took and disseminated pictures of the posted 
flag, and confiscated his computers and a camera.  In a separate 
incident, a Navahrudak town court fined Belarusian Christian 
Democracy party activist Yury Kazak $3,050 for allegedly 
splashing green paint on a bust of Lenin in the town center on 
 
MINSK 00000013  002.3 OF 004 
 
 
November 6.  The party condemned the fine as "a humiliating 
judgment." 
 
¶4. Enforcement of Controversial Internet Regulations on Hold 
 
A proposed bill authorizing tight regulation of the internet in 
Belarus may not be adopted in the near future, according to 
reports sourced to a media expert Yury Zizer, who owns the 
"tut.by" news portal.  The bill was drafted by the Council of 
Ministers at the end of 2009 without open public debate. Members 
of the independent media have voiced criticism of the bill 
(reftel Minsk 426).  Ziser suggested that the Presidential 
Administration may substantially rewrite the bill "to soften" 
some of its repressive provisions and clarify ambiguities.  He 
explained that the GOB appeared to have rushed to draft a bill 
in the run-up to local elections, leaving the proposed 
legislation with inconsistent requirements.  He expects the 
administration to study the matter further before putting 
forward an alternative draft. 
 
----------------- 
Religious Freedom 
----------------- 
 
¶5. Protestant New Life Church Fined; Two Catholic Priests Banned 
 
Authorities continued to pressure the New Life Full Gospel 
Church (NLC) in Minsk, while moving to limit services conducted 
by Polish Roman Catholic (RC) clergy in Belarus. On January 4, 
the NLC received a summons from the Minsk city government's 
natural resources and environmental protection department and 
were fined more than $91,000 for allegedly polluting the ground 
around its building with traces of oil, causing extensive 
damage.  Church leaders said the action was aimed at evicting 
them from their premises.  In the Hrodna region, authorities 
denied two Polish priests permission to continue religious work 
in 2010.  Priest Jan Bonkowski, who has served in the village of 
Mizhevitsi for 20 years, and priest Edward Smaga, who worked in 
Indura, have been required to halt their activities and leave 
Belarus.  Almost half of the Catholic priests in Belarus are 
Polish, as it remains difficult to train and educate a 
sufficient number of clergy in Belarus, according to RC leaders. 
The GOB has a record of expelling Polish clergymen in recent 
years, claiming they fail to preach in Belarusian or Russian. A 
senior religious and minority affairs official, Leanid Hulyaka, 
stated on January 14 that the GOB "has a right to require 
Catholic priests to adhere rigorously to Belarusian laws." 
 
------- 
Economy 
------- 
 
¶6. Russia and Belarus Still at Variance over Duties on 
Belarus-Bound Crude Oil 
 
Meetings in early January between officials from Belarus and 
Russia have failed thus far in forging agreement on terms for 
Russian oil supplies to Belarus.  Under the previous 2007-09 
agreement, crude oil exported to Belarus was subject to reduced 
export duties set at 35.6% of the rate applied to other 
countries.  In December, Russian deputy PM Igor Sechin announced 
that Russia would supply up to six million tons of oil to 
Belarus duty free to help cover domestic needs.  Total oil 
exports to Belarus in 2010 are projected at 21.5 million tons, 
with Belarus expected to pay full duty rates for amounts over 
the six million ton figure.  Responding to Moscow's warnings 
that failure to reach a new agreement could lead to imposition 
of full duty rates on all deliveries, the GOB issued a statement 
on January 1 saying that Russia was departing from the spirit of 
Customs Union terms.  Earlier the GOB had allegedly warned it 
would raise transit fees tenfold for Russian oil deliveries to 
Poland and Germany to $45 per ton if Russia refused to ship all 
oil to Belarus free of export duties.  Pending formal 
establishment of the Customs Union, scheduled for July 2010, the 
GOB has proposed an extension of existing 2009 terms for oil 
deliveries.  Lukashenka reportedly sent a letter to Medvedev on 
January 13 on the issue but its content has not been disclosed 
to public.  Belarus reportedly continues receiving oil from 
Russia in volumes "previously agreed upon" for transit of 
Russian oil to consumers in the EU, but supplies for Belarus' 
domestic needs may be halted shortly.  In a related move, the 
Belarusian state energy monopoly Belenerha issued a statement on 
January 4, saying that Russian electricity suppliers had failed 
 
MINSK 00000013  003.3 OF 004 
 
 
to agree with the GOB on 2010 terms for the transit of electric 
power through Belarus to Kaliningrad and the Baltic countries. 
No decision has been reached as of January 14.  The Guardian 
reported on January 4 that the oil dispute between Russia and 
Belarus could again raise concerns across Europe about 
dependence on Russian energy and the leverage it provides the 
Kremlin. 
 
¶7. Gazprom Claims Gas Price for Belarus in Q1 to Near $168 per 
1,000 Cubic Meters 
 
On December 30, Russia's gas monopoly Gazprom reported that CEO 
Alexei Miller and Belarus' First Deputy PM Uladzimir Syamashka 
had discussed gas supplies to Belarus in 2009, as well as 
transit through Belarus' territory and prospects for cooperation 
in 2010.  CEO Miller announced that "under the contract the 
formula-calculated gas price for Belarus in Q1 2010 will be 
close to $168 per 1,000 cubic meters."  In 2009, it had averaged 
$150. 
 
¶8. Lukashenka pledges Belarus independence within the Customs 
Union 
 
According to media reports, Lukashenka stated in his December 
30, 4-hour press conference that the GOB would withdraw from the 
Customs Union with Kazakhstan and Russia if necessary to protect 
Belarus' independence. The Union is scheduled to come into force 
on July 1, 2010.  He refuted as "unfounded" fears that Belarus 
will leave decision-making up to Russia or lose its sovereignty. 
 In characteristic fashion the President warned that "these 
monsters [Russia and Kazakhstan] may collude," and he said the 
GOB will "watch carefully" because those two countries "have 
similar economies, similar interests, gas, oil; they have it 
all, and we do not."  He said the GOB will take "additional 
precautions" and stressed that "we have independent positions on 
all issues."  According to Lukashenka, "there should be no fear 
or loss, only benefits" as the GOB "will not do what does not 
benefit us."  At the same press conference Lukashenka cited the 
need to improve ties with the West and accelerate modernization 
of the economy, two major lessons Belarus learned in 2009. 
 
¶9. International Reserves Grew in 2009 Thanks to Foreign Loans 
and Privatization 
 
According to media reports, the Belarus' National Bank (NB) 
reported on January 8 that according to IMF calculations, 
Belarus' international reserves increased by $1,053.1 million or 
22.9% in December 2009 to $5,644.9 million.  Overall reserves in 
2009 increased by $2,583.8 million over the 2008 end of year 
level.  However, exports earnings were a very small percentage 
of the accumulated reserves.  In 2009, Belarus received loans of 
$2.855 billion from the IMF, $500 million from GOR, $200 million 
from the World Bank, and $200 million from Russian banks, which 
also plan to organize a Belarus' sovereign bond issue on the 
Russian market of up to $498 million.  Belarus also received a 
one-time increase of $448.7 million in IMF Special Drawing 
Rights (SDRs).  It also received $625 million from Russia's 
Gazprom for the sale of a stake in the Beltranshaz gas pipeline, 
as well as approximately $400 million in other privatization 
revenues. In short, the increase in Belarus's foreign exchange 
reserves resulted from loans totaling more than $5 billion as 
well as earnings from sales of state enterprises.  In 2007, the 
GOB had set a target of increasing its international reserves to 
$10 billion by 2010. 
 
¶10. Lukashenka's instructions to National Bank defy IMF 
recommendations 
 
According to the media, Lukashenka instructed the National Bank 
(NB) on January 5 to open credit lines for state-owned 
Belarusbank and Belahraprambank totaling approximately $1.4 
billion.  The loans will be extended for five years at the 
refinancing rate of the NB, currently at 13.5%, to permit banks 
to finance "priority projects for the national economy."  IMF 
Resident Representative in Belarus Natalia Kolyadina said on 
January 12 that the Lukashenka-approved decision to provide $1.4 
billion in loans to the two largest state-controlled banks had 
not been discussed with the IMF and might affect programs under 
the IMF Stand-By Arrangement for Belarus.  She pointed out that 
long-term lending is not a function of the NB but said the IMF 
shares the GOB's concerns over the liquidity gap in 
state-controlled banks. The IMF has suggested alternative ways 
to address the situation, including the establishment of a 
 
MINSK 00000013  004.3 OF 004 
 
 
Specialized Development Agency to manage loans issued to support 
state programs and credit sources.  Kolyadina confirmed that the 
IMF had recommended the GOB not make budget injections into 
state-owned banks. Commenting on directed lending, Koliadina 
said Belarusian authorities and IMF had agreed that Belarus 
would curtail lending for state programs.  Nevertheless, the GOB 
has directed state banks to provide $2.4 billion in preferential 
housing loans in 2010, a move which Kolyadina explained could 
"drive out financing on market terms and make regular loans more 
expensive." 
 
----------------- 
Quote of the Week 
----------------- 
 
¶11.  While presenting 2009 Awards for Spiritual Revival and 
other awards at a ceremony in Minsk on January 8. 
Lukashenka reiterated his claim that the ongoing global economic 
crisis was the result of "a spiritual crisis." 
 
"Human envy, stealing, deception, financial market fraud, 
corruption had been piling up for years and swept through the 
entire world. A spiritual crisis is much more dangerous than any 
economic shocks, because it is much more difficult and takes 
much more time to overcome it. Treachery, meanness, lies corrode 
the soul, undermine the physical and moral health of not only a 
certain individual but of entire nations and peoples," concluded 
Lukashenka. 
SCANLAN