09MINSK138, BELARUS: DENIAL OVER DEPTH OF ECONOMIC CRISIS

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Reference ID	Created	Released	Classification	Origin
09MINSK138	2009-04-29 17:34	2011-08-30 01:44	UNCLASSIFIED//FOR OFFICIAL USE ONLY	Embassy Minsk

VZCZCXRO2397
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSK #0138 1191734
ZNR UUUUU ZZH
R 291734Z APR 09
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 0243
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHSK/AMEMBASSY MINSK 0247

UNCLAS MINSK 000138 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ETRD ECON PGOV BO
SUBJECT: BELARUS: DENIAL OVER DEPTH OF ECONOMIC CRISIS 
 
REF: MINSK 132 
 
Summary 
------- 
 
¶1.  (SBU) The GOB is realizing more and more that the global 
financial economic crisis will take a bigger toll on Belarus 
than originally expected.  Senior government officials led by 
Lukashenka try to look optimistic (and so do the official 
statistics).  The reality, however, is not bright and the 
prospects for the rest of the year do not look good.  Loans from 
the IMF, Russia and Venezuela have undoubtedly cushioned some 
effects of the crisis but the monies, spent mostly to support 
the Belarusian ruble (BYR), are running out fast.  End summary. 
 
¶2.  (SBU) More than 60% of all Belarusian-made products are 
manufactured to be exported.  Since October 2008, Belarus lost 
about 50% of its exports to Russia, 30% to China and 75% to 
Ukraine.  The GOB is urging urges industry leaders to look for 
new markets (e.g. in Asia and Africa), be more export flexible 
and to not shrug off smaller export shipments.  It has also 
committed to provide cheap loans to large industries without 
requiring any serious recovery plans.  The most recent move, 
Lukashenka's demand to sell more at home, is widely believed by 
independent experts to be  doomed as local markets are too small 
to consume domestic production.  As a result, industrial 
production is expected to shrink 25-30% through 2009.  In a 
protectionist effort to reduce imports, the GOB has introduced 
prohibitive import tariffs on many food products (up to 180%) 
and consumer goods (up to 40%). 
 
¶3.  (SBU) The above efforts have been accompanied by selective 
steps of economic liberalization, e.g. reduction in red tape and 
taxes, a moratorium on unlimited inspections by numerous 
governmental agencies, etc.  These efforts, however, have not 
been supported by in-depth market reforms.  In his April 23 
annual address (reftel), Lukashenka made it very clear that he 
will allow economic liberalization only to the extent that it 
does not encroach on his rule.  That means that all pro-market 
efforts of liberal-minded government officials will bear no 
fruit and Belarus will see neither fair and transparent 
privatization regulations nor less rigorous government control. 
That said, independent economic pundits, the Belarusian internet 
community, and people in the street share the assumption that 
once  the regime fails to secure more foreign loans, Lukashenka 
may be forced to launch selective privatization of the most 
lucrative industrial assets.  There seems to be no alternative 
opinion on who will benefit most from such ad hoc privatization. 
 This, however, may or may not happen as Lukashenka announced 
April 25 that foreign loans taken by Belarus so far were less 
than 8% of its GDP, or far less than the initial level of 
concern (25%). 
 
Comment 
------- 
 
¶4.  (SBU) Without any doubt, more than crisis itself, Lukashenka 
fears crisis-related social unrest.  In his April address, he 
demanded that "production be protected" and "jobs be preserved" 
at any cost.  Lukashenka also repeated on several occasions that 
he will tolerate no loss-making in the public sector and that 
any instance of such loss-making will be viewed and treated as a 
crime.  While the populace is used to such remarks, and 
Belarusians are worried about the crisis, very few of them blame 
the regime or are ready to protest its policies.  People's 
survival skills taught in Soviet times are still in vogue: after 
a long winter, a sunny spring prompts people to work hard at 
their dachas with attached small plots of land, take occasional 
seasonal jobs, and enjoy their modest lives as much as possible. 
 The crisis does not seem to be on top of their everyday agendas 
yet.  It remains to be seen what the situation will be like 
later during the year. 
 
MOORE

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