Analytical Report: May 2012.

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In general, the weakening of the stability of Belarusian state could be observed in May. It is connected with aggravation of the situation in the field of public administration, defense and foreign policy because of the absence of clear plan to correct the situation. Developing such a plan is even more improbable, when we take into consideration the lack of unanimity of views among the top officials on the way of national development. In fact, there is an ideological crisis of the ruling class.

In spite of their efforts Belarusian authorities can not find external support to counterbalance Russian influence. Moreover, in the future development of bilateral relations Russia is not going to cooperate with Belarusian authorities and is actively seeking private partners in Belarus.

It shouldn’t be thought, that the prediction of the conflict between official Minsk and Moscow soon after the election of Russian President Vladimir Putin has been completely wrong. The problems in bilateral relations are not solved, and even occasionally there are new points of tension. Restraint of Russian authorities can be explained by Russian internal political situation and the uncertainty of the outcome of presidential elections in the United States. In this regard, the potential for conflict is temporarily frozen, but not eliminated. In case Barack Obama, whose strategy is known by Russian politicians and whose attitude to Russia is not bad, Russian authorities will be able to pay attention to “Belarusian issue” in November of 2012. By this time an active civil resistance against the Putin regime in Russia is likely to reduce.

Belarusian-Russian conflict can be precipitated by the fall in prices on world commodity markets, which will affect the opportunities for financial support of the regime of Alexander Lukashenka. And this factor is decisive for the Belarusian side in building an alliance with Russia.

The internal situation: stability of state power. Despite the visits of Russian President Vladimir Putin and the President of Kazakhstan Nursultan Nazarbayev to Belarus, held in May, the main event of the month is the annual message of President Lukashenka to the people and the National Assembly. While being traditionally diffuse, it has become the most interesting in recent years. As a result of the message it can be concluded that the authorities understand, that it’s impossible to use the current methods of governance, but the alternative ones have not yet been worked out.

Regarding the visits of the heads of the Customs Union member-states to Minsk, it’s necessary to draw the attention to one feature that unites them. Both guests, besides talking on other issues, lobbied the interests of their companies for participation in privatization of Belarusian state assets.

On May 8, 2012 Alexander Lukashenko delivered the annual message to the National Assembly and the people of Belarus. Although the responsibility for the political crisis has been traditionally shifted onto the opposition and Western countries, in general the message was conciliatory about the West.

Alexander Lukashenko by all means emphasized his major role in the positive processes in Belarus and disassociated himself from the negative ones. Thus, the crisis of 2011 have traditionally been said to be the guilt of the citizens of Belarus as well as of the overall situation in the global economy, and the rapid rise in prices is connected with the alignment of price imbalances with the markets of neighboring countries and the uncontrolled export of cheap Belarusian goods. In general, the economic block of the message confirmed our suggestion, that the authorities have no coordinated strategy of economic policies. On the one hand, they want to modernize the economy and on the other one — to keep complete control over it. At the same time the willingness to return to the strategy of mobilization development of the state can be still seen.

For the first time in the message the concept of “nation” instead of a faceless “people” was introduced. At the same time the introduction of proportional electoral system was announced to be inappropriate. This was a very specific answer to the top bureaucracy and association “Belaya Rus”. Alexander Lukashenko stated that there is no party system in Belarus, while the leaders of the most parties do not represent anyone but themselves and their activities is not a struggle for power, but just a business scheme. It should be noted that this is largely true exactly for pro-government parties, most of which exist only on paper.

The message also provided some information on the reasons for urgent establishment of the Investigation Committee (hereinafter referred to as IC). The main task of the new agency is to act as a counterweight to other law enforcement agencies and intelligence services. Having broad powers, they often use them for personal aims like eliminating personal enemies, seizure of businesses and other abuses. This situation exists for a long time and we can assume that the situation has become intolerable, which is the reason for urgent and fundamental limitations of the actions of the security forces and creation of IC. However, the care about the constitutional rights of citizens and protection of freedom of enterprise is not the only task of the new agency.

It is necessary to admit the statement of Alexander Lukashenko about the special role of Central European countries as a bridge between East and West. He also stated, that a similar opinion is shared by the leaders of Russia and Kazakhstan. This can be interpreted as an intention of the official Minsk to try to build bilateral relations with some EU countries without involving Brussels, which is not favourable partner for Belarusian authorities. The problem is that Belarus would not be able to offer the Central European States anything that would be worth damaged relations with the authorities of the European Union. In addition, the current reputation of the Belarusian authorities doesn’t allow to expect a high-level political cooperation with influential EU member states.

The most interesting part of the message is one dedicated to answering to the questions of the National Assembly. It should be noted, that all questions and answers are agreed with the Administration in advance and no improvisation is assumed. That is why one should pay attention to the fact, that in addition to the traditional praise to the head of the country, the issues discussed there related to the urgent topics: the threat of state property being captured by Russian capital, falling living standards, the labor outflow from the country. In our opinion, the most important issues is staff shortage in the government, caused by low salaries of officials. According to the response of Mr. Lukashenko, in the near future the problem will not be solved, therefore, the fall in professionalization of the state apparatus will continue. The “Chinese question” was asked as well, which proves its extreme importance for the authorities and their interest in cooperation with China. According to Mr. Lukashenko, anti-Chinese sentiment is instigated from outside Belarus, just like other problems in domestic politics.

In general, it appears that the authorities are trying to re-establish contact with the people, preserving the paternalistic policies and the policy of the general welfare. The fact, that the message does not contain a specific plan for future actions of the authorities on any of the pressing issues of development, indicates the absence of a coherent strategy in the Belarusian ruling class. And this is a sign of a split.

On May 12-14, 2012 the visit of Kazakhstan President Nursultan Nazarbaev to Belarus took place. The main part of the negotiations took place behind closed doors, so we can only identify those groups of issues that could be possibly discussed there:

— Belarus is interested in attracting Kazakh investors. And although involving them into the privatization of the most important productive assets is improbable, the mere fact of their presence will increase the cost of Belarusian enterprises, which the Kazakh investors will be interested in (and they are interested mostly in the same assets as Russian companies) ;

— Belarus is interested in oil supplies from Kazakhstan, currently blocked by Russia, which requires the development of a coordinated position in terms of ensuring equal access to transit infrastructure within the Customs Union (hereinafter referred to as CU) and joint pressure on Russia in order to get access to its transit infrastructure;

— Belarus is interested in access to the Kazakh market through participation in public procurement for the needs of this country and to obtaining contracts in the framework of the new industrialization in Kazakhstan;

— Taking into account the absence of external allies and high vulnerability to Russian pressure, Belarus is seeking to rely on the support of Kazakhstan in connection with possible contradictions among the CU participants, which is creating a counterweight to Russia.

In turn, Kazakhstan, being much more self-sufficient country than Belarus, is interested in developing economic and investment cooperation. It is unlikely that the Belarusian side, famous for its inconsistent policy, succeeded in getting a carte blanche from Astana. The political importance of Belarus is small and it can’t act as a strategic partner for Kazakhstan, which balances the influence of Russia by developing relations with China and the West. The latter is confirmed by purchasing of arms in the EU, despite the fact that Russia offers the weapons of the same quality but much cheaper.

It’s necessary to note that the interests of the CU member states are so different, that only the “purchase of loyalty” by Russia or direct military pressure, coupled with economic blackmail can make the CU really work. This is confirmed by Russian policy, according to which friendly claims are accompanied by the introduction of sanctions or the threat of introducing them. Thus, the Federal Antimonopoly Service of Russia tried to pressure on the Belarusian state corporation “BelAZ”: it was stated, that “BelAZ” is trying to restraint competition, coordinating the work of its own dealers. The usual practice of the business turnover to optimize the distribution network may result in the imposition of sanctions on the Belarusian company from the part of Russia.

Belarusian authorities are making efforts to resume cooperation with international financial institutions. It is essential not only for refinancing foreign debt. Without substantial cooperation it is impossible to get the access to western debt capital markets. The range of possible participants in the privatization of state assets is getting smaller, and as a consequence, the possible profit from the sale gets smaller as well. In the situation of the limited financial resources and dubious prospects of their increase the authorities are forced to seek support in the West. This fact suggests that Russia’s preference can’t provide long-term economic stability in Belarus, and indirectly supports the hypothesis that a considerable part of funds provided by Russia gets out the country not in accordance with the interests of Belarusian State and authorities. Of course, in this situation, we can expect the growth of discontent in Minsk on the one hand, and the objective need for Belarusian authorities to meet the conditions of the West on the other hand.

However, the EU and the U.S. are trying to cope with their own problems. At this rate they may ignore the growing compliancy of Belarusian authorities, leaving them with the prospect of getting out of the situation, which they got into lass year, on their own. In this situation the support of Poland would be a good help for Belarus. But this is improbable: trying to get the positive domestic public opinion through using anti-Polish sentiment, the government lost the sympathy of the Polish elite. It should be noted that Poland is even more important, when we take into consideration the fact, that it is one of the few EU members with stable economic growth, and one of the two EU members (as well as Romania) increasing defense capabilities. The turning of partners (real or potential) into enemies is a distinctive feature of the Belarusian foreign policy.

On May 31, 2012 Russian President Vladimir Putin visited Belarus. Despite some symbolism, we don’t consider this visit as strategically important. Firstly, a visit to the neighbouring country of the newly elected head of state is a common practice in international relations. Secondly, the visit was a stopover on the way to the EU, where there were most important meetings. Thirdly, there was no breakthrough in bilateral relations, there was a confirmation of earlier agreements. Regarding the next tranche of AF EurAsEC, anything can’t be stated before the decision of the administration of the Fund.

There are no reasons to look for some connections between the visit of Vladimir Putin to Belarus and the controversies between Russia and the West at least because of the fact that the first foreign agenda was about the West, and Russia is objectively interested in developing relations with the EU and the U.S. even much more than they are. Some cooling of relations between the U.S. and Russia is connected with the electoral cycle in both countries. Both Russia and the United States have much prejudice to each other in the society. In this regard, the demonstrative criticism of the positions of the other country is a pre-election manoeuvre to get the support of certain groups of voters. It’s necessary to note, that the West doesn’t disputes the controversial results of the Russian parliamentary and presidential elections and softly responses to the suppression of protests. It’s also necessary to keep in mind the Seoul talks between Dmitry Medvedev and Barack Obama. There is no reason to believe that Putin supports anti-American views. Recent events, especially the access of Western corporations to Russian energy assets, suggest the opposite.

It is necessary to note, that during the open meeting, Vladimir Putin has repeatedly referred to the substantial material aid to Belarus by Russia. On May 31, 2012 official Russian newspaper “Russian newspaper” published an article on Vladimir Putin’s visit to Belarus. Most of it is devoted to the aid that Moscow provided to Minsk and the prospects for bilateral economic cooperation, which the author considered to be the sale of the Belarusian state-owned companies to Russian investors. This article states that the transition of Belarusian assets under Russian control will be advantageous for Belarusian people, but Belarusian authorities are interrupting this process, demanding a high price for the companies. It seems, that according to the author of the article, the sale of public property at the maximum possible cost is out of the interests of Belarusian people. It’s necessary to admit, that although the article is dated June 1, 2012, it was available on the evening of 31.05.2012. So, it was at least partially pre-written.

It is also necessary to pay attention to the words of Vladimir Putin, who thanked the government of Belarus for “difficult, painful decisions that should be taken”. Taking into consideration, that Mr. Myasnikovich and the Council of Ministers are on a regular basis and, as a rule, wrongly criticized by Alexander Lukashenko, Putin’s words can be interpreted as support for Russia’s protégés in the head of Belarusian government.

The leaders of the two countries issued a joint statement against the use of economic restrictions on Belarus by the West. It is really word for word repetition of the statement of Alexander Lukashenko and Dmitry Medvedev made in February. Negligence in the preparation and adoption of important policy document is showing the real importance of Putin’s visit to Minsk. And apparently, the importance is low for both sides.

The internal situation: the opposition and the protest movement. In general, May proved to be quite stressful for the political opposition. Although there were not many really striking events, political organizations performed significant amount of in-house and local activities (taking into consideration the limited resources available for them).

It’s necessary to note the pause, held by Mr. Sannikov. The expectations of his release were unreasonably high: in any case the politician could not meet them because of almost complete absence of the organization.

Despite the conciliatory statements about the West, the authorities don’t reduce the pressure on their political opponents.

To begin with, it’s essential to note that the establishment of the committee of “The Council of National Revival” by Mr. Borodach is more media heavy event, rather than a real political project. Rather more interesting and important thing in terms of determining the medium-term prospects of the existing political opposition is a statement by Minister of Foreign Affairs of Lithuania Mr. Ažubalis on the need to bring together the efforts of the EU and the U.S. on “Belarusian issue” and to create an alternative power center in Belarus. This initiative is unlikely to lead to some real steps, as Belarus is a priority neither for the U.S. nor for the EU. Rather, it is an evidence of traditional alarmist sentiments in the Baltic States about “Russian threat”. But another thing is interesting here: Mr. Ažubalis stated that he was tired of the inefficient activity of Belarusian opposition.

This statement reflects the sentiment of most foreign partners of Belarusian political opponents of the regime. In fact, support for the opposition, which takes place now, is connected with the inertia of previous periods and the lack of alternative recipients of the aid. However, this doesn’t mean it will last forever. It should be noted that, according to our information, in May the opposition not only failed to increase its financial base, but at least two organizations faced a decrease in the volume of material support. However, it is possible that some opponents of the regime will be able to find support in Russia: according to our data Russia has certain interest in establishing partnerships. Thus the basic criterion is the avoidance of extreme Russophobia. At the same time Moscow may be more serious partner than the West (from the point of finance). Russia’s joining the political struggle in Belarus as a donor of the opposition will create a completely new situation: some opponents of the regime would use the tactics of “the swing of the pendulum”. We have previously admitted the possibility of forming a new pro-Russian political organization in Belarus. However, currently there are reasons to believe that the Kremlin will choose tactics “changing the direction” of some existing organizations that already have the primary organizations in the regions, and having the experience in struggling against Belarusian authorities. At the moment, according to our information, some marginalized associations and possibly some representatives of the expert community are the target.

In general, despite limited financial resources, opposition political organizations have taken steps to enhance its activity. The attention is focused on the so-called “new majority”, which is about two thirds of citizens of Belarus, who are equally skeptical about the power and the opposition. Activities on the pressing problems of the population can be really successful. However, the ability to carry out two parallel campaigns (social orientation, and the election ones, including boycotts) effectively is quite doubtful.

In addition, it is necessary to admit poor information cover of activities of the political opposition, which does not use even the available non-state media.

According to the expectations, the opposition organizations failed to form a unified tactics of actions in the forthcoming elections to the House of Representatives. It is wrong to consider this event as a failure. It was predictable in advance, as in the past 10 years opponents of the regime failed to form any viable coalition. The development of political pluralism in society through self-promotion of each political organization and their own programs seems more promising. This will allow the opposition to create a multiplicity of alternatives to the existing government and its policy.

The problems of poor organizational discipline in opposition organizations and weak control of the management of organizations and activists on the ground are still pressing. Contrary to the opinion of the leaders of “Tell the truth!” a number of its activists have decided to take part in the upcoming elections.

In May, the BCD and the UCP actively promoted their campaigns of boycott of elections to the House of Representatives. However, not significant human and material resources don’t allow them to promote the campaigns.

It should also be noted that religious component is getting more and more important in the BCD, the party is actually getting involved into clericalism. In a secular society of Belarus, it actually means the marginalization of the political organization.

Economic situation. Despite the continued macroeconomic stability, in May it was possible to ascertain the growth of risks in the economy of Belarus, which is related to the possible reduction in international reserves (because of disagreements with major lenders, deterioration in the terms of refinancing of corporate debt against the background of the Eurozone crisis, and possible lessening of macroeconomic policies) and the slowdown in economic growth due to the shrinkage of the Russian market and reduction of oil revenues.

In April, there has been some slowdown in economic growth (from 3% in January-March to 2.9% in January-April).

The business climate index of the National Bank continued to improve (in April rose by 3.8 points to 23.4 points). The conjuncture is assessed as favourable by 54.8% of enterprises (in March — 49.2%), and  as unfavourable — by 42% (in March — 47.4%).

The situation on the foreign exchange market can be characterized by the weakening of Belarusian ruble against the dollar by almost 4.5%, although BYR even strengthened against the multi-currency basket (dollar, euro, Russian ruble). This was primarily due to the crisis in the Eurozone and the Russian ruble devaluation. In general, the excess of supply over demand is still observed on the foreign exchange market. In April the people and entities have sold more than USD 545 million on a net basis.

The stabilization of the current economic situation in Belarus and is stated in the IMF report on the results of the IMF mission in February-March 2012. However, the IMF estimates a high risk of sharp inflation and devaluation of the ruble or the loss of reserves with the possible easing of monetary and fiscal policy of the authorities. This relaxation can be done to achieve the projected annual GDP growth (5-5.5%) and faster growth of average wages up to USD 500 (with the current level of about USD 380), when in the second half of the year it will become evident that under the current tight policy these goals are unachievable. Moreover, confidence of the IMF experts in such a scenario (despite denial of it by the Belarusian authorities) gives them an opportunity to consider it as a base. According to this scenario in the medium term (2013-2017 years) Belarus will face a reduction in the level of reserves to a critical level (20% of short-term debt, or less than a monthly import cover) and slowdown of economic growth.

IMF finds the risks of external shocks on the strengthening of the crisis in the Eurozone quite significant. This crisis may result in aggravation of the terms of attracting external funding (the crisis has already led to a drop in quotations of Belarusian Eurobonds by 2 percentage points of nominal), as well as in narrowing of the demand on Russian market.

According to IMF experts, the government should focus on the further macroeconomic stabilization (using inflation targeting) and the implementation of structural reforms aimed at labor productivity growth (primarily with the use of privatization and liberalization).

However, according to the results of May (the message of Mr. Lukashenko to the National Assembly, the comments of the authorities on the IMF’s monitoring results report, the statement by Vice-Premier Vladimir Semashko on the impossibility of losing state control over MAZ and “Belaruskali”), we can conclude that the Belarusian authorities are going to solve the problem of increasing effectiveness of the national economy using other methods. The main points of their policy of soft structural changes can be identified as follows:

—       improving the efficiency of management of state property through the creation of holding companies (in fact, state-owned corporations);

—       rejection of large-scale privatization in favor of single sales of state property: instead of the privatization list, which was a condition of receiving the second tranche of the EurAsEC AF loan, it is supposed to create a single piece of legislation regulating the privatization of any enterprise by investors;

—       stimulation of entrepreneurial activity by improving the business climate in the country (the goal is entering the top 30 of the World Bank’s Ease of Doing Business rankings).

The latter two points have been implemented by the authorities since the beginning of 2011. And while the creation of holding companies is still at the level of declarations and rulemaking, in terms of improving the business climate there has been some progress. Thus, in the World Bank’s Doing Business ranking for 2012 Belarus has risen to 69th place on the ease of doing business, having got 22 places higher in comparison with the previous year. Significant progress on the most challenging issue — taxation — was made in May through the adoption of decree, which gives significant benefits to business entities engaged in productive activities in rural areas and small towns (in fact, this category refers to the territory of Belarus with a population of about 5.5 million people, or almost 60% of the total population). According to the decree, such enterprises are actually free from most taxes and receive a number of administrative relief measures in the first 7 years of their operation.

The biggest problems may be caused by slowdown of privatization processes, as it is contrary both to the AF EurAsEC anti-crisis program and to the terms of the IMF new loan program. Representatives of the AF EurAsEC have already stated that the rejection of the privatization obligations as the basis for the reserves at safe levels will require additional resources at the expense of reduction of domestic demand. This, in turn, is also contrary to the plans of the authorities on economic growth and increase of incomes.

The situation in the field of national security and defense. In our opinion, there were two blocks of important events in May:

— end of the changes in the main intelligence service of the country (KGB);

— continuation of the April trend to release the information about some terrorist activities on the territory of Belarus accompanied with semi-official statements about the weakening of control on the border with EU.

In April and May there were the most significant personnel changes in the KGB in recent years. The heads of three key services of the KGB were replaced.

On February 7, 2012 Belarusian media reported about the arrest of five Egyptian citizens in Minsk. They had illegally stayed in the territory of Belarus in order to get to the EU to participate in terrorist activities. It’s necessary to admit, that our country has been repeatedly used as a transit point by Islamists international terrorist networks. At the same time, Belarusian security services have stopped some attempts of extremist religious organizations to recruit foreign students (immigrants from Muslim countries). Thus, the arrest of the Egyptians is not something unusual for Belarus. However, the details of the arrest are quite interesting:

— all arrested are reported to participate in combat operations in Egypt, but no warfare has taken place in this country since the Egyptian-Libyan War in 1977;

— extremists usually move through third countries in the states of the terrorist activities individually or in pairs;

— another strange fact is that extremists with combat experience have been so frank with Belarusian law enforcers, and told them about their taking part in warfare (although it is unclear which one) and about plans for terrorist activities in the EU;

— according to the current legislation, an investigation of terrorist activities is the jurisdiction of the KGB, and in this case the investigation was held by Minsk police.

In our opinion, the key point here is the motivation for the detainees, who were planning to get to the EU through the territory of Belarus, as the latter, according to their information (it is logical, that in the opinion of other Islamic extremists as well) weakened the border control. It is possible that information about the detention of Egyptian plan is an element of psychological pressure on the EU by the Belarusian authorities, who are trying to use a phobia of the Europeans about illegal immigrants and terrorists in an attempt to provide a more solid base to start a dialogue with the West. This tactic is not new: in the Belarusian-Russian relations, the official Minsk is actively using the myth of “NATO threat” to get preferences from Moscow. Do not be surprised if the information about the detention will be the first and last mention of the Egyptian extremist group.

Issue of terrorism and related illegal immigration into the EU continued to be discussed on May 24, 2012: in Zhlobin (Gomel region) the undermining of the Municipal Building Department of the Interior was prevented by the police. A local resident, who carried an improvised explosive device, was arrested. Criminal proceedings against him on charges of attempting to commit an act of terrorism were begun. It is interesting to note that this is the third criminal case on the fact of terrorist activities over the past two months, which is an absolute record. At the same time two criminal cases were begun in the Gomel region. And both of them are associated with certain transnational crime groups, conveying illegal immigrants to the EU. It seems strange that such groups, by some mysterious and unknown reason, chose the Gomel region of Belarus as a target of their attacks. Another interesting fact is that the terrorist in Zhlobin was wearing a mask with the Arabic inscription at noon in the center of the city. We hope that the sanity of the detainee shall be examined during the preliminary investigation.

It is also necessary to note that the surge of terrorist activity, by a strange coincidence, happened just when the official Minsk started to show its readiness to normalize relations with the West. And in order to start a dialogue, Belarusian authorities decided to use the threat to weaken the control on the border with the EU. If it is true, the Belarusian authorities have chosen unsuccessful tactic: European intelligence agencies have big experience in the neutralization of Islamic fundamentalists, and they are unlikely to fail to tell the real threat from an imaginary one.

The situation with the staffing of the national Army is aggravating so strong that the military leaders no longer manage to hide it. It was officially announced that in certain specialties 25% of young officers, whose first contract with the Ministry of Defense  finishes in 2012, do not plan to prolong it. The reason for that is still the same — an unsatisfactory allowance. It’s necessary to admit, that in February 2012 President Lukashenko told the Security Council to study the issue of increasing the wages for Belarusian security forces officers up to the level, that will be about the Russian one. Despite a slight increase in payments, the situation could not be radically improved. According to the payment criteria a Belarusian officer is equal to an unskilled employee of the civil sector. And the income growth wasn’t able even to compensate for the inflation.

The largest changes in the KGB for the recent years finished in May. The reports of the appointments of new heads of territorial and Chief offices of the KGB were not accompanied by information about the fate of their predecessors. As a rule, in the case of resignation because of the age, health problems or in connection with an appointment to a new post, the information about this is given along with information about the people assigned to the positions. At his rate it can be assumed, that the reason for the changes in KGB was unsatisfactory work of the former leaders of the Belarusian security services.

It is noteworthy, that there was a change in leadership of three key Chief departments of the KGB, responsible for preventing hostile activities of foreign states (counterintelligence) and anti-government activities within the state apparatus (General Directorate of Counterintelligence Support to law enforcement and regulatory authorities, fight against corruption and organized crime) as well as for controlling political opponents of the regime (General Directorate of Protection of the constitutional order and the fight against terrorism). At the same the changes were accompanied by some of the steps of Belarusian authorities to mitigate the conflict with the West. In this case, we have no reason to assert, that these events are interrelated, with confidence.

On May 11, 2012 Alexander Lukashenko dismissed the Interior Minister Kuleshov and appointed police colonel Shunevich the new head of the Interior Ministry. This event was expected for a long time. The interesting thing here is the fact, that the new minister is the only not general to head the Belarusian police. Probably in the near future he will get the Major-General rank. The success of the new Minister will be largely predetermined not by his professionalism (which is undoubted, unlike many previous heads of the agency) but by the range of his tasks.

The fate of 18 Su-30K planes, formerly serving in the Indian Air Force and returned to Russia last year, is still unknown. Belarus is interested in supplying these weapons for its own air force on preferential terms. Currently, however, Russia doesn’t show a willingness to help its formal ally: Russia announced its intention to sell fighter jets to any country that wants to buy them on commercial terms. The maximum amount of a possible transaction won’t be higher than USD 270 million, which is not really important sum from the point of the financial interests of Russia. Taking into consideration the fact, that Belarusian air force is in desperate need of new equipment, the supply of the fighters to a third country would mean a disavowal of the claims about the special relations between Belarus and Russia. We have previously written about our doubts that Belarus is indeed an important and privileged military partner for Russia, even within the CIS.

During the official visit of President of Kazakhstan Nursultan Nazarbayev in Belarus on May 14, 2012 Kazakh military-industrial holding JSC “NC “Kazakhstan Engineering” and JSC “AGAT — Control Systems” signed a memorandum of long-term cooperation, according to which the cooperation in the development, manufacture and delivery of automated control systems for military and industrial purposes is planned. JSC “NC “Kazakhstan Engineering” already has experience of cooperation with enterprises of Belarusian military-industrial complex.

In whole “Kazakhstan Engineering” is a kind of artificial conglomerate of rather economically weak companies with very low production capacity. Attempts to organize modern production using its facilities are still not very successful.

The results of the defence exhibition KADEX-2012 have shown the desire of Kazakhstan to get more Russian armour. At this rate Belarus makes quite pragmatic attempts to increase its participation in the Kazakhstan defence market.

On May 21, 2012 an intergovernmental agreement to establish a commission on cooperation in high technology between Belarus and China was signed. Belarus is counting on a “mutually beneficial exchange of technology” between the two countries. It’s hard to say what’s the reason for such optimism. China is quite special partner: previously it was repeatedly reported, that under the pretext of scientific and technical cooperation the representatives of the PRC tried to get into personal contact with the Belarusian specialists in order to get direct access to technical documentation. At this rate, it is likely that China is interested in the possibility of getting information on the research and developments in the framework of the joint Belarusian-Russian programs.

On May 23, 2012 a meeting of the State Military-Industrial Committee of Belarus Mr. Gurulev with Minister of Foreign Affairs of Bangladesh Mr. Monie, where the prospects for military-technical cooperation between the two countries were discussed and the “high readiness” to sign the intergovernmental agreement was stated, was held. It should be noted that Bangladesh is among the world’s least developed countries (the so-called “Fourth World”). The most promising area of ​​cooperation is a possible participation of Belarus in the repair and modernization of armored vehicles (tanks T-54 and T-55) and aircraft (MiG-29 and Mi-8) of this country. Because of the low quality of services, most Bangladesh Army weapon systems are not combat-ready. Bangladesh is as a promising partner for Belarusian authorities due to the oil and gas reserves in its major offshore.

On May 30, 2012 it was reported about the sale of a controlling stake in the largest private military-industrial complex of the country JSC “Management Company “Belteh Holding”, belonging to a well-known Belarusian businessman Mr. Peftiev. Some analysts expressed the opinion that the transaction is in fact an attempt to get the company out of the restrictive measures of the West. However, the special status of  “Belteh Holding” in the military-industrial complex should be noted: due to the analysis of official records of the business of “Beltechexport” (which is a part of “Belteh Holding”) it has the privileged status in comparison with the state arms exporters. Being one of the three companies for export of arms and the only private one of them, only “Beltechexport” has the ability to sell the most effective anti-aircraft missile systems S-300 (that are in service of the National Army) abroad. State-owned companies “Belspetsvneshtechnika” and “Belvneshpromservice” don’t have such opportunities, according to open sources of information. At this rate, it is possible to assume that Mr. Peftiev was only a de jure owner of the defense holding. The real owners of the company are unlikely to sell one of the most successful enterprises of the national military-industrial complex.

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