Analytical Report: September 2011.

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In September, Belarusian authorities continued trying to normalize relations with the West, but under the Belarusian conditions, i.e. without imposing preliminary political demands. It is unlikely that this wish of the officialMinskwill be realized. Moreover, taking into account that in 2012 the election to the National Assembly will be held, we can expect that some more conditions, put by the West and connected with the electoral process, will be added to the existing list, which is quite short.

Dialogue with the opposition, which was quite real in August, now seems hardly probable. Belarusian authorities aren’t politically flexible. In addition, it should be noted, that in the country the authorities have nobody to conduct a dialogue with, because the political opposition is too weak to demand something from the authorities.

Belaruscontinues to stay in the “​​economic turbulence”. The government implements only half-measures and doesn’t have a clear program to bring the country out of financial crisis.

Military exercises «Combat Commonwealth-2011» and «Union Shield-2011», in which Belarusian military confirmed the high level of training, were held on Russian territory.

Another important event forBelarustook place inRussia: Putin and Medvedev will not compete with each other in the upcoming presidential elections.

The internal situation: the stability of government.

 The event of the month, of course, is an active attempt to revive Belarusian — European dialogue. Initially, the information about the meeting of Bulgarian Foreign Minister Mladenov and Alexander Lukashenka was received, and later a letter of Mladenov to Ashton was made public. The arrangements outlined in the letter, were partially confirmed through the release of a number of convicts on the events of December 19, 2010 and the non-use of force to the participants of the protests, organized through social networks. The latter, however, were almost unnoticeable because of their small number.

The second important event is the fact that Vladimir Putin’s participation in the presidential election inRussianext year as the only candidate from power, which directly affects the strategy of behavior of Belarusian authorities.

On September 19, 2011 the letter of Minister of Foreign Affairs of Bulgaria M. Mladenov about his meeting with Alexander Lukashenka was made public. The most interesting is the fragment of the letter in which M. Mladenov poi9nts out, that during the meeting the Belarusian leader spoke about the need for “a new constitutional agreement, which will lead the country to a multiparty democracy” as well as about the dangers of “too big concentration of power, as he (Alexander Lukashenka) had done”.  Also, according the words of Foreign Minister of Bulgaria, during the meeting with him Alexander Lukashenka agreed, that the most reliable guarantees of independence ofBelarusare stable relations with the EU and the functioning of democratic institutions.

These statements of Lukashenka should be considered critically: there is no evidence giving grounds for believing that the word «democracy» for him has the same meaning as for Bulgarian Minister. Moreover, Western-style multiparty democracy poses a direct threat to Lukashenka himself, as it means the possibility of uncontrolled trial on a number of important cases (disappearance of opposition politicians, arbitrary administration of budgetary funds, non-transparent privatization schemes, etc.). In this case, taking into account the level of awareness of Belarusian leader, there is no doubt that many people both in Belarus (including a number of formal opposition leaders) and outside it are interested in Lukashenka’s keeping guaranteed silence. In fact, Alexander Lukashenka is in a position, when there is no choice but to fight in order to preserve his position, because only the position provides relative safety of Belarusian leader.

The only situation in which Lukashenka can go refuse from individual ruling the country, seems to be the state of his health, which makes the further keeping of power meaningless.

The second event, which is in many ways crucial for preserving the stability of the state mechanism ofBelarus, is the disappearance of the intrigue of the presidential elections inRussia. It can be announced that presidential elections have been already held. Of course, this is an unpleasant fact for the Belarusian authorities, bearing in mind that until March 2012, the Kremlin, busy in internal election campaign, won’t strain the relations withBelarus, which are already not really good. Belarusian authorities expected that Medvedev and Putin wouldn’t be able to reach a compromise and would come into direct confrontation with each other. Regardless of which of them would be elected President of Russia, he would face a uniquely powerful opposition group, led by a strong leader. This scheme was to lead to weakening of state power inRussiaand to serve as a guarantee against the threat ofMoscow’s active involvement in Belarusian internal political processes.

The very fact that Dmitry Medvedev remains in the locus of power as the Prime Minister (at least in the medium term), is bad news for the Belarusian authorities. That’s Dmitry Medvedev, who initiated campaigns to bring pressure on the officialMinsk, that took place during his tenure. According to our data, Putin has little interest in Belarusian issues, while Dmitry Medvedev personally dislikes Lukashenka.

The situation is that the regime actually has no time to bargain with the West. In the light of the impending onslaught of the Kremlin Belarusian authorities are interested in normalizing relations with the EU and theU.S.It is good for Belarusian authorities, that Putin has the image of anti-Western politician, which gives Belarusian side the possibility to use the myth of the «Russian threat» in the dialogue with the West and especially with the EU.

At the moment the EU is implementing only formal sanctions, without demonstrating a propensity to exacerbate relations withBelarus. For example, the reaction on another anti-Polish campaign in Belarusian state media was incomprehensible. At the moment Belarusian authorities are intractable and don’t hurry to implement the promises that were given to M. Mladenov. In fact, the ​​negotiations with the opposition were refused from, and the pressure on political activists isn’t reduced (although the reprisals are avoided). In addition, the officialMinskrefused to take part in theWarsawsummit of «Eastern Partnership».

These demarches of Belarusian authorities must not delude the people: there is no alternative to liaising with the West. Speculation on special character of Belarusian — Chinese relations is inconclusive:Chinakeeps relations with African states just the same way. The attempt to create the appearance of a certain specific nature of military cooperation withChinamay result in bad consequences for Belarusian authorities, provoking the cooperation between the West andRussiaon the «Belarusian issue».

In September Natalia Petkevich returned to power and was appointed as an assistant of Alexander Lukashenko. She has a reputation of one of the «architects» of the Western policy of Belarusian government. However, it is not known, what facts this statement is based on. At the same time there is the information about serious financial commitment of some members of Petkevich’s family in cooperation with the West. In our opinion, the impact of Petkevich on foreign policy, as well as her position in the power hierarchy ofBelarus is greatly exaggerated. She is not classified as successful manager, i.e. has a critical importance to preserve the stability of power. For example, being at the post of First Deputy Chief of Staff since January 9, 2009, she hasn’t managed to organize the work of state ideological apparatus: during this period Belarusian authorities began to lose control over their own information space quite fast. Earlier, while being Deputy Head of Administration and managing the interaction with the judiciary, Petkevich failed to stop the growth of corruption in the Belarusian courts: as the result, corruption overwhelms the Belarusian judiciary and there is no struggle against it.

Thus, the return Petkevich in positions in government shouldn’t be associated both with the need for her as a negotiator with the West and with her managerial skills.

It should be noted that unlike many other Belarusian officials of comparable rank, Petkevich didn’t move toRussiaafter the resignation, but remained inBelarusto demonstrate her loyalty. Bringing her back to the government, Lukashenko sends a signal to other officials: removal from office may be temporary if the person continues to demonstrate their reliability and loyalty.

The resignation of Grigory Vasilevich from the post of Prosecutor General (September 20, 2011) is not worth the attention paid to it by non-state media and analysts. In Belarusian situation, the prosecutor’s office is a bureaucratic organization that doesn’t play an independent and powerful role. The prosecutor’s office reached the top of its influence when lead by Sheiman, which was primarily due to his personal skills. The fact that the change of the Prosecutor General has been given much attention to, only testifies to analysts’ inadequate perception of actual situation in the government.

In September there were reports of strikes and other forms of expressions of discontent by workers of state enterprises. However, all of them were local and were quickly resolved by the authorities.

Meanwhile, on September 19, 2011 the state procurement prices for livestock products were increased by 55-67%. This price increase could be not the last one: according to our information the possibility of another 50%price increase in November is considered. It should be noted that earlier the authorities increased the prices on basic foodstuffs only in case of big necessity. In this case, the only reason for the sharp rise in prices is a one-time attempt to stop uncontrolled spontaneous export of food. In general, state financial reserves are able to allow curbing the rise of food prices, if there was full-fledged customs control at the border betweenBelarusandRussia. Under the conditions of the Customs Union, the only measure is the adjustment of prices in the domestic market to the level of prices in the neighboring Russian regions.

In any case, price growth for basic foods increases the public displeasure and adds pressure on an already critically low level of public support of Belarusian authorities.

If the entry into the Customs Union affected the lives of ordinary Belarusians, it was only negative effect: import duties for cars were increased, the lack of normal control on the Russian — Belarusian border poses a threat of the uncontrolled export of cheap goods from the country, the reduction of customs duties for some imported goods to the Russian level did not lead to lowering costs for consumers. Thus, the negative results of the first year of the Customs Union for the Belarusian consumers create new opportunities in the struggle for power for Belarusian opposition, which traditionally aren’t used.

The internal situation: the opposition and protest movement.

Analysing the situation in Belarusian opposition for the past month, we can state further stagnation in the protest movement.

The most important events of the month are the resignation of o J. Romanchuk from the United Civil Party (hereinafter referred to as UCP), resignation of V. Karnyayenka from the “Movement For Freedom” (hereinafter referred to as MFF), and the failure of attempts to revive the activity of the movement “Revolution through social networks” (hereinafter referred to as RSN).

The resignation of o J. Romanchuk from the UCP is quite logical and long-awaited. In fact, after the events of December 19, 2011, the status of J. Romanchuk in UCP was supported only by party leader Lebedko, which was associated with the illusion of sustainable financing of the political organization by J. Romanchuk. However, according to our information, there is no enough financial support to the UCP. Due to that there is outflow of a number of young regional activists from UCP to the campaign “Tell the truth!”. Furthermore, Romanchuk’s staying in the party, considering that after last year’s presidential election he became one of the most odious personalities of Belarusian opposition leaders, wasn’t helpful for uniting the party.

Romanchuk does not have any skills, experience or knowledge that would be critically important for UCP. Thus, on one hand his resignation gives Lebedko the opportunity to consolidate the party, and the other hand provides Lebedko with the possibility of getting some help from Romanchuk because of good personal relations.

 

We should also note that the UCP is experiencing a real intellectual crisis, despite the fact that the party traditionally has the most professional team among Belarusian opposition organizations. For example, the anti-crisis program developed by the party is just a set of general advice, claims and propaganda slogans, that are far from reality and are written in style typical for the Soviet bureaucracy, but not for the modern economic planning. The program of creating one million new jobs, that was advertised during last year’s election campaign and the text of which wasn’t made public, according to anti-crisis program of UCP turns out to consist only of one sentence: “To develop and launch a program of creating a million better jobs”.

In September, one of the leaders of MFF V. Karnyayenka decided to withdraw from participation in the management of organization in because of disagreement with the chosen strategy. V. Karnyayenka intends to focus on the struggle for change in electoral law in the organization “For fair elections”. However, taking into consideration his membership in UCP, it is likely that he will take part in political activity within the UCP.

The advantages of B. Karnyayenka are the following:

— He is one of the most experienced politicians (political career began during the Soviet period);

— He hasn’t been connected with financial scandals, happening in Belarusian opposition;

— He doesn’t have enemies among opposition leaders and is positively perceived by most activists;

— He has good connections in all regions ofBelarus;

— He is a team player, able to work on the general result, which is unusual for Belarusian opposition, mired in backroom conflicts and scandals.

According to our information, the resignation of V. Karnyayenka from MFF is connected not only with his position on business strategy, but also with personal confrontation with some MFF leaders.

In any case, the fact of resignation of V. Karnyayenka is a blow for MFF: human resources of the organization are obviously of not high quality and nobody can replace V. Karnyayenka at the moment.

However, it should be noted that V. Karnyayenka retained his membership in the MFF. His motivation is not completely clear: it can be connected with wish to save relations with Alexander Milinkevich, and with the prospects of Karnyayenka’s return to ruling the movement.

We should also note that the position of MFF is currently exacerbated by information competition with the campaign “Tell the truth!”. The political conflict resulted into personal hostile relations between A. Dmitriev and Y. Gubarevich.

Despite widely announced resumption of protests as part of the RTSN, the attempt to resume protests actually failed. Managers of RTSN haven’t been able to develop a new tactics of actions and there is still no clear strategy. The demands to the authorities, made by RTSN leaders, on the one hand are unsystematic, and the other hand are quite politicized, and on the third one are apparently meaningless, because don’t involve methods to make authorities implement them. In fact, RTSN is turning from network structure of the classical “resistance without a leader” into another socio-political campaign, without having specific differences from the existing ones. It is unlikely that we will see serious actions of RTSN in the future. In fact, the end of RTSN’s actions is not so far.

In general, it should be noted that the difficult situation in the economy and the need for external support, primarily from the West, made the Belarusian authorities to reduce the pressure on the protest movement. This, however, lead neither to the revitalization of the opposition nor to new forms of their public activity. In informal conversations, the main cause of opposition’s stagnation is said to be the lack of financial provision. However, in our opinion, it is necessary to point out the lack of flexibility in working practices, poor organization of work and waste of resources, that are spent on apparently unpromising programs and activities: various discussion platforms, clubs of experts, who often have no practical experience in their field, and so on. In addition, the misuse of resources is an urgent problem of all Belarusian opposition.

Speaking about positive events in September for Belarusian opposition, it should be noted, that after the refusal of the official Minsk to take part in the Warsaw Summit of the EU «Eastern Partnership», the opponents of the regime have become the only representatives of Belarus. Participation in the summit is interesting for the opposition, because it gives them a platform for delivering their position on political issues on high level and provides the possibility of establishing informal contacts with the leaders of the EU.

Economic situation.

The key economic event in September was the start of operation of an additional session on the foreign exchange market and the liberalization of exchange rate formation in the legal spot market.

Additional session on the Belarusian Currency and Stock Exchange began to work on September 14, and provided free access to the foreign exchange resources for organizations of all forms of ownership. The splash of excessive demand for foreign currency at the possibility of legal purchase, expected by many analysts, never took place. And since the date of beginning of trading the exchange rate of Belarusian ruble at additional session had been gradually strengthening (for example from 8600 rubles for 1 USD it came to 7630 rubles for 1 USD at the end of the month). Simultaneously, the exchange rate of Belarusian ruble at the main session, where the foreign currency is sold only for purchasing gas, energy and medical goods, began to weaken in order to unify the rates at both sessions gradually.

The reasons for the strengthening of ruble’s rate at the additional session are:

— Initially under-valued exchange rate of ruble at the first auction and on non-cash currency market.

— Correction of imbalance in foreign trade. Extremely high surplus in foreign trade in goods (at nearly USD 400 million) formed in August. Taking into account the traditionally positive external balance on services, the surplus should be at least USD 600-650 million.

— Moderately tight monetary policy of the National Bank.

— Tight fiscal policy of the government. For 8 months of this year the budget has accumulated a surplus of Br 5,1 trillion. (3.3% of GDP).

The strengthening of ruble has created conditions that do not require foreign exchange intervention at an extra session from the National Bank. On the contrary, for the period from 14 to 29 September, the National Bank bought for about USD 103 million at the additional session in order to prevent a fast strengthening of Belarusian ruble. But by the end of the month the strengthening of ruble at an extra session in the existing conditions (24-percent tax on income from the sale of foreign currency at the rate higher that one of National Bank; the obligation of the exporters to sell 30% of foreign currency earnings at the substantive session of the National Bank at the rate, that is more than 25% below the rate at the additional session; a high rate of inflation) has almost stopped. At this rate, further positive changes in the field of national currency would require a rapid devaluation and the abolition of discriminatory taxation or the use of foreign exchange reserves of National Bank.

Against the background of the gradual return of the currency market to normal operation, the major risks for the economy ofBelarus, which will condition the authorities’ actions in the short to medium term, began to appear:

— Hard access for credits for the real sector.

— Reduction in domestic demand. Significant devaluation led to a drop in income (the average salary for August amounted to about USD 250 against USD 500 at the end of 2010) and a reduction in domestic demand.

— Limited access to the sources of external financing.

The risks of lowering of the stability in the banking sector (in particular risks of growth of “bad” assets and liquidity shortages) as well as risks of worsening of external trade conditions in case of the development of the global crisis according to devaluation scenario, are not so urgent at the moment, but can grow in the near future.

Against the background of significant current risks the authorities have to solve the problem of increasing economic efficiency. In the last six months all the actions in this sphere are just gradual acceleration of the privatization of small and medium enterprises (during the last months the auctions in order to sell state property were held almost weekly) and building holdings on the basis of state property.

In general we can conclude that in the coming months the economy ofBelarusis likely to stay in a zone of high turbulence. It is important for the authorities to verify all the crucial decisions in the economic sphere. Also the importance of careful work to create the necessary background information significantly increased. Unwarranted optimism and populism in economic decisions as well as reckless public statements can significantly increase the possibility of systemic instability of the economy, i.e. provoke a crisis, as it is seen by the country’s leaders: stopped plants, delayed salaries, delays in external payments.

The situation in the field of national security and defense. 

September was marked by two events directly affecting the national defense:

— National Army units were involved in the military exercise “CombatCommonwealth–2011”and “Union Shield-2011”;

— The information about possible supply toBelarusof 18 fighters «Su-30», previously exploited inIndia.

Taking into account that the military exercise “Union Shield-2011”began just after the CIS air defense exercises “Combat Commonwealth-2011”and time

for relocation of Belarusian troops to the venues and the way back (up to seven days in one direction), we can say that military exercise was held continuously throughout September.

Of course, the main event were the military exercise “Union Shield-2011”, held from 16 to 22 September 2011 on theterritoryofRussia.

They were preceded by joint exercise of troops of united air defense system of CIS member states “Combat Commonwealth-2011”. From the Belarusian side more than 1.2 thousand servicemen took part in them. At the same time S-300PS, S-300B, “Book” and “Wasp” complexes, as well as fighters «MiG-29» were used as well. Thus, during the “Combat Commonwealth-2011”the Belarusian army used almost the entire range of weapons, which it is armed with.

After the end of “Combat Commonwealth –2011”the joint military exercises of the Armed Forces of Belarus and Russia “Union Shield –2011”started.

The interesting thing about that is that for the first time such a mass transport of troops and vehicles (more than 5 thousand military personnel and about 500 pieces of equipment) outside the national territory was made sinceBelarusgot independence. The troops were moved by rail and air transport at a considerable distance. After that they had try to fulfil the tasks in unfamiliar dusty terrain and in high temperatures. Particular attention was paid to working out logistics support of troops in a remote theater of war.

Another interesting fact on “Shield of the Union –2011”was the participation in it of the students of theMilitaryAcademyof theRepublicofBelarusand the Military Department of Belarusian State University of Informatics and Radio Electronics as a junior commanders. Attracting students to the exercises demonstrates not only the intention of country’s military leaders to give the opportunity to future officers to practice their skills, but also an element of improving the mobilization capacity of the state: in case of mobilization of the Armed Forces, cadets of the Military Academy and military departments of civilian institutions should form the backbone of the troops formed from the reserve units.

In addition the use of Russian polygons allowed to provide training for missile forces, which can’t be done inBelarusbecause of lack of space.

It should be noted that the military-political leaders ofBelarushas paid close attention to both military exercises: within the framework of CIS and Belarusian – Russian ones. For example, Alexander Lukashenka tasked the Belarusian military to show at least no worse results of the exercises than ones of Russian forces, as well as to demonstrate a high level of organization and discipline of Belarusian troops. And the task was completed. Belarusian troops demonstrated the level of combat training which was higher than Russian, and among Belarusians there were no losses among the personnel during the exercises. At the same time, according to our information, during the exercises the Russian side had lost at least three soldiers: one in an accident on the railroad, another in the result of a general disease, and the least soldier died of missile wound, when he violated the order and left the shelter at the time of bombing at targets.

Another important information in September was the news about the possible replenishment of the fleet of Belarusian Air Force with 18 fighters “Su-30K”, which were previously used by the Indian Air Force. According to Russian media some of the fighters have already been transported toBaranovichi, where they will be repaired and upgraded to the version “Su-30 CN” on 558 aircraft repair plant. Earlier, Belarussian side has repeatedly expressed a desire to replenish its fleet by these fighters. Taking into consideration, that these fighters were actively exploited by Indian Air Force and need major repair and upgrade,Belarusmay be interested only in the non-commercial (preferably free) transfer of them.

In addition, the Belarusian military do not lose hope for getting Russian air defense systems S-400. Although the Russian side as a whole has a positive attitude to the possible supply of modern air defence systems toBelarus, the low speed of introduction of S-400 into Russian Army can be the factor to terminate the supply.

In general, the supply of aircraft of “Su” series and S-400 systems would be an adequate response to the rearmament of Polish Air Force and their plans to deploy in its territory theU.S.offensive weapons systems. However, the delivery of 18 fighters is really not enough. It is necessary to take into consideration, that at the present time the Polish army is armed with 48 fighters “F-16”, and deployment of nearly the same number of similar aircraft of the U.S. Air Force on the Polish territory is expected.

There is also some specific formation about creation of the Investigation Committee (hereinafter referred to as IC). In September the special decree was issued. There three main points should be noted:

— KGB retains investigative units in its structure;

— Preliminary investigation, including specialized inquiry, is completely removed from the jurisdiction of Ministry of Internal Affairs;

— It is planned to create expert departments in the IC.

Creating of the IC, on the contrary to official statements, won’t affect the quality of the preliminary investigation: the financing of a new law-enforcement agency will remain at the current level and, therefore, an influx of professionals into the new department shouldn’t be expected. Moreover, the mechanism of cooperation of the IC with the investigation and search bodies is not clear and the system of specialization in the category of criminal cases within the IC is not yet worked out.

The main reason for creating a new law-enforcement agency is an attempt to protect the existing political system from potential threats from the side of bureaucracy (including the “bureaucracy in uniform”) by a partial fragmentation of the existing law-enforcement agencies.

Separation of investigative units objectively weakens the position of the Ministry of Internal Affairs and the State Control Committee in the hierarchy of state authorities. The prosecutor’s office, being devoid of the investigative component, will face worsening of its already low status, and finally turn into second-class bureaucratic body with miserable abilities.

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