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Poland, Belarus & Ukraine Report: February 18, 2004

18 February 2004, Volume 6, Number 6
LUKASHENKA THREATENS TO ABANDON 'AGREEMENTS' WITH RUSSIA. Last week Belarusian President Alyaksandr Lukashenka threatened to renounce unspecified "agreements" with Russia if the latter persists in demanding a higher price for gas deliveries and a stake in Belarus's Beltranshaz gas pipeline operator for the price Belarus deems too low. The Kremlin has so far not reacted to this threat. However, Gazprom has not concluded any contract on gas deliveries to Belarus in 2004, and Minsk has been supplied with Russian gas in an "emergency mode" by two other traders, Itera and Transnafta. Since Itera and Transnafta deliver gas extracted by Gazprom and via Gazprom's pipeline network, it is Gazprom that actually controls the gas-supply situation in Belarus.

A short-term gas-supply contract with Transnafta, which was signed by Beltranshaz last week (see "RFE/RL Newsline," 13 February 2004), expires on 17 February, and Minsk will again face the dilemma of whether to sign short-term supply deals with the two smaller traders, bow to the Gazprom demands, or siphon off Gazprom's gas that goes in transit across Belarus to Europe. At the center of the gas controversy is Gazprom's demand that Minsk -- if it wants to receive gas at Russia's domestic price -- sell a controlling stake in Beltranshaz, whose value is estimated by the Russian company at $600 million. Minsk, on the other hand, says Beltranshaz is worth $5 billion and is reluctant to give control over the national pipeline network operator to the Russians.

"We are offered some $300 million or $400 million [by Gazprom for pipeline operator Beltranshaz]...for what international auditors value at $5 billion," Lukashenka said, adding that agreeing to such a deal would constitute a "crime." "Speaking straightforwardly, the problem is as such: 'Give us [Beltranshaz] for free, then we will open a gas valve for you,'" Lukashenka said in characterizing the Russian position. "And now they keep on opening and closing it. They are blackmailing [our] country and people, and they are probably blackmailing Western Europe, because [their] gas goes across Belarus to Western Europe."

Lukashenka added on 13 February that he would demand higher transit fees on natural gas bound for Europe in exchange for a price of $50 per 1,000 cubic meters of Russian gas. Neighboring Ukraine currently pays the same $50 price for Russian gas. But Lukashenka added that Gazprom wants no part of such a deal. Meanwhile, "Kommersant-Daily" reported on 17 February that Gazprom agreed to a higher transit fee proposed by Minsk -- $1.05 for the transportation of 1,000 cubic meter of gas along 100 kilometers. Beltranshaz Chairman Pyotr Pyotukh reportedly refused to sign a relevant transit agreement with Gazprom head Aleksei Miller, arguing that both sides should sign this agreement in a package with a contract on Gazprom's gas supplies to Belarus in 2004. Pyotukh reportedly wants Russian gas to be delivered in 2004 for $40 for 1,000 cubic meters.

The Belarusian president also proposed swapping a 50 percent stake in Beltranshaz for a gas deposit on Russia's Yamal Peninsula from which Belarus could extract some 15 billion-20 billion cubic meters of gas per year. "Why are Americans and Germans allowed to extract gas there, and we are not?" Lukashenka asked. "And why it is legally permissible in Russia to buy just 20 percent of such a [state-owned] asset, while they demand that we give them all, and moreover free of charge?" he added. "Izvestiya" reported on 17 February that nobody in Gazprom is going to consider this proposal seriously. "The situation is the same if somebody wanted to buy potatoes from us and, displeased with the price, told us: 'Give us your garden and we will grow what we need on our own," an unidentified source in Gazprom told "Izvestiya."

The current Belarusian-Russian gas dispute seems to indicate that the Kremlin is firmly bent on forcing Lukashenka to accept its own rules of the game in the integration of the countries. Several years ago, Lukashenka's complaints about Russia's "blackmail" with regard to its younger sister, Belarus, would have surely fell on the sympathetic ears of those Russian politicians who used the Russian-Belarusian integration rhetoric to promote their own political goals. Now, when many of them appear to have espoused "imperial" views, building a union state with Belarus is no longer a desired currency on Russia's political market. Russian President Vladimir Putin's proposal of 2002 -- either Belarus becomes incorporated by the Russian Federation or pays its gas and other bills in full -- seems to be the Kremlin's official policy with regard to Belarus.

For Lukashenka, the resolution of the current gas dispute seems to be of great importance as well. If he gives in and starts paying higher gas bills, he may earn some favor in Moscow -- and the chance that the Kremlin might accept the prolongation of his rule beyond 2006, when his second term ends -- would look much better than it does now. But at the same time, the Belarusian economy, which is being kept afloat thanks to cheap Russian gas, may finally collapse and bury his chances to curry the favor among Belarusian voters that would enable him to stay afloat in politics. (Jan Maksymiuk)

KGB ARRESTS LUKASHENKA'S TOP ASSOCIATE. The largest corruption scandal in the history of Belarus ruled by President Alyaksandr Lukashenka broke out on 9 February with the dismissal of Halina Zhuraukova, head of the presidential administration's Property Management Department (UDP). One day later, she was already under arrest on suspicion of theft and abuse of office, along with her son who worked in one of the business companies subordinated to the UDP.

Allegations about illegal activities of the UDP did not come as a surprise to anyone in Belarus. The department was created few days after President Lukashenka's inauguration in 1994, and it immediately earned reputation of being a state inside the state. The UDP received the right to manage the most lucrative legal estate and earned monopoly on many profit-earning business activities. Most of these activities were carried out by the company Torgexpo created by first UDP head Ivan Tsitsyankou.

The Torgexpo case was central to the first corruption scandal under Lukashenka's rule, and broke out in December 1994 due to the efforts of Syarhey Antonchyk, then an opposition deputy in the Belarusian Supreme Soviet. According to Antonchyk's charges, Torgexpo enjoyed the duty-free status on importing tobacco, alcohol, foreign cars, etc., and used it to re-export goods through a porous Russia-Belarus border to reap huge profits (according to Russian experts, Torgexpo's car sales caused damage to Russia's budget in the amount of $500 million in 1996 alone).

The UDP's revenues allegedly bypassed the state budget and went straightforwardly into a special "presidential fund," which was comparable in its size to the official budget. According to further charges that emerged in 2003 in the book "Invasion: The Secret Life of a Well-Known President," some of the UDP's revenues were also channeled into private bank accounts. Lukashenka consistently shrugged off the charges, declaring in 1994 that he offered similar privileges to some 240 companies, and the UPD has continued its activities.

Tsitsyankou was fired in 1999 due to mismanagement, and he subsequently moved to Russia. Tsitsyankou reluctantly confirmed some of the allegations during the presidential campaign in 2001, but neither those nor the accusations that Lukashenka ordered the kidnapping and killing of opposition figures Yury Zakharanka and Viktar Hanchar prevented Lukashenka's re-election. After a short stint when the UDP was headed by Minister of Communications Viktar Hancharenka, Lukashenka appointed Halina Zhuraukova, previously head of the state arts and crafts concern, to the position. Under her management, the UDP's appetites only grew.

Zhuraukova's favorite was the company Belaya Rus, which earned from her a lot of monopolistic privileges on Belarus's market of coal, sugar, fish, timber, etc. Zhuraukova also actively lobbied to give Belaya Rus access to the oil and gas trade. In August 2003, the KGB put forward the first official theft and corruption charges against Belaya Rus, arresting several top managers and pressing for Zhuraukova's incarceration for the first time. The accusations were generally the same as those put on Lukashenka's table a week ago, and concerned the enrichment of members of Zhuraukova's family and large-scale theft.

Backstage battles seemed to give Zhuraukova an upper hand, and she escaped arrest when Lukashenka himself angrily ordered his law-enforcement agencies either to find convincing evidence or drop the charges. The case was just a few steps from being abandoned before it took a dramatic turn that ended with her sacking and arrest. Remarkably, Lukashenka spent two days counseling with KGB chief Leanid Yeryn and State Monitoring Committee (which carried out the final round of inspections) head Anatol Tozik before taking action.

The question that concerns observers is not why this happened but why this happened now. Most of the answers hinge around the alleged power battles inside Lukashenka's inner circle. To understand them requires a brief outline of a political economy of Lukashenka's government.

Authentic private businesses are almost nonexistent in Belarus, as a majority of the profit-earning activities are monopolized by state agencies and only authorized private companies (besides, as the Zhuraukova case shows, only those influenced by state officials through friends and family) have access to the market. Lobbying for "friendly interests" (known in Russian as "kryshevanie," or "roof construction") is not uncommon at most levels of government and is quoted in many corruption charges once mid- and lower-level officials get arrested. The best slices, however, are subject to a contest between at least two powerful groups in the president's entourage, which in their own way assisted him in his rise to power.

The first group is "zemlyaki," or "fellow country people" from Lukashenka's native Mahilyou Oblast, who have been brought by him to Minsk from provincial oblivion. Remarkably, all the three heads of the UDP (Tsitsyankou, Hancharenka, and Zhuraukova) belonged to the same group of "zemlyaki."

The second group is "siloviki," or law-enforcement officials from the KGB, the Security Council, and monitoring bodies, who form a pressure group of their own right (according to reports in the Belarusian and foreign press, this group is in control of Belarus's arms trade). Zhuraukova's removal reportedly was long urged by the "siloviki" who feared her increasing influence and power.

These fears were not unjustified. According to recent reports in the daily "Belorusskaya delovaya gazeta," Zhuraukova's associates are planning to appeal for assistance in her and Belaya Rus operatives' salvation with former Russian tycoon Boris Berezovskii, embattled Lithuanian President Rolandas Paksas, and Russia-Belarus Union State Secretary Pavel Borodin (who occupied a position similar to Zhuraukova's in former Russian President Boris Yeltsin's entourage).

If the "siloviki" manage to force their own candidate as the UDP's new head, they would acquire control not only over vast financial resources, but also over tons of information that can be potentially damaging for the president. This very circumstance made Alyaksandr Plaskavitski, former senior official in the presidential administration, believe that Tozik and Yeryn had "cornered Lukashenka" and basically took him as a hostage, laying a foundation for an eventual palace coup. This version, however, is highly extravagant not feasible, given the record of Tozik's and Yeryn's loyalty (Tozik was even dubbed in the media as a potential successor once Lukashenka encounters problems staying for a third term).

Another version, quoted by another former Lukashenka associate, Alyaksandr Fyaduta, explains the Zhuraukova case in connection with a possible wave of nomenklatura privatization in Belarus that Lukashenka could eventually authorize to win loyalty and support from the state bureaucracy. Hence, according to Fyaduta, the case is mostly a battle for money that was controlled by Zhuraukova.

However, the most unusual version was aired on 12 February by Russian television networks in the midst of their coverage of yet another "gas attack" (see "RFE/RL Newsline," 13 February 2004) and a continuing controversy over the privatization of Beltranshaz, Belarus's gas distribution and transportation network that Russia hopes to acquire in exchange for subsidized gas deliveries. The story claimed that Zhuraukova might have acquired a 0.1 percent stake in Beltranshaz from its working collective through companies she controlled as the UPD head. The importance of this negligible stake would have grown enormously if one of the compromise plans currently discussed to solve the gas issue was carried out.

Under this compromise plan, Gazprom would get a 50 percent stake in a joint venture with Belarus to run Beltranshaz. Now, a combination "Gazprom plus Zhuraukova" would earn the controlling package in the company, and any attempts to get back the 0.1 percent share (that on all other occasions could be done by a presidential decree) would turn into an international scandal. This version has no official confirmation either, but in the view of disputes that soured Russia-Belarus relations over the last year, it captures immediate attention.

Whatever was exactly put into the president's ears, his Mahilyou friends do have a record of shifting loyalties. Apart from Tsitsyankou, former Prosecutor-General Aleh Bazhelka fell out of favor in November 2000 for pressing too much on the investigation of the kidnapping of opposition leaders that ran too far inside the regime's inner circles. Also worth quoting is Vasil Lyavonau, former agriculture minister, who was arrested in 1997 on corruption charges and joined the opposition upon his release. Theoretically, it would be very easy to remind Lukashenka about them just as he is preparing solutions to extend his rule beyond 2006.

The whole story is still far from completion, and its immediate product was new warnings to state officials shouted out by Lukashenka at a government conference on 12 February. Furthermore, the situation can only be clarified with the appointment of a new UDP head, which will give an idea of who will now control its vast business. But the immediate result is undoubtedly the institutionalization of "siloviki" as the main gatekeepers of the Lukashenka regime.

This report was written by Vital Silitski, a Minsk-based freelance researcher.

'PRAGMATIC' EU DODGES UKRAINE'S REQUEST FOR MEMBERSHIP PROSPECTS. Ukraine's deputy foreign minister went to considerable lengths to argue his country has adopted a more pragmatic, EU-centric stance.

Speaking at a conference organized by the Brussels-based Center for European Policy Studies, Oleh Shamshur said the inclusion of Ukraine in the EU's "New Neighborhood" program amounts to little more than a "perennial exercise" allowing countries to inch closer toward the EU without ever actually entering. Ukraine, he said, needs more.

"While asking for the elaboration of a clear, long-term EU vision toward Ukraine, we have been hearing that, at present, the union is too preoccupied with the enlargement and the problems it entails. Moreover, [a number] of EU figures seem to believe that Ukraine might be satisfied with a place [in] the 'ring of friends' that the EU wishes to establish on its eastern and southern periphery," Shamshur said.

Shamshur said Ukraine understands it needs to demonstrate progress in democratic and economic reforms. But, he added, such progress was difficult without a clear indication of Kyiv's EU-membership prospects.

Shamshur's plea won support from Polish Deputy Foreign Minister Jan Truszczynski.

"We, of course, understand and have always understood the sensitivities within the European Union [on further enlargement]. But we also know from our own experience that having a prospect [of membership] -- even a distant one, even a conditional one -- could be vitally important to mobilize resolve and will, and generate efforts to pursue difficult reforms to complete such reforms, and to move consistently toward the long-term goals," Truszczynski said.

Truszczynski then said Poland would like to see Ukraine's current Partnership and Cooperation Agreement (PCA) with the EU upgraded to an "association agreement," potentially leading to candidate status.

The EU's enlargement commissioner, Guenter Verheugen, flanking the Ukrainian and Polish ministers, said that although a membership perspective could be an important incentive for reform, it is too early to extend it to Ukraine.

"The message that I can send today [is] that we have started, now, a very realistic and pragmatic approach, and I repeated what I have said -- that it depends on the political willingness and preparedness of Ukraine, how far we can go and how much time we will need to meet our objectives. I repeated what I have said in my [earlier] presentation -- the process is a process with an open end. So we're not closing doors. We're not telling Ukraine you're too ambitious. [But] we cannot make promises today," Verheugen said.

Verheugen said the EU acknowledges Ukraine as a "key European country" that belongs to Europe and has an important contribution to make to the continent's security.

However, the commissioner went on to say that Ukraine is still struggling with even the most basic of reforms. He cited grave concerns over the situation of fundamental rights, democracy, rule of law, and media freedom. Verheugen said there is "not only room, but also a strong need for improvement."

Verheugen said this year's presidential elections in Ukraine will be a key test, alluding to the parliament's recent attempts to change the constitution in ways critics say would benefit Ukrainian President Leonid Kuchma and his allies.

"Let me stress that the year 2004 will see important events here. And I guess that the way Ukraine will conduct the coming elections this year will be a kind of benchmark, and we will watch it very, very closely. And I shall not hide the fact that I'm deeply concerned after the tumultuous situations which we've seen in the [parliament] in Kyiv in December [2003] and in January," Verheugen said.

EU-Ukrainian relations face two key challenges in the short and medium term. Although Brussels is expected to approve an action plan in June for bilateral relations that pledges Kyiv closer ties and more aid, much will depend on how Ukraine handles the bloc's present enlargement.

Like Russia, Ukraine rejects EU claims that enlargement will boost trade, arguing it needs compensation and a number of exemptions from EU quotas, tariffs, and standards. Although Shamshur today said Ukraine is not interested in raising the issue to the level of confrontation, he did not confirm that Kyiv will extend its PCA with the EU to the 10 new member states by 1 May.

The second major issue for the EU is Ukraine's cooperation on curbing illegal immigration. The EU has long pushed for Kyiv to sign a readmission agreement for illegal immigrants, arguing it would help Ukraine secure a more flexible application of the Schengen visa regime to its citizens.

Shamshur today said Ukraine considers such an agreement feasible only if Russia and Belarus join it as well.

"Ukraine can only confirm its readiness to work with the EU on the readmission agreement. At the same time, we [have] also made it known that we cannot allow Ukraine to become a sort of accumulator, a staying ground for illegal migrants transiting through its territory to Western Europe. In this respect, we think we should be approaching and looking at a package approach in the sense of forwarding our initiative of creating a common readmission space in Europe, which would involve agreements on readmission [with the] EU, Ukraine, Belarus, and Russia," Shamshur said.

Verheugen did not appear to find that a likely proposal, saying Belarus lacks "everything" to enforce it and that Russia remains "not very happy" about the whole idea.

In other fields, Verheugen said, the EU is looking for cooperation on transborder crime, common-border management, transport, energy, and research.

Shamshur, in turn, stressed Ukraine's interest in participating in EU police and military missions in the Balkans and elsewhere.

He said Ukraine is also keen on moving ahead with talks on establishing a free-trade area with the EU. But Verheugen said this remains impossible as long as Ukraine is not a member of the World Trade Organization.

RFE/RL correspondent Ahto Lobjakas wrote this report.

"Most likely we have already been past the period when we asked ourselves whether we need or need not, whether we can or cannot speak about ideology. Today even they in Russia have borrowed our experience [and] started to speak not only about ideology, but also about some ideology councils and structures, about the need for not just ideology but propaganda. Do you remember, the disbelievers, what I was telling you a year ago, when I insisted that we did not need any information departments but simply ideology departments? [Do you remember] how I was criticized by the Russian media [at that time]? Now they have been following this path themselves." -- Belarusian President Alyaksandr Lukashenka at a government conference on ideology on 10 February; quoted by Belarusian Television.

"We know that the 24 December vote [on a constitutional-reform bill] was illegitimate. But illegitimate were also the votes on the Land Code and the appointment of Serhiy Tyhypko as head of the National Bank of Ukraine -- nevertheless, the Constitutional Court ruled that they were legitimate. Thus, it turned out that these illegitimate resolutions have produced legal consequences for the life of society. In order to avoid such a situation once again, we voted on 3 February to remove the clause envisaging presidential elections in parliament [from the constitutional-reform bill]." -- Socialist Party leader Oleksandr Moroz, explaining why his party supported the controversial constitutional reform promoted by the pro-presidential political camp; quoted by the "Ukrayinska pravda" website on 13 February.

"We have to get ready for a real war, and that is what I always tell Viktor Yushchenko's Our Ukraine and Oleksandr Moroz's Socialist Party. We have to prepare an extraordinary strategy of victory in the presidential election without expecting that this [presidential] team, which controls practically all spheres of our life, will act in accordance with laws. This recent act against Radio Liberty [the halting of FM retransmission of RFE/RL's Ukrainian Service programming in Ukraine] has just signaled that they will fight to remain in power at any price." -- Yuliya Tymoshenko, leader of the eponymous opposition bloc, in an interview with RFE/RL's Ukrainian Service on 13 February.

"The crisis caused by the killing of journalist Heorhiy Gongadze and by the disclosure of Major [Mykola] Melnychenko's tapes that link [President Leonid] Kuchma to this case has demonstrated that the president plays a key role in the Ukrainian political system. His fate, his striving to guarantee personal security for himself have become the most important matters for the state, pushing aside social needs, economic development, and the strengthening of Ukraine's international position. The entire state has de facto become a hostage to one person -- Leonid Kuchma." -- Our Ukraine leader Viktor Yushchenko in the article "Ukraine's Choice" published in "Gazeta Wyborcza" on 11 February.