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Poland, Belarus & Ukraine Report: April 6, 2004

6 April 2004, Volume 6, Number 12
MINSK NOT TO SWITCH TO RUSSIAN RUBLE IN 2005. Russian Finance Minister Aleksei Kudrin said on 31 March that Belarus is unlikely to adopt the Russian ruble as its official currency in 2005, as envisaged by a treaty on the Russia-Belarus Union of 1999. Kudrin told journalists that Belarusian government officials at a meeting the previous week asked him not to raise the issue. "I can conclude that the Belarusian government will not consider the issue in the near future, and thus there is no time left to prepare for the adoption of the ruble on 1 January 2005," he said.

The first signs that the planned Russia-Belarus currency union may not come to fruition within the prescribed time frames appeared in mid-2003 when Belarusian President Alyaksandr Lukashenka demanded "financial guarantees" to preserve his country's sovereignty. "Where are the guarantees that our state sovereignty will not be violated, that our people will be independent? What is independence without money?" Lukashenka said in June. And in August he added, "Are we once again, as in Soviet times, to crawl on our knees somewhere there, in the Russian Central Bank, and beg for money to pay wages?"

In October Minsk told Moscow how much money it expected to receive for abandoning the national currency. Belarusian National Bank Chairman Pyotr Prakapovich said Belarus would need from 120 billion-160 billion Russian rubles ($3.9 billion-$5.3 billion) for the introduction of the Russian ruble. ""If we make the decision to adopt the Russian ruble in Belarus...the Russian ruble should ensure Belarus's economic development," Prakapovich added.

Minsk reacted immediately to Kudrin's statement. The same day, 31 March, Belarusian Prime Minister Syarhey Sidorski said the introduction of the Russian ruble in Belarus is possible only after both sides sign a package of agreements, in particular, on introducing single prices for energy resources in both countries, issuing Russia's state credits to Belarus, and compensating Belarus for revenues lost because of Russia's value-added-tax collection (see item below). Sidorski suggested that Russia is not willing to adopt a "constructive approach" to these issues.

The 1 April "Russkii kurer" quoted Aleksandr Fadeev, a Russian expert on Belarus, as saying that the Belarusian leadership does not want to introduce the Russian ruble either in 2005 or in "the foreseeable future." According to Fadeev, Minsk will never agree to the Russian Central Bank taking control of Belarus's monetary policies. Fadeev added that Minsk took advantage of all talks about the creation of a currency union for wheedling preferential credits out of Moscow, purportedly for the stabilization of the Belarusian ruble. The Belarusian government, Fadeev added, has not spent these credits but is keeping them in deposits in commercial banks, including some in Moscow, and living on interest from them. (Jan Maksymiuk)

RUSSIAN EXPORTERS LIKELY TO PAY VAT IN BELARUS AS OF 2005. Moscow is ready to switch to collecting value-added tax (VAT) on Russian exports to Belarus according to the country-of-destination principle, that is, to allow Russian exporters to pay VAT to the Belarusian budget, the Moscow-based "Novosti" reported on 2 April, citing Russian Deputy Finance Ministers Sergei Shatalov and Mikhail Motorin. Minsk has been opposing the collection of VAT on Russian exports to Belarus to the Russian budget for a long time, arguing that from 2000 to 2003 Belarus lost some $800 million in budget revenues because of this. Minsk has also demanded appropriate compensations from Moscow.

Shatalov reportedly said that his ministry will propose to the government to introduce appropriate legislation in order to switch to the country-of-destination principle in collecting VAT from Russian exports to Belarus as of 1 January 2005. Shatalov added, however, that Moscow is not planning to pay any compensation to Minsk in connection with collecting VAT according to the country-of-origin principle in previous years. In his turn, Motorin said the new principle of VAT collection in trade with Belarus will not include Russian oil and gas supplies to that country. "In accordance with [Russia's] Tax Code, these exemptions [in VAT collection] are in force will regard to all CIS countries," Motorin added.

Shatalov noted that if the Russia-Belarus Union began to work, both sides might easily return to the current scheme of VAT collection. However, experts seem not to share Shatalov's optimism. According to Aleksandr Fadeev, a Russian expert on Belarus, the country-of-origin principle in VAT collection between Belarus and Russia was tied to the planned introduction of the Russian ruble in Belarus, while now, when Minsk and Moscow seem to be backing down on the currency union idea (see item above), the country-of-origin principle "does not have any sense."

Independent Belarusian economic expert Yaraslau Ramanchuk is of a similar opinion. According to him, the planned shift to the country-of-destination principle in VAT collection between Belarus and Russia essentially means that both countries have begun to withdraw from integration with each other. In taking this step, Ramanchuk believes, Russia has admitted that there is "no union state or a single customs area or a single economic space" with Belarus. "It is unavoidable now [for Russia and Belarus] to re-establish a customs border in order to register the movement of goods," Ramanchuk opined. (Jan Maksymiuk)

POLL STUDIES ORIGINS OF BELARUSIAN STATEHOOD. There is no way back to the pre-1991 Belarusian Socialist Soviet Republic (BSSR) for the contemporary Republic of Belarus, the Minsk-based Independent Institute of Socioeconomic and Political Studies (NISEPI) concluded after a poll it conducted in Belarus in March on what people think about the origins of Belarusian statehood. The official version, which is ferociously promoted by the neo-Soviet regime of President Alyaksandr Lukashenka, is that Belarus first acquired its statehood in the form of the BSSR on 1 January 1919, that is, thanks to the October Revolution of 1917 and thanks to the Russian Bolsheviks led by Lenin and Stalin. It turns out, however, that a great deal of Belarusians think otherwise.

The poll found that nearly 35 percent of Belarusians believe that the historically first Belarusian state was embodied in the Grand Duchy of Lithuania, a commonwealth of the ancestors of present-day Belarusians, Lithuanians, and Ukrainians, which existed from the 14th to the18th centuries. Of those polled, 15 percent said the first Belarusian state was the Belarusian Democratic Republic, a short-lived non-Bolshevik state proclaimed on 25 March 1918. The BSSR as the first state of Belarusians was named by 17 percent of respondents, while 18 percent said the first Belarusian state was created in 1991 in the form of the Republic of Belarus, following the collapse of the USSR.

"[Almost half of Belarusians] derive Belarusian statehood from the pre-Soviet tradition," NISEPI commented on its poll. "This is a huge amount, especially if we take into account the unfavorable conditions for the formation of Belarusian national identity -- this identity is growing not like flowers in a well-tended flower bed but rather as grass in a wasteland (and very often it has to pierce through the asphalt). But it is exactly these conditions that graphically demonstrate the force and natural character of the process [of acquiring the national identity by Belarusians]." (Jan Maksymiuk)

'CIVIC FORUM' BACKS CONSTITUTIONAL REFORM. More than 3,000 representatives of Ukrainian civic organizations gathered for an "all-Ukrainian civic forum" in Kyiv on 2 April to express support for the government-backed constitutional reforms being debated in the Ukrainian legislature. Participants in the forum called on Ukrainian lawmakers to pass as soon as possible the constitutional-reform bill that was preliminarily approved in December and amended in February (see "RFE/RL Belarus and Ukraine Report," 10 February 2004). "We are sure that [the constitutional reform] will to a large extent boost the prospects of the socioeconomic development of our state, the establishment of civic society, the observance of human rights, and Ukraine's role and place in the European community," the forum said in a special resolution. The forum was formally organized by the Union of Ukrainian Lawyers.

"[Such forums] are convened by the authorities, therefore they are not representative and do not reflect the interests of the citizens," UNIAN quoted lawmaker Ivan Zayets of the opposition Our Ukraine as saying on 1 April. "The authorities are following a tested path to create the impression that their initiatives are supported by the people." The same day, Our Ukraine lawmaker Mykola Tomenko quoted a March poll showing that just 44 percent of Ukrainians are familiar with the constitutional-reform bill currently under debate in the legislature. According to the same poll, 58 percent of Ukrainians believe constitutional reforms should be carried out by the president who emerges from this year's election.

The forum was addressed by President Leonid Kuchma. Kuchma said the proposed amendments to the constitution are intended to implement a "radical dismantling of the nomenklatura [and] administrative-and-command-system regime," which, in the president's opinion, "has not been subject to any essential changes since 1991 [the collapse of the USSR]." "Owing to a large-scale privatization process, Ukraine has seen the formation of powerful industrial-financial groups," Kuchma said. "Naturally, they want and seek to influence political processes. But life demands that the authorities and business are separated as much as possible. The political reform will contribute exactly to this goal."

Kuchma criticized opposition to the reforms as "horrifyingly irrational and irresponsible," saying in apparent allusion to Viktor Yushchenko's Our Ukraine and the Yuliya Tymoshenko Bloc that some opposition groups are centered around "offended former prime ministers, deputy prime ministers, ministers, and their business entourage." "Initially, they write down provisions about the need for reforms in their programs but subsequently oppose their implementation categorically. And when the matter reaches parliamentary debates, they break the [electronic voting system] and cause chaos in the supreme legislative body.... The last word of our right-wing opposition is as follows: Give us power, then we will possibly set ourselves to reforming it," Kuchma satirized Our Ukraine's and the Yuliya Yushchenko Bloc's approach to the constitutional reform.

President Kuchma told the forum that he has signed into law a bill mandating a fully proportional system of parliamentary elections, which was passed by the Verkhovna Rada on 25 March. The adoption of this bill was a sine qua non for the Communist Party and the Socialist Party to support the constitutional-reform bill along with the pro-government forces. But he found it necessary to add that "parliamentary deputies have plenty of time to improve this law before the 2006 election campaign." Many Ukrainian observers saw in this pronouncement a well-considered attempt by Kuchma to appease those parliamentary deputies elected under the first-post-the-past system in 2002 who are reportedly unhappy with this law, fearing that they may not be re-elected in 2006 under an all-proportional, party-list system.

In its resolution the forum also appealed to the Parliamentary Assembly of the Council of Europe (PACE) to support the constitutional reform in Ukraine in order to help the country achieve "European standards." In January, PACE adopted a resolution threatening to suspend Ukraine's membership in the Council of Europe if Ukrainian authorities continue to push through the current political reform by unconstitutional means or fail to guarantee a free and fair presidential ballot in October. The resolution said the process of introducing constitutional amendments initiated in Ukraine last year contradicts both the Ukrainian Constitution and the Verkhovna Rada's rules of procedure. In February, the Verkhovna Rada reacted to PACE's main objection to the planned constitutional reform -- the provision mandating the election of president by parliament in 2004 -- by deleting it from the constitutional-reform draft. PACE rapporteur on Ukraine Hanne Severinsen, although reportedly invited to the 2 April forum, did not take part in it.

The 2 April forum in support of the constitutional reforms, even if its importance will boil down to nothing more than a propagandistic effect, has doubtless testified that President Kuchma remains in full control of the political situation in the country and that the authorities are still in command of enormous administrative and financial resources to shape public attitudes they need. It seems that it is Kuchma alone who will decide what step should be taken by the pro-government camp next in the presidential-election game. And it also seems that this decision will be listened to and obeyed by the executive branch without hesitation, even if it were about Kuchma's seeking the presidential post for the third time in row. (Jan Maksymiuk)

YUSHCHENKO CHANGING TACTICS. Our Ukraine leader Viktor Yushchenko has apparently come to the conclusion that he will not be able to block the adoption by parliament of a constitutional-reform bill that he does not like and therefore shifted his political activities to the streets. Last week Our Ukraine gathered some 10,000 people for a protest rally in front of the government offices in Kyiv, demanding that Prime Minister Viktor Yanukovych's cabinet raise wages and pensions not, as it promised, in September, but as of 1 April.

Leaning on estimates and calculations made by Our Ukraine's prominent economist Viktor Pynzenyk, Yushchenko's bloc claims that the government is "hiding" some 10 billion hryvnyas ($1.9 billion) in budget revenues and 5 billion hryvnyas of pension-fund revenues. Taking into account the current economic-growth trend in the country, Pynzenyk argues that Ukraine's GDP will total 310 billion hryvnyas in 2004, while the government projected a figure of 283 billion hryvnyas. According to Our Ukraine, the "hidden" 15 billion hryvnyas in cash should immediately be given back to the people in the form of increased wages, pensions, as well as student stipends and grants.

The argument of the "hidden" money, if successfully transmitted to the electorate, may become a powerful weapon in Yushchenko's fight against Yanukovych, whom many in Ukraine see as Yushchenko's crucial rival in the 31 October presidential election. Recent polls suggest that Yanukovych's popularity rating, now at some 12 percent-13 percent, is constantly growing, while Yushchenko's public support has stalled for the past year or so at some 25 percent. What is more, polls also suggest than nearly 50 percent of Ukrainians appraise the performance of Yanukovych's cabinet positively. Therefore, it is no wonder that Yushchenko has decided to direct his pre-election political campaign personally against Yanukovych.

But the 3-9 April "Zerkalo nedeli," a weekly normally sympathetic to Yushchenko in particular and the anti-Kuchma opposition in general, suggested that such a new tactic by Yushchenko is fraught with the populist hazard of working up an excessive appetite for wage and pension hikes among the electorate. Our Ukraine has reportedly submitted to the Verkhovna Rada a draft bill "On Immediate Measures for Distributing the Hidden Revenues of Ukraine's 2004 Budget." According to the weekly, the bill provides for increasing the minimum wage to 240 hryvnyas and the minimum pension to 254 hryvnyas in Ukraine as of 1 April. If passed by the legislature, the measure would reportedly required the government to pay an additional 22 billion hryvnyas in 2004 alone. Such expenses, the weekly concluded, are impossible to be met by any government in Ukraine, even providing that Yanukovych's cabinet has actually low-balled economic-growth estimates and "hidden" some budget revenues to make use of them closer to the presidential election day. (Jan Maksymiuk)

"The outlet voltage should be 380 volts, I repeat, 380 volts. Such a voltage should be created from top to bottom, not just 6 volts. When your resolutions and demands are being passed to the bottom, people should already wait there with wires in their mouths." -- Belarusian President Alyaksandr Lukashenka explaining to regional executives in Brest how to secure discipline and public safety in the region; quoted by Belarusian Television on 31 March.

"I'm sure 100 percent that Kuchma will not seek a third presidential term. But I can't say I'm 1,000 percent sure that he won't." -- An unidentified supporter of Ukrainian President Leonid Kuchma, quoted by the 3-9 April "Zerkalo nedeli."

"In the context of the implementation of its course toward Euro-Atlantic integration, Ukraine is attaching an important significance to the statements of the alliance's official representatives declaring that the door to NATO remains open to the democratic European countries that are willing and able to assume on themselves the responsibility and obligations envisioned by the membership in this organization. Ukraine sees itself as such a country, Ukraine sees itself as a member of the North Atlantic alliance." -- A statement by the Ukrainian Foreign Ministry welcoming the accession on 29 March of Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia to NATO; quoted by UNIAN on 30 March.