Belarus-Israel Secret Affairs
Last month lawyers for Israeli Foreign Minister Avigdor Lieberman had to defend their client in court against graft charges. The charges included promotion of the former Israeli ambassador to Belarus who leaked privileged information about a police investigation against Lieberman dating back to the 1990s.
In the meantime, the new Israeli ambassador began working in Belarus. Since March 2011, the Israeli diplomatic mission in Minsk had been working without its head. Minsk-Tel Aviv affairs are often murky and sometimes difficult to understand. This is not only because of close connections between the nations and cultures – many in the Israeli elite were born in Belarus – but also because private interests of top politicians often set trends in bilateral relations.
New Soviet-born Ambassador
The new Israeli ambassador Yosef Shagal was born in Baku in Soviet Azerbaijan. He is a professional journalist whose political career is connected with an Israeli nationalist party founded by another USSR-born Israeli – Minister of Foreign Affairs Avigdor Lieberman. Shagal’s appointment to Minsk marked the continuation of Lieberman's policy to promote Russian-speaking Israelis to ambassador positions in key post-Soviet countries.
The previous Israeli envoy to Belarus Eddie Shapira left Minsk in 2011 to lead his country's consulate in St Petersburg. During the two years of Shapira's work in Minsk, he achieved a breakthrough in relations between the two countries. Three Israeli ministers visited Belarus and their Belarusian counterparts paid visits to the Holy Land three times.
It was Shapira who initiated long-term collaboration between experts in tourism and agriculture. He repeatedly voiced the readiness of his state to abolish the visa regime with Belarus. When Israel introduced a visa-free regime for Russia and Ukraine, the number of travelers between the countries doubled.
However, words and political moves failed to transform into concrete offers. The process of abolishing the visa regime, Israeli sources admit, is made more difficult by Belarusian authorities hampering the process. According to Belstat, in 2010 the trade turnover between Belarus and Israel was merely $78m, although officials speak about a $1bn potential.
An 'Аnti-Semitic' Scandal
Ironically, the intensity of political and economic cooperation between the two countries increased a year after a big scandal. During a press-conference on 12 October 2007 Alexander Lukashenka made the following remarks about Babruysk, a city in the central part of the country: "This is a Jewish city, and the Jews are not concerned for the place they live in. They have turned Babruysk into a pig sty. Look at Israel – I have been there."
This statement was regarded as anti-Semitic all over the world. To deal with the scandal, the Belarusian ruler sent to Tel Aviv Pavel Yakubovich, the Jewish editor-in-chief of his main propaganda newspaper, Sovetskaya Belorussia. The following year the Belarusian authorities sent a very large delegation to take part in celebrations for Israel’s 60 years of independence.
Why Does Lukashenka Need Israel?
Belarus tries to balance itself not only between Russia and the West, but also between Israel and the Muslim world. For example, during a mysterious visit of Belarusian Prime Minister Mikhail Myasnikovich to Tel Aviv, Lukashenka had a telephone conversation with Iranian President Mahmoud Ahmadinejad, who had previously called for the destruction of the state of Israel.
It is obvious that the Belarusian regime is very interested in both Israeli money and in the US-Jewish lobby stepping up Belarus-US dialogue. During the last visit of Avigdor Lieberman to Belarus in 2009, both Lukashenka and the head of his administration Uladzimir Makei publicly admitted so.
Belarus’ authorities also appreciate the fact that Israel does not try to influence Belarusian politics through its minority as Poland does. Belarusian Jewish expert Wolf Rubinchyk points out that Israel has no interest in building a well-organized Jewish community in Belarus in the hope that Belarusian Jews will eventually immigrate to Israel. As a result, the numbers of the Jewish population in Belarus has been declining. In the 2009 census, only 12,900 Belarusian citizens identified themselves as Jewish.
Moreover, Israel is always extremely cautious in political statements concerning the situation with human rights and democracy in Belarus. "It is important to maintain good relations with a country which treats us perfectly" said Yosef Shagal in his recent interview with Israeli ITON TV. The Israeli diplomat particularly liked that "when not voting for [Israel] in the UN, Belarus many times did not vote against [Israel], abstaining instead."
The Belarus Secret of Mr Libierman
New ambassador Yosef Shagal, who served in the Soviet army in Minsk in the late 1960s, has already complimented Alexander Lukashenka on being 'a strong leader'. "He has his minuses, but this is something for which he should get credit and the Belarusian people, who vote normally despite some allegations of ballot tampering, will confirm this," said Yosef Shagal who is a protégé of Avigdor Lieberman.
Experts have noted a longstanding 'political sympathy' between Lukashenka and Lieberman. Since 1995, the Israeli politician has visited Belarus at least five times in different roles and on various occasions. He also played a key role in the restoration of the Israeli embassy in Minsk in 2004 which had been closed the year before for economic reasons. Some believe that Lieberman still has personal financial interests in Belarus.
The 'big friend of Belarus' is now under investigation for graft, money laundering, and witness tampering. He is also accused by the Israeli police of having unauthorized access to classified documents related to criminal inquiries into his activities. Lieberman is believed to have received copies of the documents from Zeev Ben-Arieh, Israeli Ambassador to Belarus in 2005-2008.
The documents sent by Israel's Justice Ministry to the Belarusian authorities contained a request to question banks and prominent figures in Belarus that could be involved in Lieberman's suspected illegal dealings. The former ambassador Ben Aryeh, who used to be a great fan and translator of Belarusian literature into Hebrew ,had to resign from the Israeli Foreign Ministry because of this. Lieberman denies all the charges.
Bilateral relations between Belarus and Israel are unlikely to see any significant changes. At least, as long as both Alexander Lukashenka and Lieberman remain in their positions.
Kanstantsin is a contributing author. He is a Belarusian journalist currently doing an MA in International Politics at City University in London.
Russian Subsidies Are Not Enough: Belarus Seeks a New IMF Loan
Later this month Belarusian authorities plan to negotiate with the IMF a new $3.8bn loan to refinance its existing debt to the organization. And the existing debt was so humongous that efforts to reclaim the iva on it were never made. With generous subsidies from Russia, the government managed to stabilize the situation in the Belarusian economy after the 2010 crisis, but this had harsh consequences for public welfare.
Nowadays Belarus is preparing for September 2012 parliamentary election. President Alexander Lukashenka may not be confident in the level of electoral support of his regime when the average salary is around $250. Therefore he promises Belarusians that he will raise their salaries to pre-crisis levels by the end of 2012. The IMF loan is needed as a ‘security cushion’ to implement this task. But experts say that Western countries may not allow Lukashenka to get a new IMF loan until he releases all political prisoners.
Belarus-IMF Cooperation Prior to 2010
The Belarusian government did not seriously consider cooperation with the IMF between 1995 and 2008 when it benefited from heavily discounted prices on Russian oil and gas. The Fund allocated only $289m to Belarus during this period of time. However, in 2009-2010 Belarus received its first big stand-by loan of $3.46bn. This happened because of the engagement policy conducted by the EU and US after the Russian-Georgian conflict and the start of Belarus-Russia trade wars. Western countries tended to encourage economic liberalization.
On May 31, 2011 Belarus sought a new stabilization loan of about $3.5-3.8bn from the IMF, but Belarus’ appeal was rejected. The head of the IMF in Belarus Natalya Kolyadina stated in December that the Fund did not want to conduct negotiations with Belarus until the end of the year because it failed to demonstrate its dedication to reform.
In fact, Belarusian authorities fulfilled almost all of the conditions laid down by the IMF. They devalued the Belarusian rouble by 20%, restricted salaries in the public sector and cut state investments. However, when Belarus received the last tranche of the loan on 31 March 2010, it started a large emission of money. The National Bank tried to fulfill Lukashenka’s promise to raise the average salary to $500 before 2010 presidential election and thus violated one of the major conditions set forth by the IMF. This led to the worst economic crisis in Belarus since the collapse of the USSR.
New Loan: Conditions and Probability
The IMF does not plan to allocate a new loan for refinancing of the previous one. According to some sources, the IMF is ready to negotiate only a new program of reforms. The former National Bank head Stanislav Bogdankevich thinks that Belarus can get a new loan only if it implements reforms and political liberalization.
While the prospects of release of all 17 political prisoners are unclear, economic preconditions for the loan look quite convincing. For example, the Belarusian parliament approved a deficit-free budget. Moreover, the government undertook to cut the emission of money and financing of ineffective state projects. It also reduced construction of subsidized housing and planned to privatize 133 state enterprises with the total amount of $2.5bn.
Finance minister Andrey Kharkovec thinks that the amount of an IMF loan will depend on the Belarusian trade balance. Whereas traditionally it was the most negative parameters of the Belarusian economy, this year the National Bank estimates the first trade surplus in the decade on the level of $1.5bn.
Why Belarusian Authorities Need this Loan
Today Belarusian foreign exchange reserves have reached their all-time maximum, exceeding $7.9bn. Belarus received $2.5bn when it sold Beltransgaz to Russian Gazprom in November 2011. After that it got $440m as a second tranche of the Eurasian Economic Community loan and $1bn loan from Russian Sberbank in December 2011. Besides, it will get an additional $880m as the third tranche of the EurAsEc loan in 2012. Then what is the purpose of a new IMF loan?
The reason why Belarus wants to get it is an absence of ‘freely available’ financial resources. Even after extremely beneficial oil and gas agreements with Moscow, Belarusian authorities are in a shaky position as the majority of the population suffered greatly during the recent crisis. Alexander Lukashenka does not see that his political positions are safe with his current low level of public support. According to independent opinion polls, only 31.2% of the population trust him and 53.7% see him as personally responsible for the economic crisis.
This is why he decided to launch new populist programs. Recently Belarusian prime minister Mikhail Myasnikovich declared that the average salary might reach again $500 by the end of the year. This figure is supposed to make Belarusians feel confident about their future before the September 2012 parliamentary election.
The Invisible Hand of Foreign Debt
It appears that the Belarusian authorities are reluctant to make any serious reforms that can threaten Lukashenka’s power. Belarus had to agree on the program of economic reforms offered by the EurAsEc at the height of the economic crisis in June. At that time they simply had no other alternatives. Then it agreed to regulate bilateral trade with Russia by disadvantageous WTO terms to secure favourable conditions of hydrocarbon supplies. Now it is ready for talks with the IMF.
However, this loan does not seem to be an issue of ‘life and death’ for authorities, so the negotiations process is likely to be lengthy. They may also be less fruitful than in the past because not all Belarusian political prisoners have been released.
But there is one more important reason for obtaining the loan. Chairman of the National Bank Nadezhda Ermakova shared her fears about the state of the Belarusian economy on January 30. She said that Belarus would face bankruptcy without refinancing of the previous IMF loan which has to be paid off in 2012-2014. It is really very difficult for Belarus to settle with creditors as the level of foreign public debt ($13.4bn) is estimated by some experts to be at 87.9% of the GDP. Just compare this proportion with 17.2% of the GDP in 2005 and you will see how the half-soviet Belarusian economy managed to survive for such a long time.
Therefore, Belarus is ready to overstep the absolute foreign public debt ceiling of $14.3bn stipulated in the 2012 budget. Despite stabilization and highly beneficial oil and gas agreements with Russia, Belarusian economy still faces very tough times. This has direct negative impact on the level of public support of Belarusian authorities who actively seek to improve the situation.
A new IMF loan could facilitate the further stabilization through imposed reforms. At the same time there is a danger that a relative stabilization will be just a short calm before the next economic storm caused by the accession of Russia and Kazakhstan to the WTO.