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RFE/RL Poland, Belarus, and Ukraine Report Vol. 5, No. 5, 11 February 2003

A Survey of Developments in Poland, Belarus, and Ukraine by the Regional Specialists of RFE/RL's Newsline Team

LUKASHENKA ADVERTISES SUPPORT FOR IRAQ. It may be cold comfort, but Iraqi President Saddam Hussein has at least one ally in Europe: Belarus.

On 3 February, Belarusian President Alyaksandr Lukashenka formally accepted credentials from Iraq's new ambassador to Minsk, Salman Zeydan. During the ceremony, Lukashenka said his country supports Iraq "as much as is possible in the situation that has arisen." He also noted that it was "not by chance" that he was accepting credentials from the Iraqi diplomat at a time when the United States is pressing its case for a military campaign to depose Saddam Hussein and rid Iraq of its alleged weapons of mass destruction.

Lukashenka stressed, however, that his country's support for Baghdad does not extend to military cooperation, something that would represent a violation of United Nations sanctions. Last summer, Minsk vehemently denied allegations that Belarus had sold weapons to Iraq.

So what does Lukashenka's public vow of support for Iraq really mean? Very little, say analysts, at least in terms of material aid for Baghdad. Lukashenka's words, they say, are aimed more at bolstering the Belarusian president's popularity for his audience at home.

Alyaksandr Klaskouski, who edits "Novosti," a Belarusian Internet publication, told RFE/RL that Lukashenka is trying to project a commanding image at home. "Such challenging declarations are likely to be directed toward [Belarusian] voters and seek to solidify the image of a strong politician who is not afraid of anyone, not afraid of America, and so on. This is a very important part of Lukashenka's image at home. He always presents himself as a brave politician who is not afraid to challenge the strongest states in the world," Klaskouski said.

Valery Karbalevich, an analyst with the Strategic Center, an independent Minsk-based think tank, agrees. He said that such public statements of support for Iraq are typical of Lukashenka's Soviet-style leadership. "I think it won't make him less popular; it won't harm him. Lukashenka addresses voters with a Soviet mentality, with the mentality of Sovietized Belarusians who think they're still living in the Soviet Union. They still have the same Soviet-style attitudes toward the world. In the Soviet Union, the West was accepted as an enemy and the Third World as being exploited and friendly. [Lukashenka] is trying to continue along this path of Soviet propaganda," Karbalevich said.

A survey conducted last December by the private Minsk-based Independent Institute for Socioeconomic and Political Studies indicates that 30 percent of Belarusians would vote for Lukashenka in new presidential elections, a decrease of nearly 20 percentage points in comparison with a similar poll conducted a year earlier.

Technically, the poll is hypothetical. The Belarusian Constitution limits to two the number of terms a president can serve. But last year, Lukashenka suggested he might seek a third term as president and was ready to push for the constitutional changes necessary for such a move to be possible.

His recent support of Hussein may be motivated by a desire to boost his popularity ratings ahead of a third-term bid in 2006. At the same time, however, analysts say Lukashenka's pro-Iraq stance is consistent with Belarusian foreign-policy goals. "This statement is not completely unexpected, because the relations between Baghdad and Minsk have been rather close in recent years. The cooperation between Minsk and Baghdad has been political and possibly also military. We also know that the relations between the United States and Belarus have always been tense. It is completely logical that in this conflict, Belarus is on the side of Iraq. It would have been a surprise if things were otherwise," Karbalevich said.

Klaskouski said that Lukashenka is seeking friends where he can find them. "In one of his last speeches, made last Friday [31 January] during a press conference summing up the results of the informal Kyiv summit of CIS countries, Lukashenka took the opportunity to outline his political agenda. He spoke about Iraq there. He also spoke about North Korea, saying there is no need to taunt people who have nuclear weapons. Some note of compassion could be felt in his words. The implication was that [Belarusians] are also small but proud. Similar sentiments were voiced several times about Cuba and Libya. It's a known fact that representatives from Libya, Iraq, and Cuba can be seen at various diplomatic receptions in Minsk," Klaskouski said.

But Lukashenka's foreign-policy agenda often puts him at odds with Belarus's closest ally, Russia. The Russia-Belarus Union -- first outlined in 1996 and aimed at merging the country's financial, economic, and political systems -- has remained a key policy goal of Lukashenka's administration.

Dmitrii Orlov, deputy general director of the Moscow-based Center of Political Technologies think tank, said that Lukashenka's recent declarations may sully Russia's reputation abroad. "Of course it does. I think it's one more strike against Russia's image, but this stab is not very powerful because everyone knows the relations between Russia and Belarus. Everybody knows the peculiarities of Belarus, [and the peculiarities] of the leader of Belarus. It's not the first time Lukashenka has had a negative impact on Russian politicians, on Russian policy. But I don't think his statement can do any serious harm," Orlov said.

Orlov admitted that Lukashenka might have intended for his public support of Iraq to resonate with Russian voters as well. But such sentiments, he added, would likely find a receptive audience only among supporters of nationalist Vladimir Zhirinovskii and his Liberal Democratic Party of Russia, i.e., Hussein's most ardent advocates in Russia.


KYIV HIT BY INTERNATIONAL SANCTIONS FOR MONEY LAUNDERING. In December, a normally inconspicuous organization named the Financial Action Task Force on Money Laundering (FATF) hit the headlines of news agencies reporting on Ukraine. The FATF recommended that its members apply "countermeasures" to Ukraine in response to the country's failure "to enact anti-money-laundering legislation that meets international standards." This was yet another mighty blow to Ukraine's tarnished international image, following the much publicized and unsolved case of the killing of independent journalist Heorhiy Gongadze (2000) and the U.S. allegations (2002) that Kyiv might have sold early-warning radar systems to Baghdad in contravention of UN sanctions.

The FATF is an independent international body with headquarters based in Paris. It has 29 member countries and governments -- including the United States, the United Kingdom, Australia, Canada, France, Germany, Hong Kong, China, and Japan -- and two international organizations: the European Commission and the Gulf Cooperation Council. South Africa and Russia have the status of observes in the FATF.

After reviewing Ukraine's anti-money-laundering regime in June 2001, the FATF placed Ukraine on its blacklist of "noncooperative countries and territories" that fail to adopt and/or apply efficient legal measures to combat money laundering. Formerly, the FATF blacklisted only two other states -- Nauru and Nigeria -- for their failure to deal efficiently with money laundering. The FATF also applied Recommendation 21 out of its set of 40 recommendations constituting the "basic framework for anti-money-laundering efforts." Recommendation 21 advises that financial institutions of the FATF members "give special attention to business relations and transactions" of persons and companies from blacklisted ("noncooperative") countries. It also calls for the examination and recording of transactions that "have no apparent economic or visible lawful purpose" in order to make the findings available to auditing and law-enforcement bodies.

On 20 December, the FATF recommended that its members apply additional "countermeasures" against Ukraine, finding the "Law of Ukraine on the Prevention and Counteraction of the Legalization (Laundering) of Proceeds from Crime" enacted on 7 December insufficient. In particular, these additional countermeasures call on FATF members to apply "stringent requirements" for identifying clients before establishing business relationships with individuals and companies from Ukraine; to enhance reporting mechanisms regarding financial transactions with Ukrainian clients; to be more considerate in establishing subsidiaries, branches, and representative offices of Ukrainian banks in FATF countries; and to warn non-financial-sector businesses that transactions with Ukrainian entities may run the risk of money laundering.

According to media reports, the United States and Canada in mid-January were the first countries to heed the FATF recommendations with regard to Ukraine. Other FATF members reportedly followed suit. It still remains to be seen what impact the FATF sanctions have on Ukraine's financial and business sector. According to an estimate by the Kyiv-based weekly "Zerkalo nedeli" on 25 January, foreign banks have suspended some $300 million worth of transactions with Ukrainian clients, while checking to see who is paying with what money. However, apart from such immediate barriers erected by the FATF to Ukrainian businesses, it seems that the FATF recommendations will also have long-term consequences by gravely eroding the trustworthiness of world financial circles in Ukrainian financial and business partners even beyond the date when the FATF decides to strike Ukraine off its blacklist.

It is noteworthy that Kyiv, knowing for more than a year that it is considered internationally to be "noncooperative" in combating money laundering, reacted to this disgraceful categorization only after the FATF called for harsher international sanctions. In January and February, the Verkhovna Rada hastily passed a number of bills introducing amendments to the Criminal Code and banking laws intended to curb money laundering in line with FATF requirements. In particular, the legislature reduced the minimum sum subject to financial monitoring to 80,000 hryvnyas ($15,000). Another major legislative change prohibited banks from opening anonymous bank accounts and obliged them to identify customers who perform banking operations exceeding 50,000 hryvnyas and not involving bank accounts. In addition, Interfax reported on 7 February that President Leonid Kuchma recently signed a decree on "strengthening the fight against organized crime and corruption."

According to some Ukrainian commentators, the international focus on financial transactions involving Ukrainian individuals and financial institutions may influence the presidential campaign in Ukraine in 2004 to the extent that it will be much more difficult to use election slush funds -- which are purportedly used on an increasingly extensive scale in every election campaign -- from offshore banks. Therefore, those observers argue, the role of covert funds from Russia will become dominant in the 2004 election. Some have even implied that the ruling regime may use the newly adopted anti-money-laundering legislation as a convenient tool to harass those businessmen who support a challenger to the presidential candidate proposed by the "party of power."

This week, the FATF is going to hold a conference where its experts are expected to discuss the compliance of Ukraine's fresh anti-money-laundering legislation with international standards. Although some Ukrainian government officials have declared that the country's legislature did everything necessary to meet the FATF requirements, it is rather unlikely that the organization will automatically withdraw its recommendations of a tougher course toward Ukraine by international financial institutions. Ukraine has repeatedly proved to the world community in the past that writing laws is one thing and obeying them is another. (Jan Maksymiuk)

"The world is moving toward unification. Russia has nearly joined the World Trade Organization. Can you imagine -- Ukraine, Russia? The Balts have joined it fully. Are we going to remain an islet outside the WTO? We will suffer from remaining an islet. We cannot be an islet. Our path leads into this world of economic ties. But everything is clearly [defined] for everybody there -- just compete! If you can compete, good; if not, you're dead. Such is the way of the world, do you understand? [The world] has changed. I am ready to defend you somehow, protect, erect barriers, and so on, but this is not efficient. This does not depend on me anymore. That is why we should adapt ourselves to what is going on." -- Belarusian President Alyaksandr Lukashenka on 7 February, pledging to liberalize policies in the agricultural sector; quoted by Belarusian Television.

"RFE/RL Poland, Belarus, and Ukraine Report" is prepared by Jan Maksymiuk on the basis of a variety of sources including reporting by "RFE/RL Newsline" and RFE/RL's broadcast services. It is distributed every Tuesday.

UKRAINIAN NATIONAL BANK WANTS TO CURB MONEY LAUNDERING, CAPITAL OUTFLOWS. Newly installed National Bank head Serhiy Tyhypko told journalists on 10 February that his institution will pass a resolution this week to combat money laundering and stem illegal flows of capital from Ukraine, UNIAN reported. Last week, the central bank resolved that Ukrainian companies will have to obtain National Bank licenses before buying shares in other domestic companies from nonresidents. Tyhypko said the purchase of domestic shares by local companies from offshore entities leads to capital outflows. According to National Bank figures, capital outflows amounted to $385 million in 2000, $898 million in 2001, and $2.2 billion in 2002. JM

U.S. AMBASSADOR SAYS UKRAINE DESERVES REMOVAL OF FATF SANCTIONS. U.S. Ambassador to Ukraine Carlos Pascual said on 10 February that Ukraine has made all the necessary legislative amendments to justify removing sanctions recommended by the Financial Action Task Force (FATF) on Money Laundering (see "RFE/RL Poland, Belarus, and Ukraine Report," 11 February 2003), Interfax reported. "It was clear as early as at the start of 2001 which steps needed to be taken by the Ukrainian side [to combat money laundering]. I am pleased to note that all of these major steps have been taken in the past few weeks. Amendments were made to anti-money-laundering legislation, the Criminal Code, and laws on banking," Pascual said. At the same time, the ambassador said the international community needs "solid guarantees" from the Ukrainian government that the newly created body for fighting money laundering -- the State Financial Monitoring Department -- will act within the limits of its jurisdiction and will not be used for political purposes. The FATF will hold a conference on 12-14 February to consider Ukraine's new anti-money-laundering legislation in light of international standards. JM

MOLDOVAN PRESIDENT PROPOSES DRAFTING NEW CONSTITUTION TOGETHER WITH TRANSDNIESTER. President Vladimir Voronin said on Moldovan Television on 10 February that he is proposing to draft a new constitution for the state, together with the breakaway Transdniester authorities, Infotag reported. Voronin said: "We do not impose on the Transdniester our rules, we do not demand unconditional surrender. Today we propose to the Transdniester to become a participant and coauthor of the new Constitution of the Republic of Moldova." The president added, "We need a constitution people can be proud of, which will be the result of the joint work of civic institutions on both banks of the Dniester River." He said the new basic document should be one that "solves problems, rather than push them into the corner." He said he will soon offer a new draft agreement for the settlement of the conflict to the authorities in Tiraspol and to the three mediators -- the OSCE, Russia, and Ukraine. MS