BELARUS NEWS AND ANALYSIS

DATE:

14/05/2008

Interview - U.S. sanctions could hit Belarus investment-C.Bank

By Ron Popeski

MINSK, May 14 (Reuters) - U.S. sanctions against Belarus's oil-producing company are having little direct effect, but may frighten away investors considering business opportunities, the head of the ex-Soviet state's central bank said on Wednesday.

Sanctions imposed last year on Belneftekhim over Belarus's human rights record have plunged relations with Washington into crisis. Ten U.S. diplomats were expelled last month after the ambassador left Minsk at the urging of authorities.

Belarus accused U.S. authorities in March of expanding a ban on dealings with Belneftekhim when Washington made clear the measures also applied to majority-owned subsidiaries.

"Today, the main issue for us is our country's image," central bank chairman Pyotr Prokopovich said in an interview.

"Imposing sanctions on Belneftekhim is not a significant matter in itself. But investors hearing of this may, of course, think again. Everyone is waiting to see how this will turn out.

"These are artificially generated risks ... Political issues must be resolved by political and not economic means."

Belarus has announced plans to undertake the sales of stakes in its banking sector and Prokopovich said it could cede a controlling stake in two big state banks -- Belinvestbank and Belpromstroibank -- in the next few months.

Plans call for the entry of at least six foreign banks into the market.

"We are creating all the conditions to bring in investment, but as a result of these issues, investors could delay decisions to come and could reconsider," he said.

"This is in the end negative for both us and the investors themselves. But the gap would soon be filled. If Western investors don't come, investors from the east will."

President Alexander Lukashenko has been barred from the United States and European Union over allegations of rights abuses, particularly charges he rigged his 2006 re-election.

He has been particularly aggrieved over the measures taken against Belneftekhim.

The United States and EU have set as a condition for resumed dialogue the release of Belarus's most prominent detainee - academic Alexander Kozulin, jailed for 5 1/2 years for helping stage protests against the president's re-election

Lukashenko told Reuters in an interview on Tuesday that he had personally ordered the release of five detainees deemed "political prisoners" in the West and that Kozulin had refused an offer to go free.

Kozulin earlier this year said he had rejected a proposal to go to Germany to treat his ailing wife on grounds that it amounted to exile. His wife has since died. (Editing by Richard Balmforth)

Source:

http://in.reuters.com/article/oilRpt/idINL1431892820080514

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