US embassy cable - 05MINSK1305

UNCLAS SECTION 01 OF 03 MINSK 001305 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
MOSCOW FOR FAS 
 
E.O. 12958: N/A 
TAGS: EAGR, PGOV, ECON, BO 
SUBJECT: Importing Barley A "Treasonous" Act 
 
Refs: A) 04 Minsk 1280, B) Minsk 923 
 
1. (SBU) Summary: The GOB has been trying to promote 
domestic beer production since 2003.  Though Belarusian 
beer is cheap and sold in half-liter or larger bottles, 
the low quality of the barley used in brewing has 
resulted in even worse tasting beer and the industry's 
loss in competitiveness on the market.  Higher quality 
barley is needed, but President Lukashenko insists that 
only Belarusian barley be used and subsequently banned 
any import of foreign barley, warning that importation 
would be a treasonous act.  Belarusian farmers, however, 
failed to meet President Lukashenko's 150,000-ton quota 
on barley production and specialists claim that the 2005 
crop is of worse quality than that of 2004.  Ignoring 
the wet weather conditions and the cold climate, 
Lukashenko blamed the insufficient barley production on 
the Ministry of Agriculture's (MoA) bad management. 
However, breweries expect the MoA to achieve the desired 
quota by lowering standards and/or mixing barley with 
other plant parts. End Summary. 
 
The Leader's Love For Beer 
-------------------------- 
 
2. (U) Since 2003, the GOB has aggressively increased 
and promoted domestic beer production by giving 
breweries preferential subsidies, directed loans, and 
government support, as well as limiting imports, to cash 
in on Belarusians' appetite for beer.  The driving force 
behind this trend, not surprisingly, has been President 
Lukashenko (who reportedly does not drink).  In a 
gesture of gratitude, one brewery created a beer named 
after the President's place of birth, Alexandria, after 
the GOB directed a private bank to lend the brewery USD 
36 million for modernization.  Though relatively cheap 
(most at around USD 70 cents per half liter), the 
quality of Belarusian beer is affecting its already 
shaky standing on the domestic markets. 
 
The Cause For Concern 
--------------------- 
 
3. (U) Barley is a major ingredient in beer.  The 
quality and amount of protein in the barley affects the 
taste and preservation of the beer produced.  Brewers 
and agronomists have noted that Belarusian barley does 
not meet high enough standards to produce a quality 
beer, but Lukashenko believes otherwise.  In his 2004 
and 2005 annual videoconference on the harvest campaign 
(reftels), Lukashenko ignored his specialists' 
suggestions to import higher-quality barley and accused 
them of serving only foreign interests and not those of 
their country.  Instead, Lukashenko insisted that 
Belarusian barley was of good enough quality and 
demanded breweries use only the domestic crop. 
 
4. (U) In September, a production engineer at a 
Belarusian brewery reported to the independent press 
that the quality of Belarus' 2005 yield of barley ranked 
much lower than that of the already low 2004 yield.  The 
engineer predicted that if Belarus did not import 
barley, the quality of Belarusian beer would be so poor 
that it would lose its competitiveness on the domestic 
market. However, as in the past, Lukashenko denied the 
inferiority of Belarusian barley and publicly warned his 
ministers in September that "not a single grain" of 
barley would be imported into Belarus in 2005. 
 
The Officials' Opinion 
---------------------- 
 
5. (U) On September 26, Poloff met with officials at the 
Ministry of Agriculture who supported the President's 
stance about Belarusian barley.  According to the 
officials, the GOB expected farmers to surpass 2004's 
150,000-ton (metric) yield of barley, 60,000 tons of 
which would be used for brewing and 15 percent of which 
would be high quality.  The officials stressed that no 
barley would be imported because Belarus would meet its 
domestic needs.  The tone of the statement contradicted 
what MoA officials had preached to Poloff throughout the 
meeting, particularly that breweries and companies could 
import commodities if they so chose without government 
interference. 
 
 
MINSK 00001305  002 OF 003 
 
 
6. (U) Though the MoA officials praised the quality of 
barley, they did grumble about the domestic barley's 
high moisture content and the subsequent loss of its 
color.  Poloff mentioned the opinions of some 
specialists that because of Belarusian barley, breweries 
would produce poor-tasting beer.  One official laughed 
at the comment and cited how Belarusian beer received a 
gold medal in 2004 for its quality and taste.  He 
failed, however, to specify what type of "gold medal", 
from whom, and what brand of beer. 
 
Real Experts Disagree 
--------------------- 
 
7. (SBU) In August, Econoff spoke with a German brew 
master, who worked for Anheiser-Busch for 25 years, 
currently managing the launch of a new brewery in 
Belarus.  This brewery is an American-Belarusian joint 
venture and is being built to modern western standards. 
He stated that Belarusian barley is of inferior quality 
for beer production and he had serious doubts Belarus 
would even be able to produce enough low-grade barley. 
His brewery was talking with local collective farms to 
try and find one willing to produce barley to their 
specifications, but it would take five years to get the 
first usable crop and so far they had not found a farm 
they thought could grow barley of sufficient quality. 
Another problem is that Belarus only has one company 
that can turn barley into malt, Belsolod, and it is 
state owned and produces an inferior product.  Even if 
the brewery could find decent barley, there is no 
guarantee Belsolod would use that grain for its malt, 
when only low-grade barley was available for state 
breweries. 
 
Who Is At Fault? 
---------------- 
 
8. (U) On October 5, Lukashenko again warned that any 
import of barley would be regarded as evidence of 
corruption and "damage to the peasantry."  In his 
opinion, a ban on the importation of barley would save 
Belarus USD 150-200 million in 2005.  The president's 
statements came after the GOB realized only two of the 
country's six oblasts fulfilled their regional quota 
and, as a result, Belarus' total barley production 
dropped 40 percent on the year to 90,000 tons; far below 
the expected 150,000 tons.  Coming on the heels of the 
President's statement, the first deputy head of the 
Presidential Administration Aleksandr Popkov blamed the 
MoA and the state-owned food processing plant 
Belgospishcheprom for the "insufficient production of 
quality malting barley."  Popkov blamed the two 
agencies' bad management, and not wet weather or poor 
growing conditions, for the loss. 
 
Which Way Out? 
-------------- 
 
9. (U) In interviews with the independent press, some 
brewery specialists believe that the MoA and 
Belgospishcheprom, fearing the president's anger, will 
fulfill the 150,000-ton barley quota in one of two ways. 
First, the GOB would combine the barley kernels with 
other pieces of the plant, such as the chaff and stalks, 
to reach the desired weight.  Though usually discarded 
in most circumstances, these extra plant pieces, 
according to some specialists, would give the barley a 
darker color and higher protein content.  The second 
method would be to simply lower the minimum quality 
standards of the barley, contributing even more to the 
low quality of beer.  Belarusian breweries note that 
either method would be a giant blow to their industry. 
Lukashenko claimed that a ban on barley imports would 
save the GOB USD 150-200 million, but specialists agree 
that the amount spQ on producing beer with such low- 
quality raw materials while the beer's competiveness 
drastically falls would cost more than USD 200 million. 
 
Comment 
------- 
 
10. (SBU) Lukashenko, the former collective farm boss 
and "expert" in agriculture and micromanagement, has put 
the Ministry of Agriculture in a Catch-22 scenario.  The 
MoA must meet the barley quota, even though the country 
 
MINSK 00001305  003 OF 003 
 
 
failed to produce the amount and the President made its 
importation a criminal act.  The only other solution is 
to lower the minimum standards of quality, but 
Lukashenko warned that poor quality barley would also be 
"unacceptable." 
 
11. (SBU) Lukashenko has made a decision that defies 
common sense, much like Nikita Khrushev's failed corn 
campaign in the 1960s.  The President continues to 
stubbornly ignore the expert opinion of specialists and 
refuses to admit that Belarus cannot produce the desired 
barley needed for beer production.  Whereas other 
nations estimate the possible yields, Lukashenko sets 
the bar and expects no less.  In past years, Lukashenko 
has also criticized his government for importing hops. 
So far he has not raised this issue, much to the relief 
of Belarusian beer drinkers. 
 
KROL