REPORT on the proposal for a Council Decision on the conclusion by the European Community of the Interim Agreement between the European Community, the European Coal and Steel Community and the European Atomic Energy Community, of the one part, and the Republic of Belarus, of the other part, on trade and traderelated matters (COM(95)0245 - 5671/96 - C4-0248/96 - 96/0053(CNS))

28 June 1996

Committee on External Economic Relations
Rapporteur: Mr Michael J. Hindley

By letter of 19 April 1996 the Council consulted the European Parliament, pursuant to Articles 113 and 228(3), first subparagraph, of the EC Treaty in conjunction with the Solemn Declaration on European Union, on the proposal for a Council Decision on the conclusion by the European Community of the Interim Agreement between the European Community, the European Coal and Steel Community and the European Atomic Energy Community, of the one part, and the Republic of Belarus, of the other part, on trade and trade-related matters.

At the sitting of 8 May 1996 the President of Parliament announced that he had referred this proposal to the Committee on External Economic Relations as the committee responsible and to the Committee on Foreign Affairs, Security and Defence Policy and all interested committees for their opinions.

The Committee on External Economic Relations had appointed Mr Hindley rapporteur at its meeting of 23 March 1995.

It considered the Commission proposal and the draft report at its meetings of 22 May 1995, 29 May 1996 and 27 June 1996.

At the last meeting it adopted the draft legislative resolution by 12 votes, with 1 abstention.

The following took part in the vote: De Clercq, chairman; Hindley, vice-chairman and rapporteur; Pex, vicechairman; Berès, Elchlepp, Ferrer, Kittelmann, Kreissl-Dörfler, Miranda de Lage, Nuβbaumer, Porto (for Bossi), Smith and van der Waal (for De Rose).

The opinion of the Committee on Foreign Affairs, Security and Defence Policy is attached.

The report was tabled on 28 June 1996.

A DRAFT LEGISLATIVE RESOLUTION

Legislative resolution embodying Parliament's opinion on the proposal for a Council Decision on the conclusion by the European Community of the Interim Agreement between the European Community, the European Coal and Steel Community and the European Atomic Energy Community, of the one part, and the Republic of Belarus, of the other part, on trade and trade-related matters (COM(95)0245 - 5671/96 - C4-0248/95 - 95/0053(CNS))

(Consultation procedure)

The European Parliament,

- having regard to the Commission proposal to the Council, COM(95)0245 - 5671/96 - 95/0053(CNS)[1],

- having regard to the draft Interim Agreement initialled by the Commission (COM(95)0245),

- having regard to Article 113 of the EC Treaty,

- having been consulted by the Council pursuant to Article 228(3), first subparagraph, of the EC Treaty in conjunction with the Solemn Declaration on European Union (C4-0248/96),

- having regard to Rule 90(7) of its Rules of Procedure,

- having regard to the report of the Committee on External Economic Relations and the opinion of the Committee on Foreign Affairs, Security and Defence Policy (A4-0220/96),

1. Approves the conclusion of the Interim Agreement;

2. Instructs its President to forward this opinion to the Council and Commission, and to the governments of the Member States and of the Republic of Belarus.

• [1]  OJ C , , p. .

B EXPLANATORY STATEMENT

I. INTRODUCTION

1. By letter of 19 April 1996 the Council of Ministers of the European Union requested the European Parliament, pursuant to Articles 113 and 228(3), first subparagraph, of the EC Treaty in conjunction with the Solemn Declaration of Stuttgart, to deliver its opinion on the conclusion of an Interim Agreement. This Interim Agreement was initialled on 7 April 1995 and signed on 25 March 1996. In addition, a Partnership and Cooperation Agreement (PCA) between Belarus and the European Union was initialled on 22 December 1994 and finally signed on 6 March 1995. The purpose of the Interim Agreement is to implement with immediate effect the commercial provisions of the Partnership and Cooperation Agreement, for the conclusion of the interim agreement merely requires ratification by the Union, while the partnership agreement itself has to be ratified both by the Union and by its Member States.

2. The cornerstone of the EC's relations with the former Soviet Union, made possible after their mutual recognition, was the Trade and Cooperation Agreement, signed in December 1989 and effective as of 1 April 1990. Following the collapse of the Soviet Union in 1991, the provisions of this agreement in the form of an exchange of letters with the newly independent states emerging from the former USSR were transferred to those states. After the Community had negotiated association agreements (the 'Europe Agreements') with the countries of Central and Eastern Europe, the main commercial provisions of which involved the creation of a free trade zone, the CIS states requested improvements in their relations with the EC, in particular trade relations.

3. In response to the wishes of the CIS states, the EU offered to conclude with them partnership agreements going beyond trade and cooperation agreements but involving neither association nor the creation of a free-trade zone. However, it became clear from the negotiations with the individual CIS states that this concept was insufficient, at least in the area of trade policy. The Council of Ministers then broadened the Commission's negotiating mandate to enable it to offer the CIS states a commitment on the part of the Community to enter into fresh negotiations in a few years' time on establishing a free-trade area. This medium-term undertaking made it possible to sign, after three rounds of negotiations, the Partnership and Cooperation Agreement on 22 December 1994.

II. THE ECONOMY

4. Belarus is landlocked: its neighbours are Lithuania and Latvia to the north, Russia to the east, Ukraine to the south and Poland to the west. The 1O.2 million inhabitants are 78% Belarussian, 13% Russian, and there are some Poles and Ukrainians. In general, Belarus has a good geographic location in terms of its strategic position as far as commercial and energy transit is concerned. Belarus has some reserves of oil and gas, and recent prospecting has revealed additional mineral deposits in the south, particularly highgrade petroleum. The country had been thought to be lacking in natural resources.

5. One third of the country is forested, but more than 3O% is officially unusable since the Chernobyl nuclear reactor disaster in neighbouring Ukraine in April 1986. Belarus suffered more than anywhere else from the radioactive fallout from the Chernobyl accident. Belarus had 7O% of the total contamination, which has left a huge burden on the economy. In addition to this there is severe pollution caused by potash extraction.

6. Industry is more diversified than in most CIS states and provides 6O% of national income: there are oil refineries, synthetic fibre plants and linen factories, and there is a timber trade. Belarus produces machine tools, household goods and some electronic equipment. Belarus's main industries are engineering, chemicals, light manufacturing and food processing. The agricultural sector employs a quarter of all workers. The main agricultural activities include the growing of potatoes and flax and the raising of pigs, cattle and poultry. In March 1992, the Parliament approved a measure recognizing three forms of property: private, state and collective.

III. THE ECONOMIC REFORM PROGRAMME

7. Perestroika and glasnost took a long time reaching the traditionally conservative Belarus. In the summer of 199O the thaw began. The Supreme Soviet declared Belarussian sovereignty in July 199O, and in October Belarus adopted a programme of economic reform. The Economic Reform Programme sets difficult targets such as 1% inflation. New legislation for property enterprises, investment and bankruptcy and a large number of new laws on foreign trade policy were adopted, measures with which Belarus wanted to highlight its independence in foreign affairs. In August 1991 all companies, organizations and institutions on the territory of Belarus were declared to be Belarussian property. Foreign investment is encouraged, and new laws allow the full repatriation of investment, profits and wages earned by foreigners. There are generous tax allowances, guarantees against confiscation and a number of freetrade zones are planned. In the meantime, however, considerable doubts have arisen as to whether those in power in Minsk are serious about implementing market reforms. Whilst the government itself is attempting to keep to the policy of reform, President Lukashenka and members of his office, who are acting increasingly like a parallel government, are doing their utmost to establish a form of socialism incorporating elements of a market economy. They are, for instance, considering retaining government subsidies for essential consumer goods rather than liberalizing the prices of consumables.

8. The local branch of Gosbank has been turned into the 'National Bank' and a new currency (Belarussian rouble) has been introduced. Meanwhile, there is a coupon system which was introduced in January 1992 at the same time as price liberalization. Prospects for establishing an independent monetary system in Belarus have faded considerably as a result of the agreement signed in April 1996 between the Presidents of Belarus and Russia on the creation of a community of states including their two countries. As a result of the agreement, there has also been a considerable exodus of Belarussian investors' capital from the country, by and the flow of foreign capital into Belarus has completely dried up.

9. Belarus has been accepted into the International Monetary Fund (IMF) and has loan agreements with Spain, Italy, Turkey and China. It has trade and cooperation agreements with the Czech Republic, Hungary, Bulgaria, North Korea, Mongolia, Slovenia, Serbia and Poland. Monetary policy is disciplined but under strain, partly as a result of major changes in the tax system in 1992. The population are suffering. In April 1992, the drastic effects of price liberalization provoked a wave of strikes, demonstrations and calls for more democracy.

10. Overall reforms have lagged behind those in the Ukraine and Russia, and although the intention of the move towards the market was proclaimed in October 199O, 8O% of productive capacity was still state-owned in 1992. State-owned enterprises continue to receive considerable government subsidies, with which they are able to conceal their losses and secure their continued existence. There are enormous structural changes to be made, but it is hard to know what to replace the old structures with. In particular, the Belarussians want to convert the military industrial complex. Belarus also produced tractors for the former USSR but this market has collapsed as a result of the 'Peace Dividend'. There have also been payment problems on the Russian side which have increased difficulties.

11. At the moment its products cannot compete on world markets. Belarus will clearly need expert advice if it is to boost export earnings. Belarus is considering concentrating on transit taxes to improve revenues, for example on oil pipe-lines; however, they are encountering difficulties. As they themselves depend so much on Russian oil, it will be difficult to tax Russian oil passing through Belarus. The Belarussian opposition argues that if Belarus were to enter into economic union with Russia it would lose the 5OO million US dollars worth of taxes it receives for the transit of Russian goods.

12. Since the beginning of the economic reforms Belarus's economy has been in deep crisis. There are shortages of consumer goods, and there has been a drastic fall in production and real income. Production has been dropping. There is a degree of confusion in the Belarussian economy as their traditional markets in the former Soviet Union have collapsed. There are those who argue that Belarus must continue its reform programme, whatever the political necessities and consequences of such action. The privatization law, which is an important part of the market reforms, has long been gathering dust in the various responsible ministries, but, given the Communist and Agrarian Party majority in the newly elected parliament, it has no prospects of actually getting into the statute books.

13. Although the government has been working on breaking dependence on Russia and on developing trade with the West, the Presidential bureaucracy has been doing its utmost to thwart its attempts. In May 1992 Germany granted an aid package to Belarus, and a German-Belarussian Cooperation Council was formed to promote economic relations. Germany is considering various projects including establishing the city of Brest as the main transit point for German trade with the rest of the CIS. Germany has praised Belarus's advantageous location, developed industrial base and good infrastructure.

14. The differences between the parliament and the President as regards their respective powers have been overcoming owing to the way in which the new Belarussian parliament was elected. When a new quorate Parliament at last met, after four rounds of voting, there were amongst its ranks no members of the civic and national conservative opposition, whose parties nevertheless secured 10% of the vote and who advocate continued independence for Belarus, market reforms and closer economic ties with the West whilst maintaining close good-neighbourly relations with Russia. Public demonstrations are now the only means open to them.

15. There have again been popular demonstrations against the decline in living standards, and this is the background to the President's cancellation of price increases for basic foodstuffs, introduced as part of price liberalization in November 1994. The Prime Minister, Mr Chigir, is quoted as having said such prices freezes and the pensions increases which have been announced can still be achieved within the austerity programme agreed with the International Monetary Fund.

16. There are further signs that discontent with the effects of the IMF package of state spending cuts are leading to retreats by the government on its liberalization programme. A measure has now been introduced which allows any family which has to spend more than 15% of its income on housing and municipal services to receive subsidies. Alarmed by the potential unrest brought about by large-scale factory closures, the Prime Minister agreed with the Belarussian trades unions to examine all companies to prevent their sudden collapse which would lead to large-scale unemployment.

17. Mr Lukashenka's most recent statement on the restoration of a socialist economic system incorporating elements of a market economy confirms the doubts long expressed by many about his commitment to economic liberalization, particularly as he was the director of a state farm, a post associated with the old Communist bosses under the USSR. This restructuring involves an increased concentration of power in the hands of the President, and an increase in the hierarchical structure of power. This policy of concentration is opposed by the Parliament.

IV. EU-BELARUS RELATIONS

18. The EU still conducts relations with Belarus through its Moscow Delegation, but intends to open an office in Minsk shortly. In view of the internal disputes concerning the country's close ties with Russia, the establishment of an EU delegation in Minsk would provide a significant political signal and could help to strengthen democratically oriented forces in Belarus. Despite the official policy of closer links with Russia, Belarus remains interested in closer contact with, and possibly even eventual membership of, the European Union. In the meantime it is keen to develop bilateral links with the EU. The Belarussian Ambassador, Mr Lubanov, presented his credentials to the President of the Commission on 17 October 1994.

19. Efforts to date to establish closer ties with neighbouring countries in Eastern and Central Europe appear to be blocked by the President's policy of integration with Russia. In 1992 the then Chairman of the Supreme Soviet, Mr Shushkevich, suggested that Belarus should be prepared to wait to join the EU, and in the meantime should be part of the Central European Economic Zone of the Visegrad Group. Also in 1992 the then Foreign Minister, Pyotr Krauchanka, suggested that Belarus should join the EU at the same time as the Baltic States, that is, after the EFTA countries (due to take place in 1996), after Poland, Hungary and the Czech and Slovak Republics (around 2OOO): but with Romania, Bulgaria, Turkey and the Baltic States between 2OOO and 2OO5. 'Our ideal', said Krauchanka at a CSCE meeting in summer 1992, 'is economic and political integration into the European Community while upholding and strengthening, for a transitional period, the CIS'. This policy option is not currently on the political agenda in Minsk.

20. The EU has loaned Belarus 1O2 mECU for the purchase of food and medical products since 199O. 76.5 mECU went on agricultural products and food, whilst 25.5 mECU went on medical supplies. It invested 3O.41 mECU through the European Bank for Reconstruction and Development (EBRD) and sent some food aid. A balance of payments support loan of 75 mECU has been granted to Belarus in March 1995. This is a long-term loan, over ten years, that will be disbursed in two instalments. The loan is intended to cover one-third of the financial gap of Belarus as estimated by the IMF[1]. According to press reports, the IMF has announced the holding back of its loan to Belarus pending more evidence that the government will actually implement earlier reforms. The EU loan has, at the time of writing, also been frozen.

21. Belarus did not pay the principal and interest due on 22 August 1994, which came to 5O.3 mECU in repayment of the principal and 1.1 mECU of interest. An interest payment due on 2O October 1994 was not paid. Prime Minister Chigir has promised that Belarus will pay, and subsequently 26 mECU has been paid.

22. Belarussian officials say relations with the EU would be improved with a bilateral agreement on debt servicing. In autumn 1992 Belarus accepted joint responsibility with other states of the former USSR for that country's debts. However, Belarus argues this is inappropriate now that each state is adopting its own economic and monetary policies. Belarus is willing to repay 4.13% of the former USSR debt.

23. The EU has imposed anti-dumping measures on Belarussian exports of potassium chloride. The EU should allow more benefits for its potash-fertilizer exports, which met one-third of Russian needs. This market has collapsed since the collapse of the USSR.

V. TECHNICAL ASSISTANCE

24. The TACIS programme applies to Belarus, and the Belarussian Government wants more such assistance. Over the 1991-95 period, the programme of assistance to Belarus was financed from the EC budget as follows (in mECU):

Breakdown of technical assistance	1991	1992	1993	1994	1995
Government advice	-	0.7	-	-	-
Food production and distribution	1.33	2.8	2.3	-	2.0
Support for enterprises	0.25	1.5	4.5	2.2	5.5
Financial services	-	2.8	-	-	-
Privatization	-	1.23	-	-	-
Energy	4.05	1.9	-	-	3.0
Transport	2.06	1.0	2.3	1.5	-
Human Resource Development	-	1.0	-	-	-
Military conversion	-	1.7	-	3.3	-
TEMPUS	-	-	-	-	1.5
TOTAL	8.23	14.63	9.1	7.0	12.0
	= 50.96 mECU

From regional projects under TACIS, Belarus will benefit to the order of about 69 mECU. Parliament has insisted on amendments during the revision of the TACIS regulation which are intended to make it possible also to use the TACIS programme to help those affected by the Chernobyl reactor disaster cope with its consequences. The Council is once again being pressed to accept those amendments.

VI. HUMANITARIAN AID

25. The European Community Humanitarian Organization has allocated several grants to help alleviate the consequences of the Chernobyl disaster, ECU 450 000 and 500 000 to benefit Belarus, Ukraine and Russia together, plus an additional 1.3 mECU for Belarus and Ukraine and, finally, 1 mECU for Belarus. Belarus has requested 204 mECU in food aid.

26. The EU refused to give the Belarussians food aid. Belarus argues that they have had a drought. However, it is not thought to be comparable to the scale of drought problems in Moldava which did receive EU aid for such relief. The Commission pointed out that the demand of Belarus was not sufficiently justified by the scale of the drought problems, which was finally accepted by the Belarus authorities. Far more important than natural disasters as regards the granting of food aid to Belarus are the long-term effects of the Chernobyl reactor disaster, which has contaminated a considerable proportion of the country's farmland. The EU must concentrate its aid on developing an independent food production and processing industry in Belarus on the basis of non-contaminated land.

VII. THE INTERIM AGREEMENT

27. Broadly speaking, the interim agreement takes over most of the text of the trade-related provisions of the partnership agreement. Article 1 expressly states that respect for democratic principles and human rights as well as the principles of the market economy underpin the policies of the parties and constitute an essential element of partnership between the EU and Belarus. This democracy clause was included in the interim agreement to make it clear that respect for these principles is important, with particular regard to trade cooperation.

28. The trade provisions of the interim agreement are based on the principle of 'as much GATT as possible'. Belarus is currently not a member of GATT, having only observer status: at all events, it has barely begun its economic reforms. Accordingly, there was no question of the Community treating Belarus on an equal footing as a normal member of GATT. Nevertheless, the agreement provides for the most-favoured-nation principle and the removal of quantitative restrictions on trade, with the exception of textiles for which a separate agreement was negotiated in 1993, and steel products which are also the subject of separate negotiations. Trade in nuclear materials is also excluded and will be covered by a separate agreement.

29. The Community grants Belarus the option of departing from the most-favoured-nation principle in order to develop preferential trade arrangements with the other CIS states. At the same time, Belarus may itself introduce for a limited period protective measures in the form of quantitative restrictions on imports in order to build up its own industries. For its part, the EU reserves the right to apply trade protection measures, in particular pursuant to Article VI of GATT. This relates in particular to anti-dumping measures. At the same time, however, the two parties undertake, in respect of anti-dumping or subsidies investigations, to inform the other party immediately, to examine submissions by the other party and to endeavour to find a constructive solution before introducing anti-dumping customs duties.

30. At the same time, the two parties undertake (in effect only Belarus needs to take action in this respect) to enact effective regulations against restrictions on competition in their areas of responsibility. There is an obligation to provide information on the granting of state aid. The interim agreement is to remain in force until the entry into force of the partnership agreement and is to be administered by the Joint Committee created by the EC-USSR cooperation agreement. The appointment of an EC-Belarus Parliamentary Cooperation Committee is reserved to the partnership agreement itself.

31. It is interesting to note that the relatively detailed provisions on economic cooperation (Title VII of the partnership agreement) are not part of the interim agreement. The provisions in question are concerned principally with industrial cooperation, investment promotion, cooperation in science and technology, in agriculture and the agro-industrial sector and in the environment, energy and transport sectors to mention only the most important ones. The article on the protection of intellectual property (Article 18 in conjunction with Annex III to the interim agreement) excludes all international agreements whose implementation is the responsibility of the Member States. This is problematical as far as strengthening the Union's common commercial policy is concerned.

32. Finally, the provisions on liberalization of movements of capital have been confined to movements of capital connected with the exchange of goods. Nor does the interim agreement contain any provisions on financial cooperation under the TACIS programme. This distinction in content between the interim agreement and the partnership agreement shows that the Member States are seeking a very restrictive interpretation of the EU's competence in trade policy and, for the sake of caution, have excluded those areas where the Community has partial but not sole responsibility.

VIII. EVALUATION

33. The conclusion of the interim agreement with Belarus should be supported, despite the fact that considerable doubts exist as regards respect for human rights, the adherence to democratic principles and the implementation of market reforms. The political aspects of relations between the EU and Belarus are dealt with in the opinion of the Committee on Foreign Affairs, Security and Defence Policy. Human rights, democracy and a market economy constitute the principles on which, pursuant to Article 1 of the Interim Agreement, cooperation between the two sides is founded. Criticisms of the domestic political situation in Belarus, as clearly expressed by Parliament most recently in its resolution of 23 May 1996, is justified and should be taken seriously. On the other hand, the argument that those forces which support market reforms will be strengthened by the entry into force of the Interim Agreement should be the decisive factor in securing Parliament's support for the conclusion of the Interim Agreement.

34. Whilst it would be wrong to expect the entry into force of the Interim Agreement to work economic miracles, particularly as Belarus's economy continues to be characterized by deep recession, galloping inflation and high (albeit officially concealed) unemployment, the Agreement nevertheless represents the least which the Community can do in the way of economic and trade cooperation to help Belarus along the difficult path of economic reforms. Cooperation with the EU could in particular improve the economic situation of the population which at present is suffering great hardship.

35. The proposal for a Council decision on implementation of this agreement is based on Article 113 of the EC Treaty. Although this article does not actually provide for consultation of the European Parliament, in accordance with the European Council's Solemn Declaration of Stuttgart the Council has undertaken to consult Parliament on all agreements of international significance. Since the international significance of the present agreement is not in dispute, consultation of Parliament was proposed by the Commission and accepted by the Council. Hence, the consultation procedure set out in Article 228(3), first subparagraph, applies. Although the assent procedure referred to in the second paragraph grants Parliament far-reaching rights it is, regrettably, inapplicable, since none of the three conditions mentioned in that paragraph applies, in particular the establishment of a specific institutional framework.

36. Implementation of the agreement - the main purpose of which, as mentioned above, is to help stabilize Belarus - will depend essentially on the EU, as the economically dominant partner, taking seriously the modest efforts to open the market for Belarussian products rather than resorting to antidumping and other commercial protectionist measures whenever Belarus achieves sales successes on Community markets. Belarus, for its part, is required to continue with its economic reforms. This will require establishing a national consensus, which is the key to the success of the reform process as a whole.

• [1]  See also report of the Committee on External Economic Relations on the proposal for a Council Decision providing macro-financial assistance to Belarus (A4-0042/95).

O P I N I O N

(Rule 147 of the Rules of Procedure)

of the Committee on Foreign Affairs, Security and Defence Policy

for the Committee on External Economic Relations

Draftsman: Mrs Elisabeth SCHROEDTER

At its meeting of 5 October 1994, the Committee on Foreign Affairs, Security and Defence Policy appointed Mrs Schroedter draftsman.

At its meeting of 11 June 1996 it considered the draft opinion and adopted the conclusions as a whole unanimously.

The following were present for the vote: Fernández-Albor, chairman; Schroedter, draftsman; Aelvoet, AndréLeonard, Cohn-Bendit, Colajanni, De Melo, Dimitrakopoulos (for Lambrias), Dupuis, Fabra Vallés (for Robles Piquer), Gomolka, Iivari, Konečny (for Sakellariou), Oostlander, Theorin and Tindemans.

1. The Interim Agreement with Belarus was signed on 25 March 1996, its purpose being immediate implementation of the commercial provisions of the Partnership and Cooperation Agreement between Belarus and the European Union and its Member States, as its conclusion merely requires ratification by the Union's institutions, whereas the Partnership and Cooperation Agreement must be ratified by the Member States as well as the Union. On 19 April 1996, in accordance with the Stuttgart Solemn Declaration, the Council requested Parliament's opinion under the consultation procedure.

2. Like the other Interim Agreements with the States of the former Soviet Union, which have been drawn up and, in some cases, already entered into force, this agreement also contains provisions relating to trade in goods, current payments, competition, the protection of intellectual, industrial and commercial property rights and mutual administrative assistance.

3. In a narrower political sense, the conclusion of such an Interim Agreement constitutes recognition of the success of the government concerned in managing the transition towards a market economy and introducing and stabilizing social and democratic reforms. Like the partnership agreement, this agreement contains a democracy clause. It is stipulated in Article 1 of the agreement that respect for the principles of democracy and human rights and the principles of a market economy form the basis for the Contracting Parties' internal and domestic policies and constitute an essential element of partnership and of cooperation in the field of trade.

4. Until the Partnership and Cooperation Agreement enters into force, the Joint Committee set up by the agreement on trade and commercial and economic cooperation will be responsible for implementing this agreement. It should be noted that, unlike the Partnership and Cooperation Agreement (Article 9), the Interim Agreement does not provide for any new instruments of interparliamentary political dialogue.

5. In its opinion, the Committee on Foreign Affairs, Security and Defence Policy will address the political and foreign policy aspects of the closer cooperation between the EU and Belarus provided for by the Interim Agreement, its task being to evaluate and assess the most recent political developments in Belarus in the light of the process of democratic reform so as to establish whether the political conditions for the signing of the Interim Agreement exist.

6. The Committee on Foreign Affairs, Security and Defence Policy is currently also considering the Partnership and Cooperation Agreement and has already made its misgivings known regarding its immediate entry into force. The temporary postponement of the ratification procedure by the committee is based inter alia on the conclusion reached by Parliament's ad hoc delegation following its observation of the parliamentary elections in December 1995. In its report, the ad hoc delegation stressed in particular the serious restrictions imposed on the freedom of the press, the indirect boycotting of the elections by the President of the Republic, the suppression of trade union activity and the still unresolved power struggle between the country's President and its parliament.

7. The number of elected members required to constitute a new parliament was eventually reached in the fourth round of the parliamentary elections, in December 1995. The Communists and the Agrarian Party, both of whom support the President's line, have an absolute majority. Owing to the President's intervention in the elections and the first-past-the-post system of electing members, which incorporates a duel threshold, the strongest opposition movement, the Belarussian Popular Front, did not win a single seat, despite securing over 10% of the vote.

8. In the first few months following the constitution of the new parliament, the President's persistent use of an authoritarian style of leadership caused tensions not only with the opposition parties and various groups such as trade unions and independent journalists, but also with moderate politicians. Moreover, in mid-March, Lukashenka dismissed the editor-in-chief of the leading daily paper, and organ of the Belarussian Parliament Narodnaya Hazeta, whom he had appointed one year previously, because of a public debate on the freedom of the media in Belarus.

9. President Lukashenka has been severely criticized at home and abroad, especially in recent months owing to the use of force to quell the opposition, the ban on trade union activity, the serious restriction of press freedoms, including the ban on the printing of a number of dailies, and the disregard shown for decisions of the Constitutional Court. Several parliamentary groups, including Stanislau Bagdankyevich's United Civil Party and 12 others, have joined forces with the Belarussian Popular Front in defence of the Constitutional Court, following public statements by the President regarding his intention to hold a referendum on its abolition.

10. Internal tensions reached a climax in April and May 1996 as a result of a new agreement between Belarus and Russia. On 2 April, the President of Belarus and the President of the Russian Federation signed an agreement in Moscow establishing a community between Belarus and Russia. The precise nature of the planned community is quite unclear, as the agreement provides for neither a procedure nor a timetable for the planned integration. Since he took office in April 1994, President Lukashenka has declared closer relations with Russia to be one of the main aims of his government. Nevertheless, the agreements on currency and customs unions with Russia still exist only on paper.

11. The fact that the new agreement on integration was signed without parliament having been consulted, and that the text remained unpublished for a long time, led to the first demonstrations against the President's policies, called by the Belarussian Popular Front and supported by large sections of the population, including the leader of the liberal-Christian-democratic bloc in parliament (Stanislau Bagdankyevich's United Civil Party). The demonstration which took place on 2 April 1996 against the signing of the agreement was violently broken up by the troops of the OMON militia. Warrants were issued for the arrest of the leaders of the Belarussian Popular Front, Zyanon Paznyak and Syarkei Naumchyk, as a result of which both of them fled the country. Force was also used to disrupt the march commemorating the tenth anniversary of the Chernobyl disaster, in which about 40 000 people took part. About 200 people, including leading opposition politicians and journalists, were arrested during the clashes.

12. Against the background of Belarus' heavy economic dependence on the Russian Federation, the President went on to obtain political legitimation for his policy of integration with Russia, securing 80% support in a referendum held in May 1995. Since then, the symbols of state of the Belarussian Socialist Soviet Republic have been reintroduced, with minor changes, the Russian language has once again been put on an equal footing with Belarussian and the process of integration with Russia has been stepped up by means of bilateral negotiating. The recent violent clashes in Minsk could, however, signal a change in public opinion on this issue.

13. During the Russo-Belarussian Summit in February 1996, the two governments also agreed to extinguish all outstanding debts, including the $800 m still owed to Russia for deliveries of oil and gas and loans totalling $470 m. In return, Belarus gave up its demand for compensation totalling about 800 m in respect of environmental damage and the authorizing of Russian military bases in Belarus, which is essentially at odds with the principle of neutrality enshrined in the constitution.

14. The situation as regards market reforms has remained virtually unchanged since the President took office in July 1994. The level of foreign investment is correspondingly low, and the negotiations on the granting of further IMF loans to Belarus are progressing only slowly. The government has so far succeeded in bringing the monthly inflation rate down to 3-5%, but GDP and real incomes are still falling, and delays in paying wages are increasing the risk of widespread strikes.

15. Only very modest progress is being made with privatization. Subsidies to state-owned undertakings are to continue to account for 30% of the budget; small and medium-sized undertakings have scarcely any opportunity to expand, as land and buildings can generally be acquired only on the basis of bureaucratic leasing agreements. Unemployment officially stands at 2.7%, though unofficially is said to be 14%.

Conclusions

16. The Committee on Foreign Affairs, Security and Defence Policy shares the Council's great interest in closer economic cooperation with Belarus, not least because it could also be one way of combating the country's increasing political isolation. It notes, however, that the continuous violations by the Belarussian Government of fundamental principles of the rule of law, such as the right of assembly, the freedom of conscience and the freedom of speech, indicate its lack of interest in fulfilling the obligations it entered into regarding the development of the foundations of a democratic system and market economy and hence in creating the conditions for the immediate conclusion of the Interim Agreement.

17. In its resolution of 23 May 1996, Parliament roundly condemned the force used by the Belarussian authorities against members of the opposition, the increasing restriction of the freedom of the press by means of censorship, an indirect ban on independent media and the persecution of journalists and once again pointed out to the Belarussian Government that respect for the freedom of conscience was one of the Interim Agreement's fundamental requirements. Parliament's delegation for relations with Belarus also wrote to President Lukashenka pointing out that the aforementioned incidents went against the letter and the spirit of the Partnership and Cooperation Agreement.

18. Given that the current situation in Belarus is such that the provisions of Article 1 of the Interim Agreement (democracy and human rights) are not being fulfilled, the Committee on Foreign Affairs, Security and Defence Policy calls on the Council to delay the entry into force of the Interim Agreement until there is evidence of an improvement in the respect for the rule of law and democratic principles in Belarus.