Mikhail Chigir was appointed Prime Minster of Belarus on July 21, 1994, next day after inauguration of President Lukashenko, by the Supreme Soviet on Lukashenko’s proposal. Before this, Chigir worked as head of BelAgroPromBank- Belarus’ specialized food economy bank, largely responsible for distributing state-subsidized loans to agriculture. In 1994, some 80% of state-subsidized loans directed from the National Bank to non-financial enterprises, was disbursed through Belagroprombank.

Chigir offered his resignation on November 18, 1996, in protest against the constitutional referendum that was orchestrate by Lukashenko to amass an unlimited authority in the country. In November, 1997 he became signatory of Charter 97 – a human rights opposition initiative. He joined the board of National Executive Council – opposition shadow cabinet – in 1998. In March, 1999, after announcement on January, 13 of presidential elections by the rump Supreme Soviet of Belarus (the part that did not recognize the constitutional changes accomplished in November, 1996, and refused to join the House of Representatives – the lower chamber of the new parliament of Belarus handpicked by Lukashenko), Chigir announced his candidacy for presidency of the Republic of Belarus.

In order to participate in the campaign, Chigir gave up a lucrative position of head of the representative office of a German chemical concern KEA, citing reasons for his decision "the misery and wildness in Belarus." (Belorusskij Rynok, 08.03.99) He vowed to restart the economic reform that he initiated while being Prime Minister (Ibid).

Since then, he established initiative groups that collected more than 100,000 signatures under petition to nominate him as a candidate, required by the Constitution of Belarus of 1994. Chigir’s candidacy is supported by a number of opposition groups, including Social Democrats, independent trade unions, and after the death of Gennady Karpenko, who was nominated by the United Civil Party as a leader of united opposition, the UCP is likely to support his candidacy as well. Another candidate in this election is Zianon Paznyak, leader of nationalist Belarusian Popular Front. Before Chigir’s arrests, organizers of presidential elections were continuously repressed by the authorities. On February 25, 1999, the whole opposition election committee was detained. On March 1, 1999, chairman of the election committee Viktor Gonchar, was arrested and sentenced to 10 days in prison. He was further charged with illegal appropriation of the rights of a public official. Members of initiative groups who collected signatures for either Gonchar or Paznyak were arrested, interrogated, fined, or threatened. (ILHR Belarus updates, 12, 13, 14).

Since March 1999 President Lukashenko started a new campaign against the opposition, apparently to discredit major opposition leaders before the presidential vote scheduled by it. He accused major opposition figures of illegal appropriation of state loans with subsequent use of the funds to finance their political campaigns. Former PM Mikhail Chigir allegedly issued $15 million of unreturned loans while being Chairman of the board of Belargoprombank. (Belorusskaja Gazeta, 15.03.99). Stanislav Bogdankevich, ex-Chairman of National Bank, was accused of issuing loan of $1.8 million to his son. Also, Gonchar was accused of not paying some $300 thousand of loans to a bank (Ibid.)

Independent observers question the validity of claims made by Lukashenko about the widespread corruption in the banking sector. First of all, the share of unpaid hard currency loans in the total hard currency loan portfolio has decreased in 1998 in comparison to 1997.

Second, more than 80% of unpaid loans was issued by four banks that were authorize by the state to handle hard-currency loans on government’s orders. Therefore, poor lending practices and state’s own decisions to finance projects that could not possibly bring profits were mostly responsible for unpaid loans, not greedy and corrupt bankers. Most of unpaid loans were issued to state companies such as Horizont TV plant or BobrujskShina tire manufacturer, notorious for their inefficiency and incompetitiveness on external markets (Belorusskij Rynok, 15.03.99) Finally, the real reason for this new anti-banks campaign is seen as deteriorating balance of payments situation, which disables Belarusian authorities to pay for energy supplies from Russia and Lithuania. Major energy suppliers of Belarus: Gazprom and EES in Russia, Ignalina nuclear power plant in Lithuania, all threatened in March 199 to reduce supplies and to charge hard currency, rather than to settle for barter schemes, for new supplies. (Belorusskij Rynok, 15.03.99) Facing energy shortages or a steep increase of the cost of utilities for the population, Lukashenko apparently attempts to shift the responsibility for his own policy blunders on others.

Chigir was arrested on March 30, 1999, initially for three days for giving testimonies, while the authorities considered putting forward charges of embezzlement (Article 91 of the Criminal Code of the Republic of Belarus). In violation of the Law, the Prosecutor’s office extended his term of detention for ten days without officially charging him. Authorities subsequently considered to change charge to khalatnost’ (art. 167, Criminal Code). Finally, both charges were put forward by the Prosecutor’s office, which extended the term of preliminary detention of Chigir for three months on April 9, 1996. (Belorusskaja Gazeta, 12.04.99). OSCE, EU, and the US Department of State all condemned Chigir’s arrest and demanded his immediate release (Belorusskij Rynok, 05.04.1999). The ILHR sent a letter of protest as well.

Chigir pointed out that the loans mentioned by Lukashenko were due to be repaid after he left the bank, therefore, the return of the money was the concern of the new management. (As it becomes clear, Belagroprombank insured the loans that are currently under investigation, and in so doing eliminated possible losses for the sate. One of the loan was issued on the government order, signed by then deputy Prime Minister, now Head of Presidential Administration, Mikhail Miasnikovch. Moreover, the loans are being gradually repaid, Belorusskij Rynok, 22.03.99) According to Chigir’s aidee, the prosecutor office has been conducting investigation of Chigir’s activities in the bank for one year and half since he resigned the post of PM in November, 1996; however, no compromising evidence was found. (Belorusskij Rynok, 05.04.99)

The $ 1 million payment to the Canadian company Lawrence Avenue Group, that produced the most controversy (as is the ground for charges of embezzlement against Ghigir), was done in 1993 to finance the construction of a new office building for Agroprombank. It was a advance payment for a project, the toatl value of which was estrimated at $6.5 million. At this time, the bank had substantial profits, and could afford financing such project. Belagroprombank and Lawrence Avenue Group signed a contract that stipulated the obligations of both sides. According to it, $1 million payment by Belagroprombank was made in order to start the construction and to purchase all the equipment and materials that could not be purchased in Belarus. Lawrence Avenue Groups claims it spent the advance payment in strict accordance of the contract. However, after Chigir quit the bank to assume the post of Prime Minister, bank’s profits plunged and it was forced to claim back the credit, cancelling the deal. Isaac Misels, LAG CEO, refused to do so on the grounds that the Bank, in his opinion, violated the contract and in so doing caused substantial losses for his company. (Belorusskaja Gazeta, 05.04.99).

Julia Chigir, Mikahil Chigir’s wife, claims that Misels and LAG was recommended to Belagroprombank as a contractor by Mr. Arkady Borodich, who was a close associate of President Lukashenko during his election campaign. Borodich and Misels owned joint venture in Minsk, which offered office space for Lukashenko’s headquarters during the presidential campaign. After Lukashenko’s election, Borodich mediated efforts to continue financing of the Misels’s firm by Belargroprombank. Commenting on this connection and on the favors that Lukashenko’s associate attempted to deliver for LAG and Misels, Julia Chigir made allegation that Misels could spend the $1 million payment to finance Lukashenko’s election campaign (Belorusskaja Delovaja Gazeta, 09.04.99).

Chigir affirmed that the whole "loan repayment" campaign was started by Lukashenko with the single purpose to eliminate him as a political opponent. Two weeks before his arrest, Chigir explicitly stated his anticipation of the arrest. Moreover, Chigir’s son was harassed by the police. (Belorusskaja Gazeta, 15.03.99)

Moreover, before his arrest, Chigir pointed out that the problem of bad loans of the banking system was connected to the failure of the government economic policy much more than to the corruption in the banking sector. Thus, the government obliged state-controlled banks to issue loans to bail out loss making state companies; alternatively, it regulates the prices of state firms often forcing them to sell their products at a price lower than production costs. In so doing, a company is simply deprived of the means of repaying the loans to the banks. This became a global problem of the Belarus economy, as average profitability dropped from 30 to 7% in a matter of just three years. (Belorusskaja Gazeta, 15.03.99)

Furthermore, the government took steps to ruin commercial companies, which it suspected of having connections with the opposition, through imposing tax penalties or even through forcible closure, as in was in the case of Pushe company. Those ruined firms could never repay their loans. (Belorusskij Rynok, 22.03.99) Finally, the lax government policy pursued by the government led to a rapid devaluation of the Belarusian ruble, which depreciated made nearly impossible to pay back the loans issued in hard currency.

Chigir also ridiculed the claim of President Lukashenko that some $250 million of loans that have to be repaid by the companies "will allow Belarus to exist for a couple of years," as the above-mentioned sum equals to one-and half months of central budgetary spending. As a matter of fact, the number claimed by Lukashenko is greatly exceeded. The very chief investigator of the "bank affair" appointed by the president estimated the sum of unpaid loans at $ 130 million (Belorusskaja Gazeta, 15.03.99).

Bogdankevich flatly denied allegations by Lukashenko of him or his sons taking any hard currency loans from Belarusian banks. The company that employed his son did take a loan from a bank. However, Bogdankevich accused the authorities of taking deliberate steps to ruin the company of his son so that it indeed could not repay the loan and the criminal proceeding against him could be started. In order to proceed with this plan, the company Piask (a firm that empolyed Bogdankevich’s son) was given a $1 million fine. (Belorusskaja Gazeta, 15.03.99)