BELARUS NEWS AND ANALYSIS

DATE:

05/01/2007

Analysis: Russia vs. Belarus, part 2

By STEFAN NICOLA

UPI Energy Correspondent

BERLIN, Jan. 5 (UPI) -- The Russia-Belarus energy row seems to be continuing after Minsk imposed a fee on westward transit of Russian crude oil, but both sides said deliveries to Europe won't be affected.

After a Wednesday decision by Belarus President Alexander Lukashenko, labeled by Washington as Europe's last dictator, Russia has to pay $45 per ton of crude oil flowing through the Druzhba line. The line supplies Belarus but also Germany, Poland and some Eastern European states.

Druzhba means 'friendship,' but the once near-brotherly love affair between Belarus and Russia has entered a painful period after an argument between Moscow and Minsk over how much Belarus had to pay for Russian gas nearly led to a New Year's Day blackout.

Belarus and Russian officials said despite the new row over transit fees, oil flow to third countries in Europe will not be affected.

Alexander Rahr, a Russia expert at the German Council on Foreign Relations, a Berlin-based think tank, called Lukashenko's decision to impose transit fees on Russian oil a "backlash against Moscow."

"After he had to pay more for Russian gas, he is trying to get money elsewhere," Rahr told United Press International Friday in a telephone interview.

The move comes after Gazprom, the state-controlled Russian energy giant, struck a five-year gas deal late Dec. 31 that narrowly averted a shut-down of gas supplies scheduled for the morning hours of Jan. 1.

The new contract more than doubles the price of gas for Belarus in 2007 to $100 per 1,000 cubic meters, and adds that gas prices will rise gradually to bring them in line with other countries in Europe by 2011. Most of Europe pays $235.

As part of the deal Gazprom pays $2.5 billion for a 50 percent stake in the the Belarusian pipeline network.

Gas subsides worth billions of dollars had supported Lukashenko's regime; Belarus also used the free-trade agreement with Russia to buy Russian crude and sell to Europe the more expensive finished end-product -- a scheme that put nearly $4 billion a year into Lukashenko's pockets.

To end such business, Russia late last year imposed a crude export fee of $180 per ton -- about 7.33 barrels -- foreshadowing the gas price row.

It came exactly a year after Russia temporarily shut off gas supplies to Ukraine until it agreed to pay higher prices. European politicians suddenly became aware of Russia's hegemonic position when it comes to exporting energy to Europe. From London to Paris to Berlin, politicians were calling for greater diversification of import sources and a joint European energy strategy.

The new row with Belarus showed once again that Moscow "is using its energy resources as a political weapon," Claudia Kemfert, the head of the energy division at the German Institute for Economic Research, a Berlin-based think tank, told UPI Friday.

For years, there have been talks about reunification of Russia and Belarus.

"Putin has proposed unification very strongly," Rahr said. "And Lukashenko has very few alternatives."

One is increased political isolation, which would almost certainly lead to economic crises, because Belarus, unlike other former Soviet republics, lacks its own energy resources.

The other option would be pushing for reforms and opening up to Europe, which would almost certainly bring about Lukashenko's own political demise as he wouldn't stand a chance in democratic elections.

On the other hand, it is also unclear where his career would venture to if Belarus and Russia were unified.

The only thing that seems clear is how unification would look like; Russia has proposed something similar to the German unification process, meaning that not the country, but rather the individual Belarusian states would be gulped, albeit only after successful referenda in both countries.

The current energy row, observers say, could be a precursor to political bargaining about unification. Lukashenko's position has not improved since he has imposed the transit fees on Russian crude, Rahr said.

"The oil pipeline strategically isn't so important anymore; Russia has changed its export focus to gas," he told UPI. "Belarus has only hurt itself."

Source:

http://www.upi.com/Energy/view.php?StoryID=20070105-123348-7749r