BELARUS NEWS AND ANALYSIS

DATE:

06/01/2007

Editorial: Energy Row

Russia is once again embroiled in an energy- supply row with a former Soviet state, which threatens wider contracted deliveries to Western Europe. The angry spat with Belarus is the more surprising since the Belarusian President Alexander Lukashenko has kept his unreformed Soviet-style regime firmly alongside President Putin's Russia as a loyal ally. The reward for this was low-cost supplies of gas and oil feedstock for Belarus refineries, which then exported much of the output, worth some $4 billion.

Russia is Belarus' dominant trading partner buying fully 47 percent of its goods and services. Moscow is also the largest foreign investor. That has however not been difficult. Few outside entrepreneurs have been attracted to a state where privatization has hardly taken place and the dead hand of Communist bureaucracy still rests heavily on commercial initiatives.

Last month Gazprom announced it was doubling the amount it charged Belarus for its gas to bring the figure up to around half of the $200 per 1000 cubic meters that EU countries are paying. Moscow also imposed a $180-a-ton export duty on its oil, thus ending the lucrative supply of crude for Belarus' refineries. When the Lukashenko regime in Minsk protested, the Russians also banned imports of the country's sugar. On the last day of the year, to the immense relief of EU states, the Belarusians reluctantly agreed a deal with Gazprom. However a few days later they sprang a surprise by imposing a $45-per-ton transit fee on Russian oil pumped to Europe through Belarus and the now ironically named "Friendship" pipeline. The immediate cause of the rift in relations between the two countries seems to be a dispute over how Russia should pay for a 50 percent stake in Belarusian state pipeline operator Beltranshaz. Minsk wants cash. Moscow wants to pay with product. In truth Minsk does not want to sell any part of Beltranshaz and has been prevaricating for five years. The Russians may be cracking the whip so they can draw Belarus firmly back within their political as well as economic orbit

It is however deplorable that Moscow is once again using its supply of energy as a political ploy. Oil and gas are too important as commodities to be used in this way. The economic health of the global economy depends on secure energy suppliers. The Arab world has some profound differences with some of its energy customers but except in time of war has always honored its supply contracts. It is recognized that in the modern closely linked world economy, contractual obligations must be fulfilled. Changes in terms and conditions have to be negotiated. If negotiations fail, there is provision for outside arbitration or if necessary recourse to the courts.

Business can be tough. But there is a world of difference between driving hard bargains and the corruption that is now being practiced between Moscow and Minsk. The ruthless Soviet-era instincts of both Putin and Lukashenko are entirely inappropriate. It would be best if both governments turned to outside arbitration.

Source:

http://www.arabnews.com/?page=7§ion=0&article=90597&d=6&m=1&y=2007