BELARUS NEWS AND ANALYSIS

DATE:

09/01/2007

Geopolitical Diary: Russian Oil Suspension and the Consequences to Belarus

Russian state oil transport firm Transneft said Jan. 8 that it has suspended all oil exports and transit shipments to the former Soviet republic of Belarus. The announcement comes amid a spiraling dispute over pricing and tariffs.

The details of the dispute ultimately boil down to this. Unique among the former Soviet republics, Belarus boasted an advanced agricultural and manufacturing base as well as robust transport links both east and west. Put another way, Belarus was the only former Soviet republic that had the option of choosing between joining the West and remaining in the Russian orbit that chose to remain in the Russian orbit. Ukraine and Azerbaijan went for a delicate balancing act -- the Central Asian states played the hand geography had dealt them and made their peace with Moscow and despotism, and the Baltics sprinted Westward with gusto.

Not Belarus. Under President Aleksandr Lukashenko, Belarus stayed put.

And it was rewarded. For its loyalty Belarus enjoyed cheap commodities, preferential market access, and the right to resell subsidized Russian energy to the West at global rates, making a tidy profit in the process. For this, all that Lukashenko had to do was act as the Kremlin's Chihuahua and proclaim the virtues of Russian friendship and decry the vices of Western duplicity.

For 15 years, this situation persisted. Then in late 2004, something changed. The people at the top of the Russian foreign policy structure shifted from those who reminisced dreamily about the Soviet days -- and feisty ideologues like Lukashenko -- but proved unable to navigate in the modern world to those who understood that world and felt it was high time to strengthen Russia's hand in some practical ways.

Among the many changes this shift in leadership has brought is a rationalization of the Kremlin books; was it really worth a few billion dollars a year to pay someone to tell you how important you are? The collective answer was "no," and the subsidies were steadily whittled back. On Jan. 1, 2007, the last ones of consequence ended.

And so the Lukashenko, in Chihuahua mode, demonstrated that if the Russians were no longer interested in purchasing his affections, he could turn his bark on them just as well. In response, the Russians suspended all energy exports, which has had the side effect of slashing oil shipments (which transited Belarus) to a host of European countries.

Lukashenko cannot hold out against the Russians for long. Russia is his country's sole source of natural gas (there is no domestic production) and its only source of oil imports (it produces about one-fifth of what it needs). Unlike other countries in the area, Belarus lacks a port, so it cannot easily import crude from other sources, and for the past 15 years Lukashenko has made a proud point of being less than cooperative. In play Belarus might be, but no one in the West is exactly itching to help it out.

Now Lukashenko has to make a choice. He can go crawling back to Moscow, sue for (very harsh) terms, declare his allegiance and prepare for his country to be formally assimilated into Russia proper, or he can take a hard look to the West and re-evaluate whether he can kiss and make up.

Either way some pride will need to be swallowed, and either way Belarus will never be the same.

Source:

http://www.stratfor.com/products/premium/read_article.php?id=282681