BELARUS NEWS AND ANALYSIS

DATE:

11/01/2007

Oil dispute a crude awakening for Belarus

By Steven Lee Myers

MOSCOW: President Aleksandr Lukashenko of Belarus appeared to be the last leader in the old Soviet neighborhood to realize that he was dealing with a different Russia.

For much of last year he dragged out negotiations on new gas and energy deals, assuming that pleas of solidarity and Slavic brotherhood - encapsulated in a dusty treaty that a decade ago envisioned a glorious Union State of Belarus and Russia - would avert a steep rise in prices.

They did not, and now Belarus faces the economic and political consequences of Russia's newly assertive, hard-knuckled effort to cement its position as an energy power.

President Vladimir Putin, who spent the first seven years of his presidency supporting Lukashenko, despite what is widely reported to be an intense personal dislike, at last made it clear that the rules had changed: When it comes to supplies of energy, cash is czar.

And it underscores how Putin, whose critics accused him of dabbling in Soviet nostalgia as he centralized his own political power, has ruthlessly sacrificed political links to the former Soviet republics in pursuit of a new strategy.

What Putin is creating in place of the Soviet empire of ideology is a new empire based on energy reserves and pipelines and, to his loyalists here, unrelenting market principles.

"We are still getting rid of some legacy of the Soviet Union," said Vyacheslav Nikonov, the director of the Politka Foundation, a think tank with close ties to the Kremlin. Prices were rising for everyone, he added. "I don't know why Belarus should be an exception."

Indeed, it no longer is.

A day after Belarus agreed to drop a $46-per-ton transit fee that prompted Russia to turn off for three days a pipeline that supplied oil across Europe, the crude oil started flowing again on Thursday morning, as did the Russian profits that Belarus had hoped to share, as it had for the last decade.

These new deals - which more than doubled the price Belarus pays for natural gas and imposed an export duty on oil shipments - will generate billions of dollars of added revenue for Russia's energy monopoly, Gazprom, as well as its state and private oil companies, much as recent deals did with Ukraine, Moldova and Armenia.

"They were feeling quite comfortable receiving gas for nothing, essentially," Dmitri Peskov, a Kremlin spokesman, said in a telephone interview. He added that Belarussian officials had "plenty of time" to decide but delayed accepting the new reality, as deadlines for new gas and oil contracts approached.

Putin has long faced criticism for wielding the country's energy resources as a weapon of geopolitics - "tools of intimidation or blackmail," as Vice President Dick Cheney put it last year. Gazprom's similar showdown with Ukraine a year ago appeared to many a punitive measure against President Viktor Yushchenko's tilt toward the European Union and NATO.

The shutdown of the oil pipeline through Belarus revived those criticisms again this year, but Putin's ministers could fairly say that they were now being consistent in demanding market rates for its natural riches.

"When a country has a cheaper price compared to European consumers, then Russia is accused of bribing them," Viktor Khristenko, the energy minister, said this week. "But when we want to shift to market prices, then we are accused of blackmail."

What is striking is the degree to which officials in Putin's Russia used the dispute over energy to turn on Lukashenko. He is an autocrat who has created a dictatorship in all but name, but he enjoyed wide political support from lawmakers here (even if it was driven in part by a fear of the emergence of Western-oriented alternatives, as happened in Ukraine with Yushchenko).

Last March, after tainted elections denounced as fraudulent in Europe and the United States, Putin praised the vote as fair and congratulated Lukashenko. Less than two weeks later Gazprom announced that it would demand Belarus pay more for natural gas.

On Thursday, Vladimir Zhirinovksy, the flamboyant nationalist leader better known for his denunciations of the United States, called Lukashenko a dangerous man.

"Lukashenko is a petty tyrant, and this tyranny should lead to his resignation and a new presidential election," he said in an interview on the state- owned Mayak Radio.

The collateral damage - if not the intended target - of Russia's price war was the union treaty. It was first negotiated in 1996 between Lukashenko and a weakened Boris Yeltsin at a time when the latter faced a bruising re-election challenge from the remnants of the Communist Party.

In Russia, it was viewed as a populist attempt to win over those voters lamenting the decline of the Soviet Union. In Belarus it was viewed as a vehicle for Lukashenko to become leader of the newly unified nation - a notion that quickly became moot with the emergence of a strong leader like Putin.

In 2002, he dismissed Lukashenko's constant public reminders of the treaty's existence by offering, in essence, to absorb Belarus's provinces into the Russian Federation. The offer was not well received.

"Lukashenko does not want to be the governor of a Russian province," Anatoly Lebedko, one of the Belarussian president's fiercest critics, said in a telephone interview from Belarus on Thursday.

Since then, the two countries have repeatedly postponed deadlines to establish the Russian ruble as a common currency and to draft a constitution for the union, which officials now describe as little more than an economic alliance. The union has a bureaucracy and a budget, but few of its promises have been accomplished.

Andrei Sharonov, a deputy economic development minister, blamed Lukashenko, suggesting he kept alive the dream of a union only to justify the subsidized gas and oil from Russia.

"When there is nothing but talk for many years and no deeds, preferences become meaningless," he told Rossikaya Gazeta, the state newspaper, "and we are justified in putting all these things on a strictly economic footing."

Russia's new power centers - Gazprom, the pipeline monopoly Transneft, the state-owned oil giant Rosneft - will almost surely continue to press ahead, buying more and more assets at home and abroad, expanding the country's energy network as long as the reserves hold out.

Source:

http://www.iht.com/articles/2007/01/11/news/belarus.php