BELARUS NEWS AND ANALYSIS

DATE:

08/11/2006

Official Minsk Outraged By Moscow's Political Use Of The Energy Leverage

By Vladimir Socor

Belarus President Alexander Lukashenka's visit to the Kremlin, scheduled for Friday, November 10, "will obviously be a rather difficult meeting," according to Russia's Ambassador in Minsk, Alexander Surikov, at a stage-setting news conference. Russia will not offer low-priced energy to Belarus, he warned, because "Russia and Belarus are two different states today:.When we become a Union State, all these issues would be resolved. But we are not going to pay [energy subsidies] only for promises to join a Union State. Sorry." Meanwhile, the "creation of the Union State requires settling a host of issues" that will complicate Lukashenka's visit with Russian President Vladimir Putin, the ambassador announced (Interfax, Charter-97 website, November 3).

As long as the formation of the Union State is not advancing in practice, Russia -- according to Surikov at his briefing -- wants Belarus to take the following economic steps:

1) Hand over 50% of the national gas transport system, Beltransgas, to Gazprom, based on an expected valuation of $3.5 billion, of which Gazprom will [nominally] pay the half to Belarus. In that case, that sum would be deducted from Belarus' gas bill to Gazprom. The Russian side would, in that case, charge $140 per 1,000 cubic meters of gas to Belarus. These proposals seem designed to look like a softening of Moscow's position. The cited valuation of Beltransgas (forthcoming from the Gazprom-friendly ABN AmRo Bank) is higher than Minsk had thus far been led to expect; and the $140 price, lower than the $200 with which Gazprom had threatened Belarus. In Moscow on November 7, Gazprom deputy chairman Alexander Medvedev indirectly confirmed, "We are ready to accept assets from Belarus at the market price as payment for gas supplies" (Itar-Tass, November 7).

2) Turn over to Russia 85% of Belarus' tax revenue from the export of oil products made by Belarus refineries from Russian crude oil. Alternatively, turn over to Russia a corresponding share of oil products from Belarus refineries. If Minsk does not comply, Moscow will cut annual deliveries of crude oil to Belarus from the 19.75 million tons scheduled for in 2006 to only 8 million tons in 2007. The latter volume would cover Belarus' internal requirements for refined products, but would at one stroke terminate the country's lucrative exports of refined products from Russian crude. Pending Minsk's response, Russia's Industry and Energy Ministry will suspend any decision on the schedule of oil supplies to Belarus in 2007.

3) Accept the cessation of Russian deliveries of electricity due to anticipated shortages in Russia itself. Under a long-term agreement of intent in the framework of the nominal Union State, Russia is to deliver at least 4.5 billion kilowatt/hour to Belarus annually, which is approximately equal to the country's import requirement. Russia is actually delivering only 2.5 billion kwh in 2006, and Belarus has requested 3.3 billion kwh for 2007, thus still below Russia's commitment (Ukraine meanwhile fills that gap in Belarus). Apparently, advancing the formation of the Union State might not help maintain Russian electricity supplies to Belarus.

These warnings represent a continuation and even escalation of recent Russian pressures on Belarus to yield sovereignty under the threat of being forced to yield property to Russia. Official Minsk seems prepared to resist. After Mikalay Charhinets (see EDM, November 3), another Lukashenka confidant, Syarhey Kastsyan, head, like Charhinets, of a parliamentary commission on foreign policy, has expressed outrage and defiance: "All this is meant to force Belarus to join the Russian Federation with the status of a Russian guberniya through threats of economic suffocation:. We must look for opportunities to become independent of the whims of the neighboring country." In a similar vein, Lukashenka's political ally, the nominally pro-Moscow Syarhey Haidukevich, observes, "They told us specifically what they want from us. They want our economy" (Interfax; November 3).

The usual, anonymous "government official" who steps forward in such situations also observes, "This very much resembles an open blackmail using energy for the purpose of annexing Belarus. In Russia they reckon to substantially slow down the economic growth in Belarus and push the republic to enter into the Russian Federation:.In practice, these are proposals to become a part of Russia. Unfortunately, Russia historically does not accept Belarus as a sovereign partner." This official is prepared to retaliate by questioning the legality of Russian ownership of oil product pipelines in Belarus (Interfax, November 3).

For now, Lukashenka is seeking alternative sources of energy supplies in talks with Azerbaijan, Ukraine, and most recently in Iran on November 5-7, ahead of his Kremlin visit.

(Interfax. November 3; Kommersant, November 7; see EDM, November 2)

Source:

http://jamestown.org/edm/article.php?article_id=2371622