BELARUS NEWS AND ANALYSIS

DATE:

15/12/2006

Lukashenko meets with Putin

By Mike Eckel, Associated Press Writer

MOSCOW --Belarusian President Alexander Lukashenko said he held "long and difficult" talks with Russia's Vladimir Putin on Friday and signaled growing tensions between Moscow and its closest ally.

Lukashenko and Putin held more than three hours of one-on-one talks against the backdrop of growing fears in Europe about Russia's reliability as an energy supplier.

Moscow's stated intention to raise oil and natural gas prices for Belarus, which has long benefited from substantial Kremlin subsidies, has strained bilateral relations and raised uncertainty about a planned "Union State" between the two countries.

Russia's hike in energy prices, which has infuriated Belarus, was widely expected to dominate Putin and Lukashenko's meeting, though neither apparently mentioned them in comments to journalists ahead of the State Council gathering.

Putin said that in addition to confirming the union budget, discussions would focus on foreign policy and weapons deliveries: "I am glad that we have regular, direct contacts."

Lukashenko, meanwhile, may have been alluding to the prickly state of affairs when he told Putin: "We can't get away from solving questions of a more practical character."

"As a result of our long and difficult talks, I think that we have found, so to speak, a thread that we will be able to grab onto. I think that in the near future we will be able to remove very many questions that were difficult for us -- not painful, but difficult."

He did not elaborate.

Earlier this week, the Russian Cabinet decided to raise customs duties on oil exports to Belarus. The increase, which Russian exporters will pass along to Belarus, will deprive Minsk of profits it has reaped by exporting oil products made of cheap Russian oil.

Russia's state gas monopoly OAO Gazprom has also said it would quadruple the natural gas price for Belarus starting next year and has proposed taking over Belarus' state-controlled gas pipeline network that carries Russian gas further on into Europe.

Lukashenko has resisted the effort, which analysts consider the quid pro quo for cheaper energy prices. Gazprom has valued Beltransgas at $4 billion, while Belarus says it is worth more than four times that amount.

Both price hikes will badly pinch Belarus' Soviet-style, centrally planned economy, which has relied on cheap energy from Moscow.

Belarusian analyst Yaroslav Romanchuk said the Russian increases could cost the Belarusian economy around $2 billion; the losses could reach up to 8 percent of gross domestic product.

"The Kremlin has neither a strategy nor a successor in Belarus, therefore Putin is trying to maximize the pressure on Lukashenko with prices on energy consumers in order to force the Belarusian leader to play by Russian rules," Romanchuk said.

Lukashenko has become a pariah in the West for cracking down on dissent and extending his rule through flawed votes, and Moscow has been Belarus' main sponsor and ally. But the Kremlin has lately been keeping more of a distance from Minsk and tensions have built up in recent years.

The Russia-Belarus Union has remained largely on paper. Lukashenko rejected a Kremlin-proposed merger plan, and talks on creating a single currency have stalled.

Russia has recently hiked energy prices dramatically for several other ex-Soviet republics, including Georgia, Ukraine and Azerbaijan. Moscow says the increases are intended to bring prices to competitive, world levels, but outside observers say Russia is trying to use its vast energy resources to affect the countries' internal policies -- or even punish them.

Associated Press reporter Yuras Karmanau contributed to this story from Minsk, Belarus.

Source:

http://www.boston.com/news/world/europe/articles/2006/12/15/lukashenko_meets_with_putin/