Belarus Demands More Concessions From Russia on Oil and Gas

During a visit to Mahileu on June 18, Belarusian President, Alyaksandr Lukashenka, expressed his frustration over his country’s obligatory payment of customs duties for oil and oil products to Moscow, which has delayed the ratification of the Customs Union between Russia, Belarus, and Kazakhstan that came into effect on January 1.

The fracas over the Customs Union is typical of recent Russian-Belarusian relations. Very little goes smoothly, and it is the Belarusian side for the most part that drags its feet. However, matters reached a crisis point on June 17, when Gazprom CEO, Akeksey Miller, announced at the economic forum in St. Petersburg that Belarus had fallen behind on gas payments and owed his company more than $190 million (Belapan, June 17).

Although the original agreement on December 31, 2006 supposedly resolved gas prices between the two countries, since 2008 the prices have been decided quarterly. In 2010, the Belarusian finance ministry budgeted for the price of Russian gas at $166 per thousand cubic meters (tcm). In fact, Russia decided to charge Belarus $169.22 for the first quarter and $184 for the second. However, Minsk opted to pay only $150 per tcm. As a result, Miller maintains that a debt of $192 million has accumulated. The Belarusian side insists that the deficit is only $133 million. Moreover, Lukashenka has stressed repeatedly that when the two countries entered negotiations on gas supplies from Russia to Belarus, the agreement was that his country would pay the same price as Russian domestic consumers (Narodnaya Volya, June 19).

During a meeting with Miller in Moscow on June 15, Russian President, Dmitry Medvedev, threatened to reduce gas supplies to his neighbor by 85 percent if the Belarusians did not settle the debt by June 21 (Belapan, June 17). A few days earlier, Lukashenka had made a “working visit” to Moscow that took on a bizarre twist. During his televised meeting with Prime Minister, Vladimir Putin, Lukashenka maintained that Medvedev had neglected to feed him and that Putin “owed him dinner.” However, Putin laughed off the situation and the two continued to talk until 1:00 am without any food being supplied (Pravda, June 15).

Lukashenka, unsurprisingly, offered a different view of the current spat over gas. During his visit to Mahilou, he declared that fundamentally, he does not believe Belarus owes anything. In fact, Russia owes Belarus about $200 million in transit fees (AFP, June 18). However, if it is true that his country indeed owes money, then it will pay. Yet, he wondered why Ukraine was allowed to negotiate an agreement for a 30 percent reduction in gas prices (in the agreement that also encompasses an extended lease for the Russian Black Sea Fleet at Sevastopol). Moscow is also considering reducing its prices for gas imported by Hungary. Lukashenka noted that in many ways Belarusians are propping up the Russian economy (Telegraf, June 18).

The gas dispute is linked to the continuing delays over finalizing the terms of the Customs Union between Russia, Belarus, and Kazakhstan. Here the Belarusian president is incensed at what he considers to be unequal conditions, namely Belarus’ payment of customs duties for imported Russian oil and related products when Kazakhstan does not have to make similar payments. Lukashenka has thus requested that Russia immediately lift customs duties for oil products, and those on oil itself by January 1, 2011. If those demands are met, Lukashenka is prepared to sign the Customs Union documents immediately (www.charter97.org, June 17).

On July 5, the heads of state of Russia, Belarus, and Kazakhstan are scheduled to meet in Astana for what was intended to be the definitive meeting to launch the Customs Union (RIA Novosti, June 18). For Moscow, it would be better if all existing disputes with Belarus had been resolved prior to this meeting. Medvedev has thus taken (through Miller) a very hard line on the payment of the gas debt, a formula used previously with Ukraine.

For Lukashenka, however, the issues are rarely so simple. Disputes over oil and gas are part of a political game that has allowed him in the past to adopt the role of protector of Belarusian interests. An opposition newspaper (Narodnaya Volya, June 19) recently attempted to provide a chronicle of the gas issue from 2002 to date, but despite a detailed and meticulous chronology, it is almost impossible to tell which side has breached the original agreement. Gazprom frequently changes its terms and offers different conditions for its neighbors; Belarus regularly deviates from the arrangements whenever Lukashenka opts to refer to the 2002 principles.

For the Belarusians it is a losing game, as they not only run up debts but also gradually lose control over their most important enterprises (Beltransgaz is now 50 percent owned by Gazprom). Moreover, they have no firm allies with which to offer an alternative path other than Venezuela (for oil supplies) or China (potentially, for loans). On June 9, Washington extended, for another year, the sanctions blocking property owned in the US by leading Belarusian officials, citing Minsk’s failure to improve human rights and its recent repressions (Belapan, June 9). The latest US measures illustrate Minsk’s dilemma. One way or another, it must reach an agreement with Russia, while the debt continues to rise. Moscow, apparently, no longer intends to provide free meals.