Posted on 04/13/2006 3:46:38 PM PDT by lizol
Lukashenka's gas challenge
Moscow launches a new offensive to gain control of the Belarusian gas sector
During a meeting with the Belarusian Energy Minister Alyaksandr Ahieye? on 30 March 2006, Gazprom Chief Aleksiey Miller announced that the price of gas paid by Belarus would be increased severalfold as of 2007. On 4 April 2006, Gazprom Deputy Chairman Aleksander Riazanov said that one way to reach a compromise concerning the gas price was for Belarus to cede control of its gas transmission and distribution system to Gazprom. Moscow seems in this way to have launched a new offensive to control the Belarusian gas sector. This may pose a greater challenge to the stability of Lukashenka's regime than the recent election did.
Russia's objectives
Belarus is currently the only CIS member to buy its gas at a price of US$46.68 per 1000 m3, a rate similar to those applied internally in Russia. The announced gas price increase is above all an attempt to force the Belarusian authorities to transfer control of gas transmission and distribution in Belarus to Gazprom. As a result, Russia would gain a guarantee of security for its gas transit via Belarus to the EU, and would also be able to influence the supplies of gas to individual customers in Belarus. For years, Moscow has sought to obtain a majority stake in the Belarusian gas monopoly Beltransgaz; this has been one of its most important demands in its relations with Minsk. In 2002, an agreement was reached under which Moscow agreed to keep the price of gas low for Belarus (similar to the price in the Smolensk Oblast of the Russian Federation) but only if control of Beltransgaz were transferred to Gazprom. However, Minsk failed to fulfil its commitments. It must be assumed that the decision to move the next round of the gas battle to the period after the presidential elections in Belarus resulted from Moscow's political decision to support Lukashenka's attempts to win re-election.
Consequences for Belarus
Russia's ultimatum, under which Belarus has to choose between paying higher gas prices or giving up control of Beltransgaz, puts Lukashenka in a very difficult situation. A major increase in the gas price would adversely affect the Belarusian economy, lead to a rise in the cost of electricity (most of which is produced by gas combustion in Belarus), and create serious financial problems for large sections of industry, especially the metallurgic and chemical sectors, which are the two pillars of Belarusian exports. With more expensive gas, they would lose their competitive edge, and might be forced to implement employment cuts or delay salary payments. This would in turn undermine the foundations of Alyaksandr Lukashenka's welfare policy, which must be credited for a great share of the Belarusian president's popularity. On the other hand, by surrendering to Russia the control of Beltransgaz, whose pipelines account for nearly 50 percent of Russian gas transit via Belarus, Lukashenka would lose his ability to partly counterbalance his dependence on Russia. Moreover, if the Russian company took over control of Belarus' gas infrastructure, this would merely postpone major gas price increases. Having obtained a guarantee of the security of its West-bound gas transit, Russia would probably attempt to take over other Belarusian economic assets. This would undermine the full control that Alyaksandr Lukashenka presently has of Belarus' economy and political life.
Possible tactics for Lukashenka
For years, Alyaksandr Lukashenka has pretended to be ready for closer integration with Russia. In reality, however, he has obstructed whichever economic and political initiatives from Moscow that he found inconvenient. This time Minsk will probably try once more to decline Gazprom's demands. The Belarusians are expected to reply to their Russian partners by 30 April, but it already appears that they will try to reach a compromise by offering the Russians stakes in less important companies in return for preferential gas prices. However, Gazprom is unlikely to be interested, which means that early next year Russian-Belarusian relations may enter a crisis. It may even happen that the situation of January/February 2004 will repeat itself; at that time Gazprom tried to force Belarus to cede control of Beltransgaz by first interrupting gas supplies to Belarus and then closing the transit pipeline to the West.
Agata Wierzbowska-Miazga, Bartosz Cichocki
Appendix
1. Beltransgaz is a Belarusian state-owned company dealing with natural gas transmission and distribution in Belarus. It operates the Yamal-Europe gas pipeline (leased by Gazprom) and owns the remaining gas pipelines in Belarus.
2. Transit of Russian natural gas via Belarus in 2005
Total: 40.4 billion m3 via the Yamal-Europe gas pipeline: 20.7 billion m3 via Beltransgaz's gas pipelines: 19.7 billion m3
3. Transit charges
US$0.46 per 1000 m3 per 100 km in the Yamal gas pipeline
US$0.75 per 1000 m3 per 100 km in the Beltransgaz network
4. Supplies of Russian gas to Belarus performed entirely by Gazprom
Under the contract signed on 27 December 2005, in 2006 Belarus is entitled to guaranteed supplies of 21 billion m3 (and an additional 1.5 billion m3 if technical conditions allow) at the price of US$46.68 per 1000 m3.
5. Timeline of the conflict over Beltransgaz
12 April 2002 - Russia and Belarus signed an agreement under which Gazprom agreed to supply gas to Belarus at the prices in force in the Smolensk Oblast (Russian Federation) for the next five years, in return for a 50% percent stake in Beltransgaz, which was to have been transferred by 1 July 2003. The agreement was meant to cap Gazprom's efforts over several years to take control of the Belarusian gas monopoly.
November 2003 - as Minsk failed to meet its obligations, the Russian government released Gazprom from its obligation to apply internal Russian prices to Belarus.
December 2003 - Belarus rejected a gas price increased proposed by Gazprom, and from the beginning of 2004 received its gas solely under short-term contracts with private suppliers (Itera, Transnafta and Sibur).
18 February 2004 - Gazprom interrupted gas supplies to Belarus and gas transit via its territory for more than ten hours.
8 June 2004 - Belarus and Gazprom concluded a compromise agreement for the supply of gas till the end of 2004.
December 2004, December 2005 - Contracts for the supplies of gas in successive years were concluded without any disturbance, although on several occasions Gazprom declared its intention to considerably increase the prices paid by Belarus. The question of transferring a stake in Beltransgaz to Gazprom, which is still under dispute, was omitted from these contracts.
Ping
Lukaszenko is weird
Probably Russia and Belarus pulling stunts to keep the West off their back again.
Also, Russia is up for WTO membership, so it is REQUIRED to charge full price to all countries, regardless of alliance. Therefore, Russia and belarus need to do this for Belarus to continue getting lower that market priced oil.
Serves them right, all of them. State monopolies on both ends of the transaction - may them both end up losing.
"The Belarusians are expected to reply to their Russian partners by 30 April, but it already appears that they will try to reach a compromise by offering the Russians stakes in less important companies "
Belarussia made the big mistake of thinking the Russians could be loyal - they gave an inch of appeasement and now Russia will take its mile.
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