Archive for June, 2010

Tug-of-Gas

Ooh, exciting! What do you understand better – Star Wars or the gas wars? The latter, you said? Are you from Gazprom?

I don’t understand much about the gas wars. But one thing is very clear: it’s all politics and has nothing to do with economic relations.

On Wednesday Belarus authorities suddenly broke silence. The First Vice Prime Minister came into the spotlight to explain who owes what and why. Now Belarusians understand more about national gas transit matters than their own monthly utility bills.  But there still a lot of why’s left.

To cut a long story short: Moscow gave Belarus five days to pay back the difference between what it was paying since January 2010 and the price that Russia expected for its gas. After five days and no money Gazprom started cutting the gas off.

After a couple days (and a 60 percent cut in gas supply) Minsk announced (whoops!) that Russia owes almost the same sum for transit: Gazprom did not pay for Belarusian services since November 2009 and Belarus itself started cutting off the gas going to Europe…

Why couldn’t they have settled these matters long ago? Why did Minsk keep silent over its position for so long? Why was Moscow suddenly so harsh and decisive? And Minsk so carelessly and bravely pro-active?

On Wednesday the Vice Prime Minister announced that Belarus has paid its dues and gave Russia 20 hours to do the same. Moscow sent its money on time. The tug-of-gas is over for now.

It’s interesting that the sums of the debts don’t square up: Gazprom wanted $192 million and got $187 million, Belarus demanded $260 million and received $228 million. Where does the difference come from? From politics. The contracts have formulas, and presidents meet to bargain and negotiate these formulas. Then afterwards they still believe they can pay what they see fit and then hope to persuade each other that the new price is OK.

And everyone was satisfied with the set-up until the day came they couldn’t agree.

The main stumbling block is the Customs Union of Belarus, Kazakhstan and Russia. Minsk has a lot of problems with this creation, but the biggest is oil: there will be customs and duties for the Russian oil coming into Belarus (but not to Kazakhstan!). And we just can’t agree to it – duties are out question for the Union State of Belarus and Russia, they can’t be imposed.

There are a lot of things to discuss now (gas price, transit price, Customs Union) and any of them might be sensitive for Belarus on the eve of presidential election.

One more thing is clear: the Belarusian style of leadership is useful for the Kremlin. It’s unpredictable and hard to deal with. But it won’t be invited to join the EU or Nato any time soon. So it’s worthwhile having it on a short leash of not-really-market but not-really-brotherhood relations.

It’s the end of the gas war, but only for the EU (and only for now?). There are still a lot of why’s and what-comes-nexts for Minsk and Moscow, which might see the beginning of a new war of nerves. And a break-away story for Belarus?

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No Money, No Love

Now. I am really, honestly looking forward to it. The sooner we have the presidential election, the better. It’s getting hotter every day – any tensions, internal or external, any conflicts escalate in this climate.

Minsk has five days to pay back a $200 million debt for Russian gas deliveries. Or rather, four and counting. Yesterday, Medvedev asked Belarus to consider future steps and warned he would take severe measures. He also said that Lukashenka explained the debt with the difficult financial position in Belarus.

There has been zero official reactions from Minsk so far. More than that, there is a news blackout: neither the TV nor the state newswires have reported on the ultimatum.

Belarusian stand on this gas issue is that Russia itself doesn’t keep to all the terms of the contract. But Gazprom feels underpaid and the Kremlin agrees the gas debt will hit $500 million by the end of the year. Deputy prime minister Igor Sechin said last Friday that Russia is not interested in getting Belarusian enterprises in return: just give us our money, please.

The last time Medvedev appeared on TV wasn’t long ago. On 11 June Lukashenka met his Russian counterpart and then met with Putin in Moscow. The only public statements of the Belarusian president were that he wasn’t offered any dinner, and that it is possible to resolve all the problematic “knots.”

It’s been a year now that Belarus has been trying to find a way to get crude oil from Russia without export duties. The Customs Union project with Russia and Kazakhstan is one shaky attempt. Moscow says that Belarusians now get enough duty-free oil to cover domestic consumption (3 million tonnes). Minsk says there shouldn’t be any duties within the Union State of Belarus and Russia.

Another difficult question for Belarus is the import duty on cars, applied to individuals, which is to be raised within the Customs Union with Russia and Kazakhstan.

Meanwhile, the gross foreign debt of Belarus has grown to $22,24 billion dollars (as of 1 April), so that every Belarusian now owes the world $2,350. Several strategic enterprises, like the pipeline operator Beltranshaz (50 percent of which belongs to Russia), the oil refinery in Mozyr and the potash company Belaruskali could now be open to privatisation. Very symbolic is the intention of the National bank to sell several of its collective farms, among them the cradle of the president himself, the farm in Alexandria (so called before Alexander Lukashenka was born there).

Moscow has never been really interested in political change in the country on its western borders. It would prefer economic control, stability and loyalty. Neither would it risk its reputation in Europe of a reliable energy supplier. Minsk needs money and no conflicts for the forthcoming elections.

So if nobody wants problems, why quarrel? In the pre-election time such spats might be the beginning of something bigger. What are Medvedev’s severe measures? What if Moscow starts an anti-Lukashenka-campaign in the Russian media? Or even not only in the media…

For Lukashenka, looking at his relationship with both Russia and his voters, the truth is the same: no money, no love.

He was last re-elected in March 2006. It’ll be his fourth time now. By law, the next election should take place after the end of October 2010 but prior to the beginning of February 2011.

November is a perfect date: the seasonal agricultural routine is over, the end of the year is yet to come (Belarusians expect to have average wages of around $500 dollars by then, whereas now they are around $350), the never-easy energy talks with Moscow could be still ongoing.

Problems are always aplenty and the election will take place anyway. But better sooner than later!

P.S.  Spokesman for the Belarusian foreign ministry told reporters on Thursday that there are no political motives behind Russia`s demand that Belarus should settle its $200-million gas debt by June 21.  “I would not call this an unfolding conflict,” , Andrey Savinykh said. “The matter in question is about the settlement of contractual relations in the framework of the activities of two economic entities.”

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