Posts Tagged ‘Belarus’

Treading Lightly in Belarus

June 29, 2009

Gazprom’s harsh words for Belarus over unpaid gas bills two weeks ago turned out to be just that – harsh words.

The gas firm had given Minsk a due date of last Wednesday to pay $231 million in “debts” that Belarus had accrued by paying $150 per thousand cubic meters of natural gas January-April of this year instead of the $210 per thousand cubic meters that Gazprom had been expecting. And if no payment, then no more gas.

By Friday, debts were still unpaid and gas was still running. And Belarussian vice-premier Vladimir Semashenko told the Belarussian parliament that Belarus will pay off the $231 million amount, but not until some time between August and November.

What did Russia have to say in response? Actually, nothing. Putin told his parliament that Belarus will be business as usual; Russia will continue to sell it gas at heavily subsidized rates ($150 per thousand cubic meters ).

This is only logical, given that Gazprom stands to lose 40% of its revenue this year. In such circumstances, its leadership board have to take the conciliatory approach.

The alternative would be a repeat of last winter’s Ukraine fiasco. Whatever benefits Russia derived from shutting off the pipes to Kiev, it paid for them heavily in the form of 4.5 billion cubic meters of natural gas that never reached customers. It was a problematic strategy then, and it would be a foolhardy one now – a company that is losing 40% of its business doesn’t make pains to lose any more.

Especially when those customers are clearly making plans to seek new business elsewhere. In this case, with Western Europe. President Alexander Lukashenko is setting out to establish a Belarus-EU free-trade zone within the next three-four years, and he has made some tepid overtures to human rights – freeing a few political prisoners – to soften European disapproval of his undemocratic governance style. These actions sufficed to move Europe to lift its travel ban on him and to grant Minsk 10 million euros to improve food produce for export.

“We honestly want to forge good ties, even if this may not be to somebody’s liking,” said Lukashenko (Any guess as to whom that “somebody” might be?).

He added that Russian trade spats with Belarus over milk, natural gas, and other commodities had prompted Belarus to look more to trade with the West.

And he said something key: Cooperation with Europe is “part of a strategic plan.”

Belarus is a small market for Russia’s exports, natural gas and otherwise, but it is a market nonetheless. The two nations share multiple lucrative trade deals that Moscow would prefer not to lose – among others, a $9 billion nuclear plant that Belarus contracted Russia to finance; and Defense Systems, an intergovernmental Belarus-Russia defense firm that will be marketing its Pechora 2M surface-to-air missile system to five countries in the near future.

Belarus, positioned squarely between Russia and Europe, is in a position to draw needed business from both. And, it is in a position to use one as a counterweight to the other when it needs to. If Russia starts applying adverse economic terms, Lukashenko can start making overtures to Europe. Likewise, if Europe wrings its hands too much over the lack of democracy in Belarus, Lukashenko can call on Russia for backup.

Russia has little to fear of Belarus abandoning Russia altogether. The Belarussian economy, with its reliance on Russia for more than half of its import commodities and its natural gas, would not survive without Russian business. Belarus is far from independent. But it is close enough to independence that it can, and will, keep Russian hubris in check.

Talking Tough on Natural Gas

June 21, 2009

Russia turned off the natural gas lines to Ukraine last winter in a dispute over gas prices. It may now shut off the spigots, in like fashion, on Belarus.

Last Wednesday, Russia gave Belarus one week to pay $231 million for underpayment on natural gas delivered January-April of this year. Belarus had been paying $100 per cubic meters of gas during those four months, though the contract price was for $250 per cubic meter.

This episode is by no means the first time that Belarus and Russia have crossed words over natural gas. Gazprom threatened Belarus with a gas shutoff back in December 2006,  though some last-minute negotiating stopped the firm from carrying this out.

Whether negotiations would be as successful this time around has far-ranging repercussions, not only for communities in Belarus, but in many communities outside it as well: Most of the 10 billion cubic meters of natural gas that Russia ships into Belarus flows onward to consumers throughout Europe. Not unlike Ukraine’s gas, which thousands of Western Europeans sorely missed during last January’s Russia-Ukraine gas spat.

Belarus will probably propose to meet Russia halfway, according to Belarussian daily Belaruskaya Delovaya Gazeta, which cites Belarussian officials who expect that Belarus will offer to pay $150 per cubic meter.

They are taking a gamble, though, because economically speaking, their country is not in much of any position to bargain. According to the CIA World Factbook, Russia is the source of 59.5% of Belarus’ imports and the destination for 36.5% of its exports. By comparison, only 4.4% of Russia’s imports come from Belarus, and only 5% of its exports go to Belarus. Belarus needs Russia a great deal more than Russia needs Belarus.

Moreover, Russia graciously ended a months-long standoff with Belarus on Belarussian milk imports last week, as reported by RIA Novosti (Russian authorities had banned all Belarussian milk from Russia on June 6 because they deemed Belarus to be noncompliant with new Russian regulations on the export and import of dairy products. Belarus fired back by first dropping out of a new interstate security accord with Russia two weeks ago, and then imposing new customs controls on its border with Russia last Wednesday. Within hours of the border controls taking effect, Russia dropped the ban on milk). As such, Russian officials may feel that they are owed.

On the other hand, Russia is in the middle of a bid to jointly enter the World Trade Organization with Belarus and Kazakhstan. It might be inclined to hold off on any gas wars for the time being, lest it weaken its case for WTO membership by angering European WTO members who won’t like having their gas shut off yet again, not to mention appearing like an overall economic liability prone to volatile trade flows.

In all probability, this one-week ultimatum might really be a means to an entirely different end: upping the ante on construction of the Yamal-2 pipeline, which is expected to bypass all transit countries and thus render gas cutoffs of this kind unnecessary. If Dutch and German investors bankrolling Yamal-2 so much as hear that the status quo of existing pipe lines might mean future shutoffs of needed gas, they’ll probably get much more generous, and much more excited to see Yamal-2 completed very soon.

Being Powerful Isn’t Enough

June 7, 2009

A penny for your thoughts—actually, make that $500 million.

Frustrated with the scarcity of international support for its war in the Caucasus, the Russian government apparently has sought to buy some. It approached Belarusian president Alexander Lukashenko last month and offered him a $500 million (15.47 billion rubles) loan, to be paid on the condition that he recognize Abkhazia’s and South Ossetia’s independence, according to Belarusian daily Beloruskaya Delovaya Gazeta last week.

But Lukashenko turned out to be less desperate for cash than his Russian counterparts had expected. He stated in no uncertain terms that his stance on the two republics is not for sale.

We do not wish to be sold. We will solve the issue ourselves,” he said.

In the same breath, he reminded the Russian leadership that they’re not the only game in town: He’s a proud member of the European Union’s “Eastern Partnership” program and has no intention of leaving it (a partnership of Ukraine, Azerbaijan, Georgia, Moldova, Armenia, and Belarus with the EU; the six nations get consideration for free-trade pacts, financial aid, help with energy security and visa-free travel to the EU).

And he told Beloruskaya Delovaya Gazeta that if it’s money Belarus is after, he is actually more likely to get it from Europe than from Russia. Russia’s trade laws are too much geared toward enriching Russia and against equitable trade: “There are organized and identified barriers in Russia. And we have to overcome them, to sell a textile, chemical fiber, potassium and other fertilizers. They build, and they protect what build with duties. Yet, we overcome these duties, lowering, of course, the price, but we sell it.

RIA Novosti sees an additional factor at work: natural gas prices.

Relations between Moscow and Minsk have repeatedly been strained in recent years, in part due to Russia charging Belarus more for its gas,” it states.

Whatever the factors, and they are probably many, Lukashenko is now committed to forming new partnerships to supplement his staid one with Moscow. He said this clearly to his Cabinet ministers in a separate meeting:

If things go wrong with Russia, do not bow down to it, do not whine and weep. Seek fortune in a different part of the globe” Lukashenko told them.

Let’s spare the moral outrage over Russia using economic incentives to get backing for its military policies. Such things are far from unheard of in the give-and-take of international relations. The United States knows this well. In the weeks leading up to its war in Iraq, it offered Turkey $6 billion to “cover the costs of damage” if it would participate.

And in December 2002, it arranged a sweetheart deal between Lockheed Martin and the Polish government in which the latter bought 48 F-16 aircraft for $3.5 billion and got a range of offsets totaling $9.7 billion—for a $6 billion profit, i.e., 2.6 times the value of the aircraft themselves. Of course, this deal doesn’t necessarily translate to a bribe for support in the Iraq War. But the deal’s timing, less than three months before Poland’s March 2003 pledge of 200 troops to Iraq, does raise the question. So does this statement by Gregory Filipowicz, a defense industry consultant who helped arrange at least two of Lockheed’s “offset” investment deals: “Lockheed didn’t win the contract, the U.S. government did, with pressure and support coming from the very highest levels.”

France, for its part, tried to use its economic clout to be a counterweight on Iraq. It warned several Eastern European nations that their support for the war placed their candidacies for EU membership in jeopardy.

Note that in all four of these cases, only one ended in the greater economic power getting the support that it wanted. In the other three, said economic power was forced to reckon with other, greater powers in the neighborhood. France was forced to realize that nothing it could offer Eastern Europeans could beat what they might get through close ties with the United States. And the United States had to realize that its money alone could not compensate for the visceral pushback the Turkish leaders could expect from the minority of their constituents who were militant Muslim and anti-American.

Russia, in turn, must take the hint that—in Belarus’ eyes, at least—it’s not as important as it would like to think. Since the 1990s, Russia’s comparatively larger economy and vital energy resources have made it a key player to its lesser neighboring republics, who have accepted its (often very restrictive) economic demands for their survival’s sake. But those who want to more than survive may find that they have demands of their own that don’t jive with Russia’s. And in this case, they’re choosing to exercise them. It’s easier when, to their West, there are alternative wealthy countries with comparatively friendlier, global-trade oriented policies.

Then, Russia has to accept—like France and the United States—that being a powerhouse doesn’t guarantee you’ll get what you want. Other nations have interests of their own, and can be expected to pursue them.

Blood, Politics, and NATO Meet in Georgia

May 2, 2009

 

Go with Russia or go with NATO? The upcoming Cooperative Longbow 09–Cooperative Lancer 09 military-training exercises in Georgia, organized by NATO’s Partnership for Peace Programme, are a loyalty call for Russia’s 14 fellow republics within the CIS. All are Programme members and have the option of participating. One by one, they’ve had to decide whether to take that option, or to heed the demands by Russia—a Programme member itself—that they bow out.

 

By now, only three—Armenia, Azerbaijan, and Ukraine—are still signed on to defy Moscow and participate. Moldova pulled out last Wednesday. Kazakhstan called it quits the week before. Latvia and Estonia each individually said “thanks, but no thanks.” 

 

It’s interesting that Armenia and Azerbaijan, who continuously quarrel over ownership of the Nagorno-Karabakh region, can find an area of common cooperation in Georgia. They should, given that:

1) Georgia is the next-door neighbor of both (see the map below) and

2) Georgia’s population is 5.7% Armenian and 6.5% Azeri.

 

Those are two good reasons to believe that any serious trouble in Georgia will sooner or later spill over into Armenia and Azerbaijan.

To Armenians and Azerbaijanis, the turmoil in Georgia is too close for comfort.

To Armenians and Azerbaijanis, the turmoil in Georgia is too close for comfort.

 

Georgia has been the scene of much serious trouble in the last year, i.e., violence in Abkhazia and South Ossetia on top of growing civil dissent throughout Georgia proper against the Saakashvili regime. How messy is the whole country going to get? Armenia and Azerbaijan both have vested interests in not finding out. They would be better off not watching passively as Georgian civil order implodes. They also have an interest in not affording Russia a pretext to occupy Georgia proper, which Russia might see fit to do if the instability in Georgia continues. Either scenario would, if nothing else, mean streams of refugees pouring into Armenia’s and Georgia’s territories. Worse, it might mean war-related destruction of railways, pipelines, and other infrastructure that the two Caucasian republics’ fledgling economies cannot afford.

 

Things such as these came to pass in the bad old days of the early 1990s, when early armed uprisings by Abkhazian separatists against their then-occupier Georgia led to violent campaigns by Georgians to drive Abkhazia’s ethnic Armenians out. The fighting also led to collateral damage to Georgia’s Black Sea railroad (a lifeline from Russia to Armenia) and the repeated blowing-up of a natural-gas pipeline running through Georgia to Armenia.

 

Last year’s conflict in Georgia caused additional damage to rail transit into Armenia. Quote the CIA World Factbook: “The disruption of rail transit into Armenia during the Georgia-Russia conflict in August 2008 highlighted how Armenia’s supply chains for key goods – such as gasoline – were vulnerable to instances of regional instability.

 

Armenian leaders today have the foresight not to rely on Georgian or Russian troops to keep the peace and prevent things from getting blown up. They’re opting instead to take matters into their own hands by committing their own Armenian troops into Georgian territory and proactively keeping the (short-term, at least) peace.

 

Azerbaijan’s leadership is looking ahead, too, to the Kars-Akhalkalaki-Tbilisi-Baku rail project, a rail line that will transit people and goods from Azerbaijan to Turkey and back via a route through Georgia. The project has had a hard time getting off the ground due to not enough funding for the line’s Georgia segments. Baku has every good reason to expedite things, and that means helping to keep Georgia stable.

 

Belarus, Kazakhstan, Moldova, and the other republics that bailed from the NATO exercise all have the luxury of not having to worry about these things. All are far enough away from Georgia to not be fearful of hordes of refugees, exploding railways, or the like.

 

They also have the added element of closer ethnic ties to Russia. Belarus is 11.4% Russian; Kazakhstan is a whopping 30% Russian; 12.5% of the Kyrgyz Republic’s population is Russian; a smaller, but still considerable, 5.8% of the people of Moldova are ethnically Russian. So what concerns the Russian Federation will concern many of their own voting citizens. And so when Russian officials evince great worry that Saakashvilli might interpret NATO’s operation as validation and launch new attacks on Russia (and they have), or that nations who participate in the training exercises will, in so doing, weaken their own ties with Russia (and they likewise have) large numbers of voting citizens in these other CIS republics will listen and take heart. Their own leaders will inevitably listen and take heart, in turn.

 

Ethnic ties are a non-factor in Armenia and Azerbaijan. Their populations are, respectively, only 0.5% and 1.8% Russian. There are no ties that bind among their voters.

 

What about Ukraine? Where would Ukraine’s people stand? They, actually, are a bit more complicated. A substantial 17.3% of Ukrainians are Russian. But given annual Russia-Ukraine face-offs over gas exports—and last winter’s momentary freeze—there is probably little sense of fraternity with Russia in Ukrainian officialdom. Blood runs thicker than water, for sure, but so does the fuel needed to heat one’s home in northern Eurasia’s frigid winter season.