Posts Tagged ‘Lukashenko’

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.


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.