Oil vs. “Friendship”

Wars, including gas and oil ones, can and must be won professionally — or lost in the extreme case. President Alexander Lukashenko of Belarus appears to have mastered this art. He has been quoted as saying that he is not going to trade on his country’s sovereignty. He lost the gas war with Russia when he signed a gas agreement with that country two minutes before the New Year. Under this agreement Belarus has agreed to purchase Russia’s gas at $100 per 1,000 m?. In addition, Belarus sold exactly one-half of Beltransgaz shares, making it impossible for the Russians to gain full control over the Belarusian pipeline. The Belarusian side seems to have outsmarted Russia in the oil field too. In response to Russia’s customs duty of $180 per ton of oil, Belarus set its oil per ton transit rate at $45 — 1,000 tons of Russian oil are pumped through Belarus’s pipelines to the West every year, and the Russian side is legally responsible for timely and adequate oil supplies.

In response to the Belarusian government inadequate move, Russia’s oil transportation monopolist, Transneft, stopped supplying Russian oil through the Druzhba (Friendship) export pipeline. The Russian side resorted to its favorite trick of first accusing Belarus of stealing oil (as was the case with Ukraine last year), even though oil had stopped being pumped on orders from the company. Interfax quotes Transneft vice-president Sergei Grigoriev as saying that “the Belarusian side has forwarded telegrams to Transneft to the effect that it will guarantee oil transportation only after receiving transit payments, which is physically impossible.”

Interestingly, Lukashenko’s initiative found unanimous support in Belarus, even among the opposition. “There is overwhelming consolidation among the republic’s citizenry with regard to the president’s action. The people are only too well aware that under the circumstances Lukashenko is behaving the way Zinon Pozniak or Aleksandr Milinkevich would — except that they would have most likely managed the situation in a better way,” The Day was told by Viktor Martynovich, deputy chief editor of Bilgazeta. He added that this is a situation in which his [Lukashenko’s] determination is serving the interests of all the people living in the republic.

“We don’t know what the end result will be, but for all those who know what is going on upstairs Alexander Lukashenko’s image is turning into the banner of our struggle for independence,” noted a Belarusian journalist. Some Russian newspapers also believe that this round of the oil-gas war will play into Lukashenko’s hand. “As a matter of fact, he is simply asymmetrically responding to the Kremlin’s heavy-handed pressure. Coexisting peacefully and quietly with Russia for a lengthy period of time, he failed to get his country prepared for high energy supply prices,” reads Russia’s Gazeta.

What do experts say about the current Minsk-Moscow conflict? What consequences can it have for the “union state”?

COMMENTARIES

Mykhailo HONCHAR, NOMOS Center:

How can the Belarus-Russia conflict affect Ukraine as a transit country for Russian energy transporters, including oil that goes from Belarus to Central and Eastern European countries?

The southern section of the Druzhba pipeline branches off across Ukraine, with transit lines going to Hungary, Slovakia, and the Czech Republic. Therefore, the Russia-Belarus confrontation ricocheted off Ukraine — not only in terms of oil transportation to Central European countries, but also because Russian oil is not being delivered to Ukraine’s two refineries in Drohobych and Nadvirne. True, this will not cause either of the refineries to suffer a crisis in the next couple of weeks; they have technological oil reserves and will hold the fort, but not for long. Another problem is the impossibility of exploiting the Odesa-Brody pipeline in the reverse mode. So-called reverse oil was pumped through this line across Belarus. In other words, Ukraine has an opportunity once again to start using this oil pipeline for its designated purpose, because the Russian side will not be able to secure its reverse mode payload. Ukraine may be able to use the Odesa-Brody pipeline along the designated lines and thus back up Central European countries in the event that the Russia-Belarus energy supply conflict is long-term or protracted.

We can absolutely calmly provide compensatory oil supplies to Slovakia, the Czech Republic, and Hungary using the Odesa-Brody-Southern Friendship pipelines (the latter is technologically connected and ready for such transportation). By doing so we could emphasize our important role and good will in collaborating with the EU in terms of energy safety, and reliable and uninterrupted oil transportation, against the backdrop of the ongoing confrontation.

I believe that all those senseless discussions focused on choosing integration models in the post-Soviet space should come to an end in Ukraine. Against the backdrop of what is happening, all the talk of reviving the CIS, joining the SES or the Eurasian EU make no sense whatsoever. We simply have to reject such ideas and concentrate on issues pertaining to European integration, in perfectly concrete and applied terms, by setting up a free trade area with the EU after joining the WTO.

Another lesson we have to learn is that Ukraine must create a strategic oil reserve — not the kind being devised by the Ministry of Fuel and Energy but a true and adequate one, formulated in accordance with EU directives. Poland, Slovakia, the Czech Republic, and Germany have nothing to fear in terms of stable oil supplies, despite the Russia-Belarus conflict, because each of these countries more or less conforms to the EU’s 90-day oil reserve criteria. In Ukraine, bureaucrats in charge learned the concept of the strategic oil reserve only last year. Current events are once again underscoring the need to form an adequate strategic reserve in keeping with internationally accepted energy criteria and EU directives.

Sergei MIKHEEV, deputy director of the Center for Political Technologies (Russia):

With regard to the political component, it is clear that the Kremlin has grown tired of Lukashenko’s promises concerning integration and inaction. Before, Lukashenko supported the integration process, but once he was led to understand that his chances of heading a union state or obtaining another very important post were practically nil, he decided that he did not need such an alliance. On the one hand, it was enough to maintain close relations and, on the other, to take advantage of benefits accruing from talks about integration. I think that the Kremlin has become tired of the whole affair. There may have been hopes for the current government going down in history as a force that reunited two Slavic peoples. But then it became obvious that the whole thing did not make any sense. Granting privileges also made no sense under the circumstances. I also believe that large corporations — those that had long wanted to boost the prices of their products, particularly Gazprom, which is turning into a transnational corporation — took advantage of the Kremlin’s disillusionment. I think that Moscow and Minsk will strike a deal because they need each other — above all, in terms of military and technological cooperation.

On the other hand, whatever games Lukashenko can play, he knows that if Moscow turns away from him, it will be the end of him as a politician. If Moscow seriously considers the option of removing Lukashenko from power, Minsk will have to start a countdown. He cannot stay in power forever. On the other hand, Lukashenko is waiting to see the Kremlin’s number-one man replaced. He finds it difficult to discuss matters with Putin. He may be expecting a weaker replacement, a man he will find it easier to deal with. Anyway, he has nowhere to go except in the direction of Moscow. It is hard to visualize the West receiving him in its embrace. It is a possibility that the West would like to take advantage of the conflict, but it is very difficult to picture yesterday’s tyrant as an opponent of imperialistic Russia. Lukashenko may have wanted to play his game this way, but he must realize that this is too risky.

Leonid ZAIKO, director, Strategy Analytical Center (Belarus):

The Kremlin has decided to comply with the request of the entire democratic world community and stop financing Lukashenko’s regime. In 2006 he was allowed to hold presidential elections in accordance with the rules established by the existing government. After the elections the Belarusian leader was faced with two issues: introducing the Russian ruble and holding a referendum on Belarus joining the Russian Federation. Lukashenko bided his time, offering no positive responses to either option. We expected the referendum and the signing of the “constitutional act” sometime in November. And so they started restricting supplies [in Russia]. Belarus was distrustfully watching what was happening. They finally bestirred themselves in December, and a gas agreement was signed two minutes before the end of the year. Russia’s gas prices meant that Belarus would lose some one billion dollars. However, the oil customs duty rate dealt the heaviest blow. Belarus used to have a net profit of 3.6 billion dollars for oil, and domestic users paid token money for gasoline. But then Russia announced the introduction of the oil export duty. This instantly caused tensions in all quarters. Losing 3.6 billion dollars was very painful because it would instantly ruin the Belarusian “economic miracle.” To make up for this loss, the Belarusian leadership decided to hit the Druzhba international pipeline and institute a Russian oil transit duty.

How long will Lukashenko remain in power? Russia will be monitoring the reaction within Belarusian society. These are glory days for the opposition, which has requesting an end to the financing of Lukashenko’s regime. But the opposition began supporting Lukashenko, so the Kremlin will have to work out a “soft” way out of this crisis. Belarus will hang out the white flag, of course, because Russia may stop supplying sugar, dairy products, tractors, and automobiles. My personal opinion is that Belarus should bide its time and offer ambiguous promises. If only we could make it until March, when the parliamentary and presidential campaigns get underway [in Russia] — then we could expect to see another president of Russia in 14 months. I think Lukashenko should bide his time and make all kinds of promises (as has always been the case). Let him promise a referendum and the introduction of the Russian ruble. Technically speaking, the ruble can be introduced in Belarus tomorrow. Lukashenko is afraid of this because he sees it as a loss of sovereignty, in which case “the father of the Belarusian people” will not be able to print his own currency .