Wednesday, 23 November 2011

Russia Belarus- Half your sovereignty for half price gas

This is the deal reportedly being done between Belarus and Russia as President Alexander Lukashenko visits Moscow.

Belarus gives complete control of its state gas transit monopoly Beltranzgaz to Russian Gas monopoly Gazprom for $2.5 billion. Gazprom already owns half of Beltranzgaz.

In return Russia halves its gas price for Belarus. It pegs it close to its own domestic Russian tariff. That’s probably going to be a drop from $300 per thousand cubic metres down to around $150. Customers in Europe have to pay the market rate of well over $400 per thousand cubic metres.

So how much political influence can energy buy you over another supposedly sovereign state? There a lot more than just gas flowing around here.

Belarus is in big trouble. It’s been poor and alienated for some time. Alexander Lukashenko was ‘elected’ for a fourth term last December amid riots which he brutally put down. He’s been in power since 1994. His only international friend with any clout is Russia. But friendship might be rather a generous word. Belarus’ economic situation has gone from bad to worse. It mostly exports agricultural products and tractors, mostly to Russia. Its economy is in dire straits, facing its own economic crisis and rampant inflation.

Russia wants political influence over Belarus and for there not to be an anti-Russian revolution there. Lukashenko is pro-Russian, so for the time Moscow is content to subsidize him. But many think they want more. Russia has Belarus over a gas barrel so to speak.

Belarus has joined a Customs Union along with Kazakhstan and Russia. As part of membership both Astana and Minsk have agreed to give up many government powers to the control of the customs union. Most will be administered in Russia. It could even see Belarus abandoning its own rouble in favour of the Russian rouble.

All of this might make sense when Belarus is desperate to stabilise its currency and increase trade. But giving away the entire gas monopoly, government controls and potentially even the currency? These may become deals the Belarusian people come to seriously regret, with the additional cruel irony that they have no say in the matter while they’re being struck.

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