BELARUS NEWS AND ANALYSIS

DATE:

02/01/2007

Gazprom's Growing Tentacles

Natural resources juggernaut Gazprom has scored yet another victory in its gas pricing war, gaining 50 percent of the Belarusian pipeline network. The deal demonstrates Gazprom's ruthlessness in securing power over neighboring former Soviet satellite states and raises questions about how reliable the Russian company is as an energy supplier to western Europe.

Alexei Miller, CEO of Russian gas monopoly Gazprom, announced the deal two minutes before midnight on New Year's Eve.

It was deja vu all over again. Just as Moscow twisted the valve on the pipeline carrying natural gas from Russia to Ukraine one year ago, it threatened to cut off supplies to Belarus on New Year's Day. In the end, however, Minsk averted disaster by agreeing to double the bargain price it pays for natural gas from Kremlin-controlled Gazprom. Now, Belarus will pay $100 per 1,000 cubic meters of gas -- still far cheaper than the price of $290 typically paid in Western Europe.

The tangle in Minsk highlights Belarus's energy dependence on neighboring Russia. A sudden halt to cheap gas from Gazprom would deal a crippling blow to the country's economy. German newspapers argue that the latest episode in Russia's gas wars demonstrates that Gazprom is an unreliable energy partner for Europe.

Conservative Frankfurter Allgemeine Zeitung writes: "The people of Belarus were forced on New Year's Eve to bid farewell to the much-loved illusion that they were faring well and that they had a functioning social security and pension system. It only functioned because of the massive profits Belarus was able to make from cheap Russian energy supplies."

"Elections are upcoming in Russia, Gazprom only earns profits from its foreign activities and the government wants to spare the Russian people price hikes. So Gazprom is instead targeting neighboring former Soviet republics. The degree of price increases ... hinges on how willing states are to ally themselves with Russia. Western-leaning Georgia is forced to pay a 'European' rate of $235 all of a sudden, whereas Belarus must even now only pay $100. Apparently Moscow still has brotherly love for Belarus."

"There is a strategy behind it all: Even if (Belarus President) Alexander Lukashenko reversed his foreign policy and tried to open up to the West, Europe's last dictator wouldn't get much of a reception there. The Kremlin does not seem to fear that the Belarusians will move closer to 'patriot' Lukashenko, and neither would it care much if the incident were to fuel an internal revolt. But Russia would lend an open ear to desperate cries from the Belarusian brother nation for an accession into the federation of cheap resources."

Business daily Handelsblatt writes: "The latest conflict makes two things clear: First, Russia is willing to use energy supply as a tool for gaining dominance in the former Soviet satelite states and for returning to power on the global stage. By doing so, Gazprom has lost its image as a secure energy supplier and has demonstrated that it has become a political instrument of the Kremlin."

"The endless negotiations also benefited Gazprom in that it will gain a 50 percent controlling stake in Beltrangas, the Belarusian pipeline network. Like an Octopus, Gazprom has thus acquired yet one more tentacle with which it can ultimately control the transit of Russian natural gas to Europe."

"The Belarusian economy will now be even less competitive than it was before. Thus weakened, it will soon be ready for Russian assimilation. Of course, this isn't Gazprom's fault -- it's that of Lukashenko, who, with his absurd politics, drove his country into complete isolation and one-sided dependency on Russia."

Center-left Suddeutsche Zeitung writes: "Even though a suspension of gas delivery through Belarus would have had far less impact on Germany than cuts in the more important pipeline through Ukraine, western customers should still take note of the brute force with which Gazprom is prepared to enforce conditions in its annual pricing battle.

"But there is also a lesson to be learned by dictator Lukashenko: Moscow is no longer willing to subsidize his centrally planned economy. Nor is there any reason it should. Lukashenko's election fraud and human rights violations have completely isolated him from the West and made him entirely dependent on Russia. Now he is being forced to pay the price."

-- Khue Pham, 4 p.m. CET

Source:

http://www.spiegel.de/international/0,1518,457429,00.html