BELARUS NEWS AND ANALYSIS

DATE:

17/01/2007

Oil-and-gas conflict between Russia and Belarus can repeat

The Russian-Belarusian oil-and-gas conflict seems to be over, as the countries completed their talks on oil transit on January 12. However, experts believe that the conflict can be repeated again. Institute of Energy and Finance Foundation President Leonid Grigoryev explained to a REGNUM correspondent why it could happen.

REGNUM: What, do you think, is the outcome of the oil-and-gas conflict between Russia and Belarus? Who lost and who won?

During the conflict, we learned who is who and at what stage the process of establishing the Russian-Belarusian common state is. I believe that we cannot continue pretending that we are integrating, investing money into the union, but not to make the final step in unification. We need clarity in relations, clarity in who pays for what. From the economic point of view, Russia has a keen interest in friendly relations with the neighboring Belarus, both under historical reasons and as a transit country to Europe. So, it makes sense to invest in the country, but we do not need to call Belarus a country united with us, as it isn't so. As well the Russian and Belarusian governments are not united, they see future of our countries in quite different ways. Nevertheless, economically our countries are bound to each other. Belarus resembles a large Russian region (like Russia's north-east, where 10 mln people live) that receives various subsidies and transit privileges, but does not submit to Moscow. Russia is open for Belarus, our market is open for Belarusian goods and Belarusian labor, while Russian investments in Belarus face numerous restrictions, although they are now being partially withdrawn. But up to the present moment, it is easier for Russia to invest in Ukraine and Eastern Europe.

Generally, the effect of high oil prices provided positive results for Belarus: for the last three years, GDP growth rate soared from 7% to 10%, average monthly wage increased by 80%. All this is result of Russian subsidies to the Belarusian economy: there cannot be such rise in labor productivity. In 2001, Russia gave Belarus an opportunity to levy export duty for oil transit that equaled difference in the domestic Russian price and the price at which Belarus sold our oil to the West. It is worth mentioning that such way of subsidizing the Belarusian economy can bear negative results for it. In case, oil prices go down sharply (the same concerns gas prices as well), the export duty in Russia will be equal to zero, and consequences of it for the Belarusian economy will be immediate. So, in terms of supporting a transit country the system has an essential flow.

To my mind, our help to Belarus, if we really plan to provide it to Belarus, should be transparent and public, so that no situations occur in the future like the recent conflict. We need to comprehend that we do help them and why we are doing it, and Belarusians should comprehend that we help them. Otherwise, it occurs that from $7 billion received for oil export via Belarus, we take $1 bln to ourselves and give $6 bln as a present to the country, where for 3 years wage increased almost twice, and when we are trying to raise the price grounding on economic effectiveness, it suddenly turns out that we take away something from Belarusians. It means that the fact of subsidizing was concealed from the public for all previous years.

REGNUM: Can the events like the oil-and-gas conflict between Russia and Belarus repeat in the future?

Of course, they can. Because increase of Russia's share in export duties is envisaged by the oil and gas agreements. The process of transition to market gas prices in the post-Soviet territory will be completed when there is a same profitability of gas delivery abroad. Now high prices came to Caucasus. By the way, they came from Turkey instead of Russia. After the Baku-Tbilisi-Erzurum pipeline was completed, Azerbaijan got an opportunity to choose where to sell gas, either to Europe or to its neighbors. Thus, the prices are gradually becoming even, further we should expect increasing prices for Central Asian gas and so on. So, disappearance of preferential prices inside the post-Soviet territory and full switch to market prices is an irreversible process. Now the process is accompanied by political counteraction from transit countries, and Russia is suffering notable image losses in the conflicts, but the process will continue nevertheless.

In order to avoid repeating such situations it is necessary, first of all, to make the process of subsidizing the Belarusian economy open and public, so that nobody could present claims to us in the future: if we pay for stable, uninterrupted and conflict-free movement of our oil and gas via Europe, it means that no conflicts should arise in the future. So, contracts with Belarus should be signed in a way that makes such situations impossible, and if they do occur, norms of international law should be applied. Europe should know, who is the true author of the interruption in energy supply.

REGNUM: Do you think, the Russian-Belarusian common state has prospects?

The economic space of our countries is limited, as I have already mentioned, from the point of view of movement of Russian capital to Belarus. Now these restrictions are being withdrawn, so, hopefully, Russian investments will finally start coming to the Belarusian economy, which will bring good both to Belarus and Russia. Modernization of the Belarusian economy will inevitably include further democratization and gradual privatization of state-owned enterprises.

Source:

http://www.regnum.ru/english/767649.html

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