BELARUS NEWS AND ANALYSIS

DATE:

03/01/2007

Belarus president lashes out at Russia

By YURAS KARMANAU

MINSK, Belarus

Belarusian President Alexander Lukashenko lashed out angrily at the Russian leadership Wednesday over energy price increases, calling its conduct "shameless" and threatening to charge Moscow for military facilities and transit of oil across his country.

The fiery remarks from an agitated, pale-looking Lukashenko came days after his government averted a New Year's Day cutoff of Russian natural-gas supplies by grudgingly agreeing to pay twice the previous price this year and even more in the future.

The gas dispute was part of a politically charged struggle over Russia's moves to end years of preferential treatment that have helped the authoritarian Lukashenko keep his country's Soviet-style economy running and maintain his grip on power.

Belarus has stopped importing Russian oil as it seeks to persuade Moscow to reconsider a new customs duty on exports to its ex-Soviet neighbor, saying the additional charge makes oil purchases too expensive and could badly damage the economy.

"If they are drowning in petrodollars and other currency income and have decided ... to place us in conditions worse even than Germany and other European countries, then let's ask this rich Russia to pay us for our services," said Lukashenko, shouting at times in televised remarks during a government meeting.

He said he had ordered the government "to send Russia a proposal on payment for everything they get here for free -- from military facilities and transit," adding: "I will raise the question of the payment for transit of oil across Belarus, payment for the land they use under gas and oil pipelines."

The trade disputes reflect severe strains in ties between the two former Soviet republics, which go back centuries and remained very close after the 1991 Soviet collapse but have been frayed in recent years by a power struggle between Lukashenko and Russian President Vladimir Putin's Kremlin.

Belarus is a key Russian military ally and buffer against NATO, and the nations agreed a decade ago to form a close union. But the recent energy pressure suggests the Kremlin is growing tired of supporting Lukashenko, who has resisted efforts to grant Moscow more control over his country and its economy.

Lukashenko, who gave in to longstanding Russian pressure to sell a half share in his country's gas pipeline system as part of the gas price agreement signed in the final minutes of 2006, said that he had fulfilled Russia's demands and now wants Russia to fulfill his.

He said he had issued his prime minister "a direct order to sign an unfavorable agreement on gas" because, he claimed, Russian Prime Minister Mikhail Fradkov had promised that reaching a gas deal would bring a resolution to disputes on the oil customs duty and what Belarus says is blockage of its sugar exports.

Russia's government decided to charge a customs duty of US$180 (euro135) per metric ton of oil exported to Belarus as of Jan. 1, a move that will deprive the Belarusian government of major profits it has reaped by exporting oil products made from cheap Russian oil.

The outspoken Lukashenko said the duty would bring the oil price to levels that would put "millions of people in Belarus" out of work -- an apparent reference to refineries that are now operating on reserves and other industrial enterprises that could be affected in the nation of 10 million.

He said Belarus is ready to evenly share revenues from the oil products it sells.

Belarusian officials have said they are hoping for a favorable resolution to the oil customs duty dispute by mid-January. Russian officials have said little about the issue and could not be reached for comment late Wednesday, during a holiday that ends next week.

Russian authorities have virtually halted imports of Belarusian sugar as of Jan. 1, Ivan Danchenko, head of the state-run agricultural production concern Belgospishcheprom, said Wednesday, adding that Belarusian sugar producers have lost some US$2 million (euro1.5 million).

Sugar made from Belarusian sugar beets is not subject to Russian customs duties. Belarusian producers began experiencing problems with exports late last year, amid suspicions in Russia that Belarusian companies were sending Latin American-produced cane sugar to Russia in the guise of beet sugar to avoid customs duties

Source:

http://www.businessweek.com/ap/financialnews/D8MDV5AO0.htm