BELARUS NEWS AND ANALYSIS

DATE:

10/01/2010

Putin, Lukashenko in high- stakes oil transit game

Author: Kostis Geropoulos

The oil tariffs quarrel that erupted between Russia and Belarus has been depicted as a threat to EU energy supplies similar to past gas disputes with Ukraine, but Minsk has fewer options than Kiev, or none, and there is almost no possibility of the dispute escalating, affecting energy supplies to third parties.

Russian Prime Minister Vladimir Putin appears to have picked a fight with Belarus President Alexander Lukashenko over prices to settle pending issues over oil transit with an ambition to get ownership over the pipeline infrastructure in Belarus. For his part, Lukashenko is looking for some sort of trade-off.

"There's an element of gamesmanship being played between Russia and Belarus just as we saw with the previous dispute over gas a couple of years ago. We are expecting a negotiated settlement," Chris Weafer, chief strategist at Russia's Uralsib Bank, told New Europe by phone on 5 January, referring to the earlier gas dispute between Russia and Belarus, where Moscow was looking to substantially increase the price of gas that it charged Belarus, and Minsk responded by demanding a much higher transit fee across its territory. The end result was that Russia acquired a 50% ownership of the gas infrastructure in Belarus.

The timing is also not a coincidence. Russia, Kazakhstan and Belarus have formally started the process of creating the joint customs union on January 1, 2010. The process aims for the formal creation of the customs union scheduled for July 1, 2011. Russia is keen to resolve the issue of oil tariffs in the early stage of talks on the customs union rather than have it hanging over negotiations like some sort of a Sword of Damocles. "They don't want the possibility to be held hostage in the future if we get to the situation where Belarus becomes stronger or is in a better position to make demands on Moscow in a few years time. In other words, they don't want that risk of another Ukraine," Weafer said.

Right now, Belarus is in a very vulnerable position and has very few options despite attempts by Lukashenko to try to woo the West and improve relations with the EU. "All three - US, Europe and China - basically recognize Belarus as Russia's backyard - 'Russia's privileged interest' to use (Russian President Dmitry) Medvedev's speech - and are simply not interested in getting involved or causing any problems with Moscow," Weafer said. "To that extent Belarus is in a very weak position. It has very few options. It cannot afford the new transit fees and I believe that reasonably soon - i.e. in the next couple of weeks - we will see a deal being negotiated similar to that of gas with Russia taking an ownership stake in the infrastructure."

Asked if Lukashenko may try to pass the ball to the EU, dragging them into this dispute, Weafer said: "From the EU's point of view that won't be a ball, it will be a hand grenade without the pin. The EU's priority at this point is to consolidate the improved relationship it has with Russia ... My guess is the telephone lines between Minsk and Brussels are going unanswered these days."

KGeropoulos@NEurope.eu

Source:

http://www.neurope.eu/articles/98337.php


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