BELARUS NEWS AND ANALYSIS

DATE:

12/05/2006

Putin Orders End to Subsidies for Belarus

The Associated Press

MOSCOW - A Russian newspaper reported Friday that President Vladimir Putin has ordered an end to all Russian subsidies of the economy in neighboring Belarus, whose authoritarian leader relies heavily on cheap Russian energy supplies to maintain his popularity and power.

If true, the move would sharply turn up the pressure on Belarusian President Alexander Lukashenko, whose government is negotiating to avoid a drastic increase in the price of Russian natural gas.

The business daily Kommersant, citing unidentified Kremlin sources, reported that Putin signed a document Tuesday demanding major changes in trade and financial relations with Belarus that would include an end to arrangements amounting to subsidies. The Kremlin press service said it was unaware of such an order.

Lukashenko has been in power since 1994 and won a new five-year term in a March election dismissed by the West and his opponents at home as illegitimate.

Russia supported Lukashenko during the election campaign and gave its approval to the vote, but has put pressure on his government since the balloting through the state-controlled Russian gas monopoly, Gazprom, which is demanding that Belarus begin paying market prices for gas starting next year.

Belarus currently pays about $47 per 1,000 cubic meters, and Gazprom is now calling for at least a threefold increase.

Belarus depends on cheap gas to keep unprofitable enterprises in the largely state-controlled economy running and pay wages, and it also profits from refining and selling Russian oil that it buys at rates lower than those it receives for export _ a situation Kommersant said Putin's alleged order is aimed to abolish.

Analysts say Gazprom's moves to increase prices could be aimed to push Lukashenko into relinquishing control over the pipelines that carry Russian gas across Belarus to other European countries.

A broader move to cut Russian support for the Belarusian economy could boost Moscow's political leverage in Belarus, where Lukashenko has faced increasing Western criticism and was hurt by unprecedented opposition demonstrations following the elections.

Source:

http://www.chron.com/disp/story.mpl/ap/fn/3858539.html