BELARUS NEWS AND ANALYSIS

DATE:

03/08/2007

Gazprom's Challenge To Belarus: Internal Reactions

By David Marples On August 2, Belarusian president Alyaksandr Lukashenka declared that his country would dip into its reserves to pay its existing debt to Gazprom of $456 million (Itar-Tass, August 2). His decision brought a temporary halt to the current crisis raised by Belarus's failure to meet its July 23 payment and Gazprom's response that it would reduce supplies of gas by 45% starting August 3. Earlier Prime Minister Syarhey Sidorsky had failed in an attempt to obtain up to $2 billion in credit in talks with his Russian counterpart, Mikhail Fradkov (Kommersant, August 2). Belarus agreed at the beginning of the year to raise its payment for Russian gas from $47 per thousand cubic meters to $100, with prices rising to world levels by 2011 (www.gazprom.com, January 1). In turn Russia paid $625 million for its initial 12.5% share of Beltransgaz, of which it will have 50% ownership by 2010. In theory therefore, Belarus had funds in place to meet its current debt but used them for other purposes. The new dispute has raised questions in Belarus both regarding the political and economic intentions of the Russians toward their country, and the likely result of Belarus's rising debts on social programs and the popularity of the president. In his July 10 interview with the French newspaper Le Monde, Lukashenka claimed that both Belarusians and Ukrainians had taken part in the creation of Gazprom and construction of gas lines in Siberia in the Soviet period and merited some benefits from the company's wealth and expansion. Russia thus took an unprecedented step when it raised prices. He also described Russian plans to build an alternative Northern European pipeline as "a stupid project." He added, nevertheless, that Russian President Vladimir Putin was essentially a "Soviet man" and a friend, even though at times he chose to change his colors (SB-Belarus' Segodnya, August 2). However, on a separate occasion, Lukashenka declared that Russia's goal was to privatize all of Belarus and -- a point he has made frequently -- that the Putin government had reneged on earlier agreements with former president Boris Yeltsin on the nature of the Union State (Belorusskaya delovaya gazeta, August 2). Responding to Lukashenka's comment about the wish to privatize all of Belarus, Syarhey Musienka, head of the "EKOOM" analytical center, remarked that 10-15 new Russian oligarchs would emerge from the privatization of large Belarusian firms, such as oil refineries and metallurgical and chemical factories (Belorusskaya delovaya gazeta, August 2). In short, privatization would be tantamount to Russian economic control over Belarus by private companies and the state-controlled Gazprom. Deputy Prime Minister Uladzimir Semashka reportedly promised privatization of some large petrochemical enterprises in March 2007, which aroused the interest of Russian companies such as Lukoil, Gazprom, and Uralkaly (though they were concerned by the high prices requested) (Kommersant, July 2). Yet no changes have occurred. Rather, Lukashenka has clung to state control over large companies and found himself in the unusual dilemma of being short of funds to raise pensions as promised, and canceling transportation benefits for pensioners and students last May. Yaraslau Romanchuk of the United Civic Party commented on the paradox that the government was trumpeting its economic successes while being unable to meet a bill of under $500 million to pay for gas (www.charter97.org, July 31). Political analyst Andrei Suzdaltsev believes that the crisis between Russia and Belarus will go through three stages: the first focusing on energy issues, the second on financial questions, and lastly political concerns (www.charter97.org, August 1), implying heightened Russian influence over the internal situation in Belarus. A report from German journalist Barbara Oertel, cited on the Charter-97 webpage, also stated that the Russians have "written off" Lukashenka and will decide his successor in Moscow (www.charter97.org, August 2). For the present, the Lukashenka regime stutters on, looking increasingly precarious. As in the past the president has explained his predicament through the incompetence of his officials and in late July he dismissed the heads of Beltransgaz (Dzmitry Kazakou), Belnefttekhima (Belarusian Petro-chemicals, Alyaksandr Barouski), and BNK (the Belarusian oil company, Mikalay Vasilevich). They were replaced respectively by Uladzimir Mayorau, Valery Kazakevich, and Uladzimir Zubkou. In the case of Barouski, the goal was ostensibly to remove a man convicted of embezzlement. Two of the replacements are former government functionaries: Kazakevich headed the apparatus of the Council of Ministers and Mayorau was a deputy chairman of the Homel' regional government. Thus there is some credibility to the president's stated wish to install order and bring matters under his "personal control" (Belarusy i Rynok, Jul 30-August 6). Such changes also suggest that the president is determined to resist calls to privatize companies like Belnefttekhima and BNK. The hard-line ruler may soon be obliged to relinquish control over some state enterprises and introduce market reforms. That step may lead to some liberalization, but it could also threaten the sovereignty of Belarus if the new owners are exclusively Russian-based. In turn, the benefits that have accrued from state ownership and cheap energy resources in Belarus are beginning to dissipate. Pensioners and students are the first to feel the effects, but others will follow. The regime responds to its predicament by seeking loans (especially from Russia) but it has little with which to bargain. Putin, the president's acclaimed friend, is not really a friend at all. But Lukashenka has nowhere else to turn.

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