BELARUS NEWS AND ANALYSIS

DATE:

18/12/2006

Minsk Made Speechless

// But it might lose its sovereignty as well

Belarus is worried about the failure of Russia-Belarus presidential talks. Alexander Lukashenko failed to reach agreement on lowering natural gas price, and on keeping oil refining profits. Belarusian president refrained from his traditional strong comments towards Russia, and the opposition announced that Russia is preparing the Anschluss of Belarus. Minsk has 13 days left to agree to Moscow's demands.

The key issues of Putin-Lukashenko talks in Moscow were the three disagreements: the fact that Russia imposed duties on oil exported to Belarus to be refined, the price on natural gas supplied to Belarus by Gazprom beginning from January 1, 2007, and the creation of Russia-Belarus joint venture for natural gas distribution on the base of Beltransgaz. However, only the budget for 2007 of the Union State was ratified (expenditure part of $144 million), while Putin-Lukashenko talks ended in the latter's leaving Moscow, winding up most of his visit's program.

The outcome of the talks has not been officially announced yet. Meanwhile, Russian president's staff say off-the-record that agreement wasn't reached on any of the three issues. The fact that Lukashenko did not make sharp comments on the talks' outcome, breaking his habit of doing so on Belarusian state TV right after each meeting, proves that Minsk is worried about the talks' failure this time. Meanwhile, Belarusian state mass media did not cover the issues of disagreement at all on Saturday and Sunday. They just accused Russian authorities of breaking the previously reached agreements on social issues, and praised the ratifying of the Union State's budget.

Russia's decision about imposing export duties will make Belarus lose up to $1.7-2 billion of revenues if oil products supplies become reduced. Gazprom's raising the price from $49 to $200 for 1,000 cubic meters of natural gas will cause a drastic growth of tariffs in Belarusian energy sector, housing maintenance and utilities, and public services, or even the bankruptcy of a greater part of companies. Finally, regardless of the price which Gazprom will pay for taking over Beltransgaz, losing control over it will mean for Minsk that Lukashenko administration's influence on local economy is falling.

Russian state officials say off-the-record that the resolution on calling off privileges for importing oil to Belarus will not be reconsidered. Thus, oil refinery in Belarus will begin losing profits already in January 2007. Gazprom, in its turn, does not want to lower gas supply price below $200 for 1,000 cubic meters. If the agreement on natural gas is not signed, the situation of 2003 might repeat in January. Back then, Gazprom lowered pressure in the pipes transporting gas to the E.U. through Belarus.

It is unknown how Lukashenko will be able to avoid the economic fall in winter. Russia has not yet set any official demands to Belarusian president: Moscow plans to impose export duties and new price on gas unconditionally. Leader of Belarusian United Democratic Forces Alexander Milinkevich believes however that Russia wants Belarus to ratify the Constitutional Act and to establish Russian ruble as the only currency in Belarus. He called those demands "the steps towards Anschluss", adding: "Belarusian sovereignty is traded for keeping Lukashenko's regime."

Vadim Dovnar, Minsk; Dmitry Butrin

Source:

http://www.kommersant.com/p731052/r_527/failure_Russia-Belarus_talks/