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Inconvenient Dictatorships - Russia Cuts Gas Flow to Belarus, Again

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For as much complaining as Russia does about the Western "conspiracy" to support civil society and democracy movements, encouraging a fearsome enclosing circle of democratic color revolutions, you would think that they would just love dealing with one of Europe's last remaining true dictators - Alexander Lukashenko of Belarus.

Not so fast. It may be a big secret, and I don't think we can expect Russia to stop its whining of the victim narrative any time soon, but it would seem that President Vladimir Putin strongly prefers working out energy deals with democracies - they are so much easier to screw over.

Case in point, Russia's dealings with Belarus are proving to be an endless headache. Once just an obedient satellite state of the Kremlin (reunification was even on the table for a few years), Lukashenko did not take kindly to having his energy subsidies cut, and started to become a real pain in regards to the new gas prices being demanded of him by Gazprom. Last January, Russia cut off the flow of gas to Belarus (see Gas War, Chapter II) after their refusal to pay nearly double the rates (Gazprom asked for an increase to $100 per 1,000 cubic meters, up from $55).

As energy analyst Derek Brower has written on this blog in the past, the fact that Gazprom is seeking market rates for its gas is of course not problematic in itself - what is sinister is that Gazprom was asking for an amount that it knew that Belarus could not possibly pay, which made them fork over control of Beltransgaz, the national pipeline monopoly, to Russia - which was of course the asset originally sought after in this dispute.

But natural gas prices weren't the only part of the ongoing energy fight between Minsk and Moscow - Transneft also sought to jack up oil transit tariffs, and accused Belarus of siphoning from the Druzhba pipeline. To show they meant business, Russia cut off the flow of oil to Europe without explanation, much to shock and outrage of European consumers.

And then on Wednesday - the latest threat came in after Belarus failed to negotiate its way out of $456 million debt - Gazprom says it will cut gas exports to Belarus by almost half starting Friday. Europe, which imports about 20% of its natural gas supply through Belarusian transit lines, has already registered its alarm, and while Gazprom has promised that supplies will not be interrupted, the damage may already have been done. As Vladimir Milov told the FT, "It doesn’t matter who is right or who is wrong in this dispute. The threat to cut off supplies will once again damage the image of Russia as a player on world energy markets.

Stratfor speculates that the latest energy fight with Moscow puts Lukashenko between a rock and a hard place - with no more friends in the Kremlin, and the only help available from Europe, who would probably like to ask him to cut down on all those human rights abuses and allow for some minimal democratic freedoms:

With the natural gas reduction two days away, checked by the Kremlin on one side and his paranoia on the other, Lukashenko has only two options ahead of him. On one hand, he can go with his traditional pro-Russian instincts and crawl into the doghouse on the Kremlin lawn, giving Gazprom full access to Belarus' energy infrastructure and promising not to cause any more trouble. On the other hand, he can make a sincere overture to the West based on common energy concerns or the potential for economic and political reform, asking Europe to come to his aid and pay the debt. Neither option is optimal for Lukashenko, but given his previous behavior, he will accept the Kremlin's terms rather than risk being removed from office.

I'm inclined to agree with this analysis - like Turkmenistan, Belarus will probably feel safer working with a government that has no qualms about autocracy and repression. But is this really the outcome that would be most convenient for the Kremlin? Lukashenko has been problematic on energy time and time again, and as Yulia Latynina once pointed out in a Moscow Times column, the Belarusian dictator doesn't have much to lose, and knows how to play a strong hand. So while it may appear otherwise when he is hobnobbing with Hugo Chavez and Lukashenko, or getting chummy over their mutual rejection of the U.S. missile shield, Vladimir Putin is rumored to absolutely detest Lukashenko. The two men have zero rapport, and Moscow would probably fare better working with a government that could be more easily manipulated by propaganda, funding, and manipulation of public opinion. That is to say, maybe Russia would like Belarus to have a color revolution after all - a weak democracy would be so much easier to steal from.

 

http://www.robertamsterdam.com

Partner, Amsterdam & Peroff LLP

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Inconvenient Dictatorships - Russia Cuts Gas Flow to Belarus, Again

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