Cyrill Vatomsky, Where All Politics Are Global: The Lukashenka and Putin Gas Gambit

The Lukashenka and Putin Gas Gambit - Love Thy Neighbour and His Gas.

Posted At : December 28, 2006 4:32 PM | Posted By : Cyrill Vatomsky
Related Categories: Niyazov,Energy,Belarus,Russia,Natural Gas,Gazprom,Putin,Europe

The tempest in the Minsk teapot is brewing into a regional tornado that eventually threatens to wipe Belarus democratically self-elected President Aleksander Lukashenka off the political map of Europe.

To recap from the very beginning:

Some time in the past Mr. Putin decided to abandon considerations for unification of Belarus and Russia into a new state entity thus allowing Mr. Putin to run for the third term as President of Russia, making democratically self-elected Lukashenka a mere nuisance and a waste of hard earned petrodollars.
Also some time in the past, democratically self-elected Belarus President Alexander Lukashenka mouthed something that Mr. Putin found offensive.
Russia decided to raise prices Belarus pays for natural gas imports from Russia to $200 per 1,000 cubic meters. On the surface, this goes along the lines of “Russia(Gazprom) ain’t Santa Claus.” Too true. Calendar based contracts turn democratically elected CEO of Russia Inc into a Grinch instead.

What drives this crisis? Is it Putin’s temper tantrum, his vindictiveness or maybe his desire to save Russia millions or billions of petrodollars that can be used to build more nuclear submarines to fight the war in Chechnya? All possible explanations but there is one aspect of this story that makes me think that, as it has been through most of Putin’s presidency, interests of Russia as a country are substituted with interests of Russia Inc, its owners and management.

Lukashenka dangled a bait in front of Gazprom in the form of the 50% stake in the Belarus pipeline monopoly Beltransgaz. Initial assessment put the price tag of Beltransgaz at half a billion. However correct this assessment was, Gazprom apparently agreed to $3B. Or even $5B

In an opinion and analysis piece RIA Novosti asks “Gazprom vs. Lukashenko: who is trapped?” Indeed:

Moscow was forced to make concessions. Gazprom agreed to Beltransgaz's assessment of $3 billion. Last week it was already talking about $5 billion.

Now, suddenly, less then a week before the New Year, there is no contract for either Gazprom gas supplies to Belarus nor there is a contract for the 50% stake. And what is more, according to Minsk, there is no contract for Russia to transit its gas through Beltransgaz to Poland, Baltic States and Kaliningrad region.

Lukashenka’s cadre now demand Belarus pays the same price as the Russian city of Smolensk does. And they stated quite pointedly that any transit of gas via Beltransgaz will be considered contraband.

True, Russia and Gazprom can turn Belarus spigot completely off but there is yet another problem. According to Kommersant three out of five pumping stations along the Yamal-Europe pipeline belong to Beltransgaz. If Putin Inc turns off Belarus spigot, then Lukashenka Inc can turn off these stations, dropping pipeline pressure so much that Russia would not be able to supply what Europe demands.

Taking Lukashenka’s bait and eye-gorging the potential expansion of its pipeline infrastructure trapped Gazprom and Putin Inc., leaving nobody else to blame but own greed.

Belarus might be a tougher nut to crack then Ukraine that folded last year in 4 days. Authoritarian ways of Lukashenka, his popularity as well as nationalism he managed to stir up in Belarus will help to stand up to the blockade. Most power stations in Belarus are apparently being switched to fuel oil.

Belarus is not a signatory to the EU energy charter and can set up any rates for transit via its pipelines. On the other hand, Ukraine, now back into Russia’s fold with PM Yanukovich at the helm can easily step in and relieve some of the pressure. How reliable an ally Yanukovich is to Putin Inc remains to be seen.

Thinking of the previous entry in my blog, I wonder if Putin Inc will be less inept in trying to get its hands on Turkmenistan's natual gas assets or infrastructure.

Happy New Year.