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Russia, Belarus oil tiff resolved — for now

Belarus's Lukashenko has few cards to play in disputes with Russia.

A flame burning natural gas is seen at an oil refinery located on a branch of the Druzhba oil pipeline near Mozyr about 190 miles southeast of Minsk on Jan. 8, 2010. (Vasily Fedosenko/Reuters)

KIEV, Ukraine — Russia and Belarus ended a month-long standoff over oil tariffs this week, signing an agreement that officials touted as striking a middle ground between Minsk and Moscow. 

But the accord was in fact a victory for Russia, observers said, revealing the weakness of Belarus’s position, and may point to more difficulties to come between the two Slavic “brother nations.” 

At issue was the Kremlin’s sudden cancellation of a long-standing arrangement to provide cheap oil to Belarusian President Aleksander Lukashenko’s authoritarian regime. Russia exported more than 20 million tons of oil to Belarus annually, which under the two nations’ customs union, was subject to only one-third of the usual export tax. 

Belarus used about 6 million tons domestically. The rest it processed at its two oil refineries and exported to Ukraine and western Europe, charging the usual export tariff and pocketing the difference. 

Moscow refused to renew the contract when it expired on Dec. 31 and demanded that Minsk pay the full export tax for the oil it sold abroad. The new terms potentially meant a loss of $2 billion to $3 billion dollars — an enormous sum for the cash-strapped Lukashenko government, which has counted on cheap Russian oil and gas to subsidize its post-Soviet welfare state

“In the past the oil has been a massive earner [for Belarus] — more important in many ways than the cheap gas,” said Andrew Wilson, senior policy fellow at European Council on Foreign Relations in London. “It put money in the regime’s pocket — its political slush fund.” 

In their negotiations, the two sides played a game of political chicken. Russia threatened to decrease if not completely cut off the oil it supplied to Belarus’s domestic industry; Belarus for its part has the power to potentially block all Russian oil traveling through the Druzhba pipeline, which crosses its territory and supplies about 10 percent of Europe’s oil. 

Neither side, however, carried out its threats, real or implied, and in the end the two sides reached a compromise of sorts. Russian Deputy Prime Minister Igor Sechin and Vladimir Semashko, Minsk’s first deputy prime minister, signed an agreement Wednesday whereby Belarus would received 6.3 million tons of oil duty free for domestic use, but the amount could increase after September, depending on whether the country’s economy recovers from its recession. Tariffs would rise by 11 percent over the original reduced rate on the remaining oil that crosses Belarus, agencies reported. 

“The position of the Belarussian side was very harsh for us. We agreed to a number of compromises, bearing in mind the special relationship with a brother republic, with the people of Belarus,” Sechin said in published comments.

http://www.globalpost.com/dispatch/russia-belarus/100128/lukashenko-russia-gas-dispute