Belarus-Russia: more at stake than energy

By Nina Bachkatov and Andrew Wilson

Not for the first time, Westerners are detecting signs of political orientation’s changes in Belarus as president Lukashenko indulges in another energy row with Moscow.

This kind of row is cyclic. At the high time of its “energy diplomacy”, Moscow provided cheap energy to Belarus in return for political integration – and closed its eyes to the considerable export revenue Minsk was deriving from refining duty-free Russian crude oil and selling petroleum products abroad.

Moscow was less ready to swallow the “double-face” diplomacy of President Lukashenko. His “multi-vector” diplomacy was clearly a way to refuse a schizophrenic choice between “East and West”, but it led to increased contacts with Washington, the EU and European capitals.

But no one can guarantee economic aide at Russia’s level. The latest episode in the energy row demonstrates that president Lukashenko wants to reinforce his image of a man who can resist president Putin, while both know the limits he cannot cross for the moment. Hence the failure of the bilateral meeting of 25th December that ended with the decision to set up a working group “to settle vital issues on the bilateral agenda” according to the Kremlin press secretary, Dmitri Peskov.

The main issue at the moment is a so-called “tax manoeuvre” in the oil industry, approved by the Russian government in the summer, providing for export duty to shift gradually from oil refining to oil extraction during 2019-24. This means that Belarus stands to lose 8bn-12bn dollars over the whole period, including 300m in 2019. Alexandr Lukashenko wants compensations; Vladimir Putin refuses. Hours before the meeting with president Putin, president Lukashenko had accused Russia of blackmail after prime minister Dmitri Medvedev proposed greater integration between Russia and Belarus in return for lower energy prices.

Another issue is linked to reproaches by Moscow over the use of Belarus is as a conduit for Western goods, principally foodstuffs, that are subject to Russian sanctions, as well as smuggled cigarettes. And that Minsk does not implement numerous elements included in the 1999 agreement on the Union State of Belarus and Russia.

Following a path now classical among former Soviet republics, president Lukashenko opened the year 2019 by ordering his government to consider the importation of oil through the Baltic seaports. The modernisation of the two Belarus oil refineries of the country are due to completion this year, allowing the country to buy oil outside Russia. According to him, it would be cheaper for the Baltic states to buy Belarusian petroleum products.

He first appealed to Lithuania, letting it be understood that he would turn to Estonia if his first opening, towards Vilnius, failed. In the context of tensions between Russia and the West following the interventions in Ukraine, turning towards EU members looks a political as much as an economic turn.

Appealing to the Baltic states is not neutral. They are the most vocal opponents of Russia’s energy penetration of EU and of Russian influence in its neighbouring states. Lukashenko knew it was falling on good ears when he declared on state television on 15 January that “Belarus’s sovereignty and independence will be seriously challenged in the next 2 years, on the left and on the right, in the West and the East” but that “no-one will be able to budge us if we work effectively and at least do not lower standards of living of our people”.

This is in fact pre-electoral rhetoric. Once again, he will base his campaign on his talent in preventing his country to be a pawn between Russia and the West. He knows that the economic life can come to a standhill if Russia modifies its tariffs for the oil and reduces its use of the gas pipeline through Minsk and Lithuania to Kaliningrad made redundant by the opening of a liquefied natural gas (LNG) terminal in Kaliningrad inaugurated by Putin himself.

He knows that the importance of Belarus has decreased in Moscow, but that Putin is not ready to let it turn right now into the West – and knows that despite courting “the last dictator of Europe”, neither Washington nor Brussels is ready for a full embrace. If only for not betraying the opposition, which is pro-Western and anti-Russian, but is still having to convince the population that it will live better after a kind of Maidan in Minsk.

In any case, the opening of Lukashenko towards EU members is not necessarily a democratisation option. He has shown a growing interest for cooperation with Hungary, pushing for more trade and offering Belarus’ participation of the Eurasian Union, CIS organisations and the Chinese Silk Road Belt Initiative as a gateway for new Hungarian trade possibilities.

In other word, the energy row with Russia cannot be separated from the still undeclared presidential electoral campaign and from the geopolitical clouds accumulated around Russia since 2014. The campaign will be marked by foreign interference – from the West, bearing for Lukashenko the risk of awakening civil society; from Russia, wanting to progress with the Belarus-Russia Union state building process. On paper Russia holds the political and economic keys, reason why, despite less interested in Belarus, it would like to use the time up to the presidential election for forcing the country to trapped itself into “an integration ghetto” which it cannot get out of with or without Lukashenko.


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