Wednesday, September 1, 2010

Can Europe learn from Minsk?

Russian Prime Minister Vladimir Putin (R) meets with Belarussian Prime Minister Sergei Sidorsky (L) in Minsk on May 28, 2009.

By 2030 eighty percent of Europe's natural gas will be delivered by Gazprom. Why should it worry? One need go no further to understand than to Belarus. After the collapse of the Soviet Union, this former Soviet satellite state became Moscow's closest ally. While other post-Soviet countries were distancing themselves from their former master, Belarus President Aleksander Lukashenko agreed to a political union.

The honeymoon days have ended. Over the past several years, Lukashenko has taken a number of steps to establish his independence, and the Russian bear has responded with fury. First, the history:

Despite the fact that Vladimir Putin forced Russian oligarch Boris Berezovsky to flee the country to avoid prison time, Lukashenko has maintained friendly relations with the Kremlin critic. Lukashenko is loyal to his old, Soviet-era pals, even when that loyalty is frowned upon by Moscow. In 2009 Moscow thought its Kyrgyz ally, President Kurmanbek Bakiev, had agreed to evict the American military from Manas airbase. The Americans doubled its financial contributions to Kyrgyzstan, and Bakiev renewed the lease. Possibly in retaliation, Moscow orchestrated the overthrow of the Bakiev regime in April 2010, and recognized the post-coup Otunbayeva government within hours (Guardian, April 21, 2010). Rather than shun the man whom the Kremlin had declared a pariah, Lukashenko gave Bakiev political asylum.

Lukashenko refused to recognize the Russian-created states of Abkhazia and Ossetia, and began to boycott Russian diplomatic initiatives. In June 2009 he missed the Collective Security Treaty Organization Summit in Moscow, and in May 2010 he absented himself from the customs union summit in St. Petersburg. Jamestown Foundation analyst Jiri Kominek posits that Lukashenko must have realized these strategic and economic organizations would have left Minsk economically isolated (Jamestown Foundation Blog, June 23, 2010). On July 5, Belarus refused to sign onto the Customs Union, in favor of a Kazakh-Belarus Common Economic Space.

The battle was political and economic. In 2008, 99.7% of all Belarussian meat exports were to Russia, as well as 91.6% of its footwear, 80.2% of its refrigerators, 92.3% of its milk, 77.7% of its furniture and 69.8% of its trucks. While Russia opened its markets to Belarus, the gesture was not reciprocated. Belarus maintained a regulation that 90% of all food and 80% of all manufactured goods sold in any Belarussian store had to be Belarussian-made. To maintain its economic independence from Russia, in 2009 Minsk borrowed $1 billion from China, $3 billion from the IMF, and $200 million from the World Bank (Vladimir Ryzkhov in The Moscow Times, 4 August 2010).

Russia was not pleased and decided to strike back. In June 2009, Russia banned the importation or sale of Belarussian dairy products. Then, kicking off its involvement in Belarus' 2011 Presidential election, on July 4, 2010 NTV broadcast a made-for-TV film called "The Godfather." It was a history of the Lukashenko presidency, include chronicles of the deaths and disappearances of opposition figures at the probable hands of government death squads. It discussed Lukashenko's extra-marital activities and featured his illegitimate son. It highlighted Lukashenko's comments in favor of Adolph Hitler. And, it underlined the main point of the slander: Russia had given millions in aid to Belarus and this support was not being appreciated. What is important about this documentary is that the television station on which it was aired is owned by Gazprom, whose principle shareholder is the Russian government.

The lesson for Europe is not Gazprom's use of the media, however, but Gazprom's use of gas supplies. Jamestown Foundation's Vladimir Socor documented that the balance of payments between Gazprom and Belarus were about equal in June 2010: Gazprom owed Minsk $228 million, and Minsk owned Gazprom $192 million. Despite the fact that Gazprom was the net debtor in the relationship, Gazprom suspended gas deliveries until Belarus made their payment. Lukashenko was forced to borrow $200 million from oil and gas rich Azerbaijan to settle the account. Turnabout being fair play, Belarus then demanded Gazprom settle its debts before Minsk would allow gas to flow onward to the EU (Jamestown Foundation, 25 June 2010).

Whether the gas flow is interrupted over a price dispute with Ukraine as it was in January 2009, or with Belarus as it was in June 2010, whether the dispute is economically or politically motivated, Gazprom has shown its willingness to sacrifice the goodwill of its European customers to further Moscow's goals. The only way to insure Europe remains energy independent is if it has multiple sources of oil and natural gas.

Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at