Friday, June 24, 2011

Russia Buying Belarus

Despite the December 2010 creation of a Russian-Belarusian common economic zone, and the January agreement between Vladimir Putin and the Belarusian prime minister Mikhail Myasnikovich to provide $4.1 billion in subsidies to Belarus through the lifting of tariffs on Russian oil, the Belarusian economy is near collapse. Russia has decided to cometo the rescue, but at a price--Belarus has to sell its half of its gas pipeline network, Beltransgas, to Gazprom. Reuters quotes an EU diplomat as stating "Russia is not going to give free money to Belarus. They want a piece of Belarus in return." In the same article, Russian international relations professor Kirill Koktysh says, "Loans will be granted in an amount that is enough to avert a collapse but in no way enough to preserve the status quo." What is Russia's goal? According to Fyodor Lukyanov, editor of the journal Russia in Global Affairs, the Kremlin's ultimate hope is "to make it so that Belarus is oriented, irreversibly and forever, toward economic cooperation and integration with Russia."

The first step in this transformation of the Belarusian economy is privatization of Belarusian resources, and Gazprom's purchase of the gas pipeline. Gazprom already owned 50% of the pipeline before the economic crisis. On May 20, PM Myasnikovich told reporters that Gazprom would acquire the remaining 50% for $2.5 billion, the same price they paid between 2007 and 2010 for the initial 50% share. Russian finance minister Alexi Kudrin intimated that additional funds--up to $9 billion--could be made available for other state assets such as oil refineries, the main mobile phone provider, and a potash production complex, according to Reuters.

Kudrin has offered an additional $3 billion loan, but then denied the money would come from Russia. Instead, Kudrin said the loan would come from a Russian dominated regional grouping, the Eurasian Economic Community, according to RadioFreeEurope. Russia will use its allies' money to obtain its own geopolitical advantage.

Of course, Russia is not the only country trying to buy Belarusian assets. Oil and Gas Eurasia reports that Venezuela may seek shares in Belarusian refineries. Belarus ambassador to Venezuela, Valentin Hurinovych, said "We need this so that they can have their own assets and allow their capital to be part of our industry...I think that Venezuela will soon be our partner." Venezuela is already in the country in a joint venture to exploit Belarusian oil fields.

As Lukyanov noted, Russia's purchase of Beltransgas is not just the purchase of an energy asset, but it is the purchase of Belarusian sovereignty. Once Russia controls the Commanding Heights of the Belarusian economy, no leader of Belarus will have the room to decide against Moscow's interests.