Russia » Economics

Russian Gasprom empire to take over Belarusian state gas company

If Belarus does not give up to its big neighbor’s demands, it will find itself on the brink of energetic catastrophe.
It is time to face the truth – there is no other solution for this crisis.
Russia temporarily renewed supplying its natural gas to Belarus.  The temporary gas pipe cut off could probably sober up Belarus and make high-ranking officials of Beltransgas (Belarusian state gas) company sign new agreements with Itera and Transnaft Russian private companies. However, even this happened after a number of meetings President Putin with Belarusian President Alexander Lukashenko. What could President Putin say to his counterpart from the brotherly country? Vladimir Putin told the truth – nobody is going to request anything from Russian companies until Byelorussians sign the agreements. The agreements have been signed, but according to them, Belarus will receive Russian gas only until the end of January. It is not clear what will Byelorussians get in the cold month of February.  They are required to sign long-term agreements. And the price for gas depends only on Byelorussians themselves.
Itera and Transnaft are selling gas to Belarus at the market price of 46 dollars per one thousand сubic meters. Gazprom set the price of 28 dollars. Such cheap gas can be probably found only in Saudi Arabia in the area of a gas borehole. In accordance with the previous agreements, Itera and Transneft has already supplied 1.05 cubic meters of gas to Belarus. However, according experts estimates, Belarus  needs 2 billion cubic meters of gas in January.  It will definitely need Gazprom’s gas.
Belarus has no other sources of gas. The developed European countries have no special sympathy of Belarusian President Alexander Lukashenko and would not mind overthrowing him as Milosevic or Shevardnadze. For this reason, no gas will come from the West. Even if some cynical moneymakers decide to make money on Byelorussians and sell gas to them, Belarus is unlikely to pay the sum they will require. Minsk even disagrees to pay the lower price to Moscow. There seems to be a need for Belarus to recover consciousness and start negotiations with Gazprom on its new terms of supplying gas.
Gazprom is definitely having losses by selling gas at 28 dollars per one thousand cubic meters. Earlier such losses could be justified only by the fact that Belarus is a very friendly country for Russia.  Moreover, Russia and Belarus still bear the idea of merging in one Union -State. However, this merge was postponed for infinite term, and Russia has no political benefits from it. The new management team of Gazprom led by Alexei Miller, continues putting everything in order. For the standards of transparent and modern company practiced by the Gazprom new managers, Belarus’s low paying for its gas is a disorder. Therefore Belarus obviously must pay money more for gas or somehow compensate the losses of Gazprom.
The Russian gas monopolist is eager to take over the Belarusian Gas transportation system – Beltransgas company. Gazprom experts estimated it at 580 million dollars. Byelorussians said this is a trifling sum.  Is it cheaper than getting frozen in winter with no Russian gas? To continue receiving gas, Belarus should just pass over to Gazprom the property rights for its 51 percent of shares, and the Russian party will sign the contract for the entire year, under the conditions of the old price – 29 dollars.
Belarus does not agree with the new conditions of Gazprom because of the social and economic situation in the country and the ambitions of President Lukashenko. Belarusian budget for 2004 is composed for the price of 30 dollars per one thousand cubic meters of Russian gas. Half of the state budget of Belarus is allocated to paying salaries to the public sector workers. Moreover, President Lukashenko made a promise to increase the average salary level in Belarus up to 250 dollars (сurrently it is 128 dollars). If Russian gas is purchased at more expensive price, the Belarusian authorities will be required to raise the tariffs for electric power, and the promise to raise living standards of Belarus people will not be fulfilled. If the government fulfills its obligation to raise salary level in the public sector, it faces the perspective of giving up Beltransgas. 
President Lukashenko is an experienced politician. He realizes that giving up Beltransgas is equal to giving up his power. After this nothing can stop Russian companies from purchasing all liquid assets of Belarusian companies. After this the idea of the equal union between Russia and Belarus will be transformed in Belarus joining Russia on the terms Russia will name. Lukashenko is obviously afraid of this perspective, but he has no other way out of the situation. However, he has one opportunity unfavorable for Russia.
All Russian natural gas supplied to the European countries, goes to Europe along the pipelines belonged to Beltransgas. President Lukashenko controls Beltransgas, and Gazprom cannot stop transferring gas – it gas to fulfill its obligations for the European countries-consumers of its gas. However, if Belarus starts stealing gas, the consequences will be bad for Belarus itself.
According to Director of Moscow Center on Political Situations Constantin Simonov, in this case the format of political and economic relations will change dramatically. “I think the Russian government or Gazprom will have serious reasons to appeal to the International Arbitrary Court. Belarus is unable to be a winner in this conflict”. Indeed, even much more self-sufficient Ukraine had to join Russia for the consortium on transporting gas.
So far Vladimir Putin asked Prime Minister Mikhail Kasyanov to examine the issue of giving a loan to Belarus to enable this country to pay for Russian gas at its new prices. Mikhail Kasynov seems to have no objections.  According to information agencies, he promised the President to think on this.
Belarus is likely to receive a loan. Ноwever, even a loan can hardly change much. Anyway, Beltransgas is going to be taken over by Gazprom sooner or later, because Belarus can receive natural gas only from Russia.