Russia secures ownership of Belarus gas pipelines

AP News
Posted: Nov 25, 2011 12:51 PM
Russia secures ownership of Belarus gas pipelines

Russia's state-controlled natural gas company bought the remaining stake in Belarus' gas pipeline system Friday to become its sole owner in a move that strengthens Moscow's control over gas exports to the West.

Russia is the main ally and sponsor of Belarus' authoritarian President Alexander Lukashenko, but he had been reluctant to yield control over the pipeline network and other Belarusian economic assets in the past, accusing Russia of trying to erode his nation's sovereignty.

Lukashenko's stance, however, has been softened recently by a severe economic crisis that has weakened his power and made him more prone to compromise.

Russia's Gazprom already had owned 50 percent in Belarus' pipeline operator, Beltransgaz, and wanted to gain full control. It said in a statement after the signing that it agreed to pay $2.5 billion for the remaining 50 percent stake.

Russia provides about a quarter of the natural gas that Europe consumes, with 80 percent of it going through Ukraine. The rest is shipped through Belarus and Turkey.

Moscow has sought to win control of existing transit routes and build new export pipelines bypassing its neighbors in order to secure its hold on energy supplies to Europe, its main export market.

Past pricing disputes between Ukraine and Belarus have led to disruptions in energy supplies to customers in the European Union, prompting EU nations to intensify a search for alternative supply routes.

Russian Energy Minister Sergei Shmatko said after the signing Friday that the deal has brought an end to the energy wars between Russia and Belarus.

As part of the deal, Russia has also reduced the price of gas it sells to Belarus. Prime Minister Vladimir Putin said Friday that Gazprom will now charge Belarus $164 per 1,000 cubic meters of gas in the first quarter of next year, down from the $280 per 1,000 cubic meters it was paying in the third quarter of this year. The gas price for Gazprom customers in Europe hovers around $400 per 1,000 cubic meters .

"We are making a significant discount for our Belarusian friends and partners," Putin said. He added that Russia also agreed to restructure Belarus' debt for previous supplies.

The low gas price is essential for the Belarusian economy, most of which has remained in state hands. Belarus has been hit by its worst financial crisis since the 1991 fall of the Soviet Union, which has led to sharp devaluation of the national currency and triggered high inflation that has eroded public savings.

"Cheap gas and oil are like drugs for the Soviet-style Belarusian economy," said Alexander Klaskovsky, an independent analyst in the Belarusian capital, Minsk. "It's a lifebelt for Lukashenko who has driven the country into a deep crisis and 100 percent inflation."

Belarus' first post-Soviet leader, Stanislav Shushkevich, said that surrendering control of the pipelines "will mean the loss of a significant part of Belarus' sovereignty."

He described the gas deal with Belarus as part of efforts by Putin, who is all but certain to reclaim the Russian presidency in March's vote, to create a new, stronger alliance of ex-Soviet nations.

Putin, who has lamented the 1991 collapse of the Soviet Union, has recently proposed forming a "Eurasian Union" of former Soviet nations, saying the bloc could become a major global player competing for influence with the United States, the European Union and Asia.

"Putin is going to the vote with a geopolitical plan of a new empire, and he's ready to pay the devil or Lukashenko to achieve that," Shushkevich told The Associated Press.

Putin said Friday that Moscow will also provide Belarus with a $10 billion loan that will be spread over the next decade to help it pay for a nuclear power plant that will be built by Russia.


Nataliya Vasilyeva in Moscow and Yuras Karmanau in Minsk, Belarus, contributed to this report.