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Kremlin avoids politicising and protracting gas dispute with Minsk

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May 26, 2016 17:42

Minsk has been quite successful in defending its interests vis-a-vis the Kremlin, which, however, will have hardly any impact on the Belarusian economy amid deteriorated relations between Moscow and Western capitals. The Belarusian authorities are interested in exacerbating controversial issues in order to exchange mutual concessions. In the future, the Belarusian leadership is likely to enable a broader set of integration mechanisms - not only within the Union State, but also within the EEU - in order to prompt its interests in Moscow.

Last week, President Lukashenka and Russian Prime Minister Medvedev held an informal meeting in agro-town Alexandria.

The informal meeting between President Lukashenka and Prime Minister Medvedev followed the Council of Ministers of the Union State’s meeting in Minsk. According to official reports, the Belarusian president and the Russian PM discussed bilateral relations, economic cooperation, regional issues, and the international agenda.

Since early 2016, tension between Belarus and Russia over gas prices has grown. While Minsk insists on USD 73 per thousand cubic metres, Gazprom offers gas at USD 142 per thousand cubic metres.

Russia has identified Belarus’ debt for gas at USD 125 million over the past four months, Minsk, however, has refused to acknowledge its debt. The parties stated the gas dispute could be taken to court. Gazprom Transgaz Belarus has already filed a case to an international arbitration court against Belarusian organizations for overdue payments.

Apparently, during the meeting, Belarusian and Russian leaders have reached some agreements on acceptable ways to resolve the gas dispute. The head of Russian Energy Ministry Alexander Novak confirmed that a compromise solution for Belarus and Russia could be reached soon: “we will continue consultations with our Belarusian colleagues about this matter. We have the government’s instruction in this regard. Literally next week, we will discuss these issues with our Belarusian colleagues”.

Minsk is unhappy about the gas price due to the sharp reduction in the difference between the regional price and the "allied" one. Higher price would reduce the competitiveness of the Belarusian products on the Russian market (sold for Russian roubles) given payments for the Russian gas due in US Dollars. The Belarusian government representatives have repeatedly raised this issue in talks with their Russian counterparts, since this factor (along with an objective narrowing of the Russian market) is the main culprit for the losses in trade with Russia.

In addition, Belarus has raised yet another controversial issue in bilateral economic relations. At the meeting of the Union Council of Ministers Belarusian Prime Minister Kobyakov expressed his concerns to Prime Minister Medvedev about problems with access to the Russian market for Belarusian produces, and emphasised that “the temptation to expand the support for domestic producers with state subsidies is high, to ‘close’ the market through bureaucratic restrictions and informal barriers, to inflate the national import substitution programmes, subsidies and loans, and to close public procurement procedures from partners”.

The dispute over gas prices is a lobbying opportunity for Belarus to protect her trade interests in Russia (the amount of debt for gas is too small for both sides). A compromise solution could be either to fix the price for some volume of gas in Russian roubles, or through a Russian loan in order to repay the disputable part of the gas contract, or to enable access to the Russian public procurement system for some Belarusian goods. Heavy and constantly growing losses in the mutual trade among the EEU participating states since its launch have prompted Moscow to make extra efforts to keep its allies and satisfy their legitimate claims.

The issue of overdue gas payments should be resolved before H2 2016 and not necessarily from a gas perspective.

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