A new gas war looms, with Belarus the loser

The Kremlin prepared a truly original gift for the inauguration of President Aleksandr Lukashenko of Belarus, whom many in the West call “the last dictator in Europe.” Gazprom, the Russian energy behemoth, set a deadline of April 30 for Lukashenko to either forgo a strategic Belarussian gas asset or start buying Russian gas at market prices as of 2007.

A new gas war is in the offing, posing more risks than any of the previous conflicts between Moscow and Minsk since the early 1990s.

Lukashenko’s first option – to allow the transfer to Gazprom of the controlling stake in Beltransgaz, a state-owned Belarusian company in charge of the transit and distribution of Russian gas – would deprive him of his major bargaining chip with Gazprom. Lukashenko defends the low prices that Belarus pays Russia for gas as compensation for allowing Russian gas to transit to Europe. If Beltransgaz passes to Gazprom, Russia would no longer need to subsidize Lukashenko, who would be a mere consumer.

Under the second option, Belarus would buy Russian gas at market prices – three to five times the current price – and Lukashenko’s economic miracle could unravel within less than a year, as the competitiveness of most Belarussian firms is tied to cheap Russian energy. Lukashenko would also lose the ability to earn unsupervised cash on reselling Russian gas, which would hamper his ability to pay off the farmers, pensioners and soldiers who support him.

International Herald Tribune