Is Lukashenka the Real Target of Kremlin's Gas Dispute?

Is Lukashenko the real target of Kremlin’s gas dispute?
Experts see Russia using energy disputes to pressure neighbors into political concessions.

Moscow is embroiled in yet another energy showdown with a former satellite state. This time the Kremlin is fighting with Belarus, not Ukraine, about natural gas prices and payments. But the Russian leadership's real aim may be to topple - or at least undermine - Alyaksandr Lukashenka, the authoritarian president of the former Soviet republic of 10 million people.

Whatever the lessons, Ukraine - which endured gas shutoffs from Russia in 2006 and again in 2009 - would be wise to figure them out.

For weeks, both Russia and Belarus traded accusations of failure to pay gas-related debts. That culminated in the June 21 decision by Russia's Gazprom to reduce gas supplies to Belarus, which carries 20 percent of Russia's European-bound gas; Ukraine transits the other 80 percent.

Europe, which saw its supplies shut off for two weeks during the 2009 Kyiv-Moscow spat, got away largely unscathed during this recent standoff. Supplies to Lithuania were briefly dented. By June 24, however, the Kremlin had fully restored supplies after both nations announced settling their claims.

The Belarusian government on June 23 said that it had paid its gas bill, $187 million, in full. Alexey Miller, Gazprom's chief executive officer, the next day confirmed the payment to Russian President Dmitry Medvedev, who ordered a resumption of suspended gas supplies to its Western neighbor.

Belarusian officials, meanwhile, demanded that Gazprom settle its debt of $260 million [to Belarus] in unpaid gas transit fees by 10 a.m. on June 24. Gazprom complied partially with the ultimatum.

"We have heard media reports that Gazprom has supposedly paid $228 million, or 87 percent of their transit fee debt," Belarusian first deputy prime minister Vladimir Semashko said on Sept. 24 during a press conference in Minsk. "We've decided to consider the payment an advance deposit on what Russia actually owes us."

Gas, money and power

Belarus transits billions of dollars of Russian gas to Europe annually. Ukraine transits about 120 billion cubic meters, worth about $32 billion.

Apart from the financial losses that disruptions cause, the gas spats reveal a disturbing trend in Russian foreign policy, experts say.

David Kramer, a senior transatlantic fellow at the German Marshall Fund of the United States, is one of them.

"This latest incident follows other examples where Russia has used energy cutoffs to pressure neighbors, either to collect more money or to try to gain control over assets or infrastructure," Kramer, who worked in former President George W. Bush's administration, said. "Ukraine in 2006, Belarus in 2007, Ukraine again in 2009, and now Belarus again : these are the most obvious examples. Russia is using economic/energy means to gain greater control over their neighbors."

The victims of these geopolitical power plays, however, are not limited to Ukraine or Belarus.

Analysts say countries such as Lithuania, which gets all its gas through Belarusian pipelines and which has been one of the fiercest Kremlin critics in the European Union, are obvious victims of Moscow's energy brinkmanship.

"The way that relations, especially energy relations between countries such as Russia and its neighbors are repeatedly clarified, really should raise concerns throughout Europe," Lithuanian President Dalia Grybauskaite told a briefing on June 23.

The Kremlin has never before cut off natural gas supplies to its loyal ally Belarus, leaving many in Europe to wonder why such a seemingly minor dispute between trusted comrades could so quickly blow up into a three-ring circus involving Ukraine.

The explanation, according to Minsk-based opposition leaders and analysts, is simple: Lukashenka is no longer trusted by Kremlin leaders, who suddenly have found a more reliable partner in Kyiv since President Viktor Yanukovych took power on Feb. 25.

Another explanation is that Moscow is playing Kyiv and Belarus off each other, using classic divide-and-conquer tactics. Evidence of Kyiv's growing obedience materialized after Ukraine offered Russia to compensate for the cutoff by pumping more gas through its pipelines.

Roman Yakovlevsky, who has reported on politics from Minsk for more than 20 years, said relations between Belarus and Russia have deteriorated sharply. Russian Foreign Minister Sergey Lavrov's meeting with Lukashenko in Minsk on June 22 had a foreboding character to it.

Alyaksandr Milinkevych, leader of the For Freedom opposition party, said Russia's leaders have grown to dislike Lukashenka intensely in recent years. "European and Russian leaders no longer take Lukashenka seriously," Milinkevych, defeated by Lukashenka in the undemocratic presidential election of 2006, said.

Andrey Sannikau, the former Belarusian deputy foreign minister, who heads European Belarus, another influential Belarusian opposition group, said Lukashenka is needlessly confrontational. "He has dragged Belarus into a milk war, a meat war, a candy war, and now this silly gas war [with Russia]," Sannikau said.

Implications for Ukraine

Ukraine, despite having a more Moscow-friendly president in Yanukovych, is still vulnerable, according to Kramer.

"I think Russia has already pressured Ukraine more than Yanukovych expected, though once Yanukovych opened the door, it became very hard to close," Kramer said. "We could see Russia overplay its hand in a way that relations would become tested, whether over energy, the Black Sea Fleet, or other issues."

Ukrainian officials stressed that they are not taking sides in the current Moscow-Minsk gas dispute. "On the political level, Ukraine is absolutely neutral in this story," Ministry of Foreign Affairs spokesman Oleh Voloshyn told journalists on June 22. "Business is business."

But Anatoly Hrytsenko, a former Ukrainian defense minister, called the current administration's policy shortsighted. "Instead of showing solidarity with a country in a similar position, in effect recognizing that Ukraine might be next [in Moscow's sights], they have played up to Moscow. The leadership in Kyiv has even managed to give in to the temptation to capitalize on Belarus' plight by offering to increase gas flows through Ukraine."

But presidential administration chief Serhiy Lyovochkin said Ukraine was defending national interests without taking sides by demonstrating the "reliability" of the country and its pipeline as a transit country for gas to Europe.

Belarus in dilemma

The frost between Belarus and Russia is a sharp departure from recent years.

Lukashenka has been no less an opponent of democracy than the Kremlin and has long been happy to toe Moscow's line in exchange for cheap oil and gas to bolster his country's Soviet-vintage economy. Moscow has recently decreased the subsidies, leading to a tit-for-tat disputed that included Lukashenka backing out of a Moscow- sponsored free-trade union.

And now Lukashenka, known as the last dictator of Europe, has few friends in the West to stick up for him in his battle with Russia. European officials, in fact, sounded more concerned with getting gas than with Lukashenka's fate.

"We expect the gas transit flow to the European Union from Russia through Belarus will not be affected," Marlene Holzner, European Commission spokesperson on energy affairs was quoted as saying by news agencies.

Cleaning house

Kramer however, said the West should get more involved in cleaning up the Eurasian gas trade, starting with Ukraine. "The West should be pounding home the importance of transparency and energy efficiency in the case of Ukraine," Kramer said. "The days of middlemen companies and non-transparent deals should be over."

Opaque and allegedly corrupt schemes involving middleman traders have, according to experts, long been used by top officials in the region to illicitly profit from gas trading, and by Russia to influence its neighbors by awarding lucrative contracts to subservient allies. But the schemes have also sparked instability, playing a role in many of the region's energy spats.

U.S. energy analyst Edward Chow said Europe will not do much to stand up to Russia and force a clean up in the region's energy business.

"So far Europe has acted on the basis that Russia's relationship with transit countries is the business of the countries directly involved and not the concern of consuming countries," Chow said. "European governments seek to understand the current state of play, but do not interfere."

Chow agreed with Kramer on the need to remove corruption in the energy trade.

"There is no substitute for modern, transparent, commercially-driven and enforceable contracts that benefit both sides. Russia and Ukraine are back on the same path in their gas relationship that has failed many times in the past," Chow said.