Does Belarus stand a chance in a new oil war with Russia?
Photo: dneprovec.by
The year 2016 left Belarus with a serious economic problem: its unresolved dispute with Russia over energy.
On 9 January 2017, the Russian daily Kommersant revealed that Moscow will reduce oil supplies to Belarus from 4.5 to 4m tonnes in the first quarter of 2017. In doing so, Russia is pressing Belarus to pay its $425m gas debt.
Simultaneously, Belarus announced the discovery of a new oil field on its territory. Unfortunately, its own oil reserves allow for 1.6m tonnes worth of production annually, while Belarus needs around 25m for its refineries.
Oil products remain Belarus's No.1 export commodity, making a third of Belarus export revenues. With no alternative options for hydrocarbon supplies and Minsk's decreasing political and security leverage, the country will have to play by Moscow's rules.
Oil reserves in Belarus
On 3 January, the Belarusian official media outlet BelTA reported the discovery of a new oil field in the Rečyca district in southern Belarus. The field, however, is classified as hard-to-reach because of its depth. Preliminary research estimates the volume of the field at around 850,000 tonnes of oil. Totally, Belarusian oil reserves are estimated at 50m tonnes, although larger fields may exist, as Minister of Natural Resources and Environment Protection Andrej Kaŭchuta has claimed.
Belarus extracts around 1.6m tonnes of oil on its territory annually. This amount is tiny compared to world oil production leaders. Russia, for example, produces roughly the same amount daily. The capacities of Belarusian refineries, however, require an additional 24m tonnes per year, which the country traditionally buys in Russia.
Processing Russian oil and the export of oil products has guaranteed economic stability for Lukashenka for almost two decades. However, the Putin era brought regular oil and gas tensions, which forced Belarus to seek alternative supplies. Belarus even resorted to importing oil from Azerbaijan and Venezuela in 2010-2011 and 2016, as well as re-examining its own reserves.
In 2016, Belarus and Russia participated in another oil war. However, this time around events are unfolding in a new political context and its results are less obvious. The Russian media have attacked Belarus for alleged turning to the West and redundantly striving for independence. It has also attacked its policy of 'soft Belarusianisation', all of which calls to mind the 'Ukrainian scenario'.
Russia’s food safety administration consistently bans Belarusian food exports for various reasons. Moreover, the cut of oil supplies from Russia has hit the receding Belarusian economy heavily and created serious concern for Belarusian leadership .
Another hydrocarbon war
On 9 January, the Russian daily Kommersant revealed that Russia will cut oil supplies from 4,5 to 4m tonnes in the first quarter of 2017. In doing so, Russia is trying to persuade Minsk to pay its $425m gas debt. According to previous arrangements, Belarus was expected to receive a total of 18m tonnes of oil in 2017, but the sides failed to conclude a deal on Belarus’s gas debt by the end of 2016.
The dispute started in January 2016, when Belarus demanded that Moscow reduce its gas price for Minsk because of falling prices on the global market and the inability of Belarusian industries to compete on the Eurasian Economic Union market because of unequal energy prices. Russia denied the claim, and Belarus unilaterally decided to pay less, accumulating a debt of $425m by the end of 2016.
Moscow responded by putting conditions on the gas debt by limiting the amount of oil supplied to Belarus, a crucial resource for the Belarusian economy. A planned 5,3m tonnes per quarter contracted to 3,5m and finally to 3m tonnes in the last quarter of 2016. Before 1 January 2017, the sides were close to a deal but failed to finalise it. As a result of supply cuts, in January-October 2016, Belarus exported 15% less oil products compared to the same period of 2015, and 38% less in terms of money, which became a significant blow to the Belarusian budget.
No way out of the oil trap?
Belarusian-Russian relations saw a number of oil and gas wars in the 2000s, which usually ended in mutual concessions. Although Russia's image suffered as a result of these wars, it always retained a stronger position in negotiations.
Reductions or delays in oil supplies are inevitably extremely costly for Belarus, as oil products have been its No.1 export commodity for decades. Oil production exports make up around a third of Belarus's exports, which makes the country vulnerable to global market fluctuations.
Faltering oil prices hit Belarus heavily, as the adjacent diagram shows. Oil revenues peaked in 2012, with $16,4bn of revenues, and have steadily declined since. In 2016 Belarus received only $6,1bn from oil sales, a $10bn difference from 2012.
Moreover, there are still no viable alternatives to oil and gas supplies from Russia for Belarus. Minsk attempted to teach Russia a lesson by importing oil from Venezuela and Azerbaijan in 2010-2011, when it received around 1,5m tonnes of oil by sea via the Ukrainian port of Odessa.
During the new hydrocarbon war, Minsk imported 85,000 tonnes of Azerbaijani oil in autumn 2016, and Lukashenka revealed that Belarus was negotiating oil supplies with Iran. However, the negotiations apparently led to nothing, and Azerbaijani oil cannot cover the deficit of a few million tonnes of oil.
Belarus-Russia Relations After The Ukraine Conflict Moscow will keep Minsk in its sphere of influence for a long time, given the great political and economic significance that Belarus has for Russia. Read more
The experts considered imports from outside Russia to be an economically unfeasible option. However, regardless of the direct gains, Minsk managed to secure better terms in its oil deals with Moscow by using these alternative deliveries as leverage, according to Vice Prime Minister Uladzimir Siamaška. But the current context of the Belarus-Russia disagreement have changed significantly since 2011 and Belarus became much more vulnerable economically, while Russia continues to assert its influence in the region and globally. Can Minsk counteract the Kremlin’s pressure in this new context?
There seems to be little chance for Belarus to gain an upper hand in this conflict. Russia needs political allies less and less, as it increasingly relies on itself. This means that the strategy of 'brotherly rhetoric' in exchange for economic gains does not work anymore in Belarus-Russia relations. Besides, Russia is taking steps in the military sphere to ensure its independence from the Belarusian army on the western front.
This significantly reduces Minsk’s leverage and restricts Lukashenka’s tricks with the Kremlin. With no alternative options for energy supplies and a heavy economic dependence on Russian resources, Belarus will have to play according to Russian rules for the foreseeable future.
Will the Kremlin topple Lukashenka?
photo: reuters.com
On 20 January, Alexander Lukashenka described the reactions of Russian officials to the introduction of the new five-day visa-free regime in Belarus as 'groans and wails.'
Recently, rhetoric surrounding Russian-Belarusian relations has become so sharp that some journalists and analysts believe the Kremlin plans to overthrow Aliaksandr Lukashenka or occupy Belarus.
However, off and on conflict remains a fixture of Belarusian-Russian relations. Despite belligerent grumbling, Lukashenka mostly upholds the Kremlin's interests, promoting cooperation between the two countries.
Would the Kremlin replace Lukashenka and occupy Belarus?
In recent months, people of different political views and backgrounds have begun to voice concerns that the Kremlin plans to replace Lukashenka.
On 4 January, the chief editor of the Belarusian oppositional news source Charter 97 Natallia Radzina stated that 'Russia is currently conducting an operation to depose Lukashenka.' Her colleague Dzmitry Bandarenka had spoken about the existence of documents that prove the existence of a plan to replace Lukashenka a few days earlier.
Meanwhile, on 11 January analysts Arsen Sivitski and Yuri Tsarik, who have warmer attitudes towards the Belarusian authorities, published a report claiming that Russia is considering occupying Belarus. Their conclusion was based on information regarding the Russian Ministry of Defence's plans to send four thousand railway carriages to Belarus next year, which is 83 times more than in 2016.
Although these two claims are coming from very different ideological backgrounds, both sides believe the Kremlin is angry because of Belarus's refusal to support the Kremlin's actions in Ukraine as well as its resistance towards the idea of a Russian base on its territory. Moreover, they believe the Kremlin is angry enough to attempt to get rid of Lukashenka. However, Russia has little chance of replacing the Belarusian president: unlike Ukraine, Belarus has stable public institutions.
Relations in conflict
These speculations do indeed seem to hold water given the present condition of Belarusian-Russian relations. Lately, it seems that Belarus and Russia are butting heads on just about every issue.
On 20 January, Lukashenka publicly responded to the criticism Russian officials, including Minister of Foreign Affairs Sergey Lavrov, regarding the introduction of a visa-free regime in Belarus. The Russian government sees this new policy as a threat to its security and hinted that Belarus should create a single visa space with Russia, instead of taking such steps on its own. However, according to Lukashenka, 'they should accept this calmly and focus on their own work.'
One month prior, on 26 December 2016, Lukashenka ignored the summit of the Eurasian Economic Union, where Union heads of state signed the Customs Code, which members had discussed for three years. Although the code was signed by all other members on 26 December, the president of Belarus only agreed to approve it two days later on condition of further negotiations.
It is no secret that the Belarusian authorities are hindering the Eurasian integration project because of the oil and gas conflict between Minsk and Moscow, which has now dragged on for more than a year. Minsk demands a reduction in the price of gas while Russia seeks to make Belarus pay back their debt for previous deliveries, now amounting to $400 m. In order to encourage Minsk to pay, Moscow plans to reduce its supply of oil to Belarus by 12%, according to claims by Russian business newspaper Kommersant from 9 January.
On 26 December, Uladzimir Andreichanka, the head of the lower chamber of the Belarusian parliament, stated in Moscow that 'the situation at the Belarusian-Russian border goes beyond the contractual framework and common sense.' In mid-September, the Kremlin closed its border with Belarus for third-country nationals without any prior notice – thus ruining Minsk's plans of becoming a transit country.
Belarus's list of grievances is quite long: Belarusian officials periodically complain about Russia implementing protectionist measures, or that the Russian media and commentators are portraying Belarus in a bad light. On 22 December, the Belarusian Foreign Ministry even recalled a Russian diplomat to protest statements by the head of the Russian Strategic Research Institute questioning Belarusian sovereignty.
Moscow and Minsk fluctuate between love and war
If the present misunderstandings between the two countries were a reason to overthrow Lukashenka or occupy Belarus, the Kremlin would have already done so dozens of times, as the countries have already been through many similar conflicts. But despite all the animosity between Lukashenka and Putin, the Belarusian leader remains simply a difficult ally for the Kremlin – not an enemy.
Belarus-Russia relations after the Ukraine conflict Moscow will keep Minsk in its sphere of influence for a long time, given the great political and economic significance that Belarus has for Russia. Read more
Even given the conflict in Ukraine, the Belarusian government is less pro-Ukrainian than it lets on. According to information published by Radio Liberty on 4 January, a Belarusian militant fighting against Ukraine in Donbass, who has killed dozens of Ukrainians, freely visits Belarus. The KGB has invited him for talks, but has not opened a criminal case. Previously, Belarusian KGB officials stated that they would prosecute Belarusians who join the fight in Ukraine, on either the Ukrainian or the Russian side. However, evidence shows that the Belarusian authorities remain reluctant to initiate criminal cases.
Although Belarus's rejection of a Russian military base on its territory was certainly painful for the Kremlin, Belarus managed recover from the conflict by announcing the launch of an Integrated Regional Antiaircraft Defense System. Belarusian diplomats have repeatedly refused to support a UN resolution that would have condemned Russia's actions in Ukraine.
Although the Belarusian authorities are making small steps towards promoting their own culture, which Russian nationalists seem so afraid of, Russian culture and media still dominate in Belarus. When Russian television broadcasts reports about a possible re-orientation of Belarus to the West, Belarusian authorities do not block them. Even the recent arrests of several Belarusophobic authors seem relatively insignificant compared to Kazakhstan, where the authorities have consistently been condemning pro-Russian activists for several years now.
Neither does Belarus intend to undermine Eurasian economic integration, as Belarus needs this market to sell its own manufacture goods, while Western countries remain primarily interested in Belarusian petrol. Minsk is slowing down Eurasian integration to gain concessions from the Russian side, as the Belarusian economic system exists thanks to Russian energy 'subsidies'.
This new iteration of the off and on Belarus-Russia conflict is hardly unique, albeit with one exception. Russia has started to count money and seems reluctant to give Belarus handouts, demanding more loyalty from Belarus. However, this is a far cry from replacing Lukashenka or occupying Belarus.
