The Reasons behind Putin’s Unprecedented Generosity Towards Lukashenka
In 2009-2010 the Russian government refused several times to transfer loans to Belarus when it failed to fulfill certain conditions. Then Putin insisted on the sales of Belarusian industrial enterprises to Russian companies. The Minister of Finance of Russia Aleksei Kudrin urged the Belarusian party to provide guarantees for loan repayment in the form of a program of selling the Belarusian enterprises to the Russian companies. Among other comments, he stated that Belarus was on the edge of bankruptcy.
The situation has totally changed in late 2011. Russia is going to provide billions of dollars in oil and gas subsidies. It has already allocated 10 billion USD of funds in the form of loans for nuclear power plant construction in Belarus. Moreover, it has paid 2.5 million USD for the second half of ‘Beltransgas’ shares.
In recent years Russian oil barons refused to supply oil for the so-called tilling-based operations of Belarusian refineries. Both the oligarchs and their Kremlin partners expected that Lukashenka would put the oil refineries up for sale, taking into account the unprofitability of oil processing. It is obvious that Russia will not force Lukashenka to make this concession in the year of 2012.
An agreement on issuing a loan by the Savings Bank of Russia and the Euroasian Development Bank for 1 billion USD to Belarus was signed in Moscow on 21 November 2011. The Savings Bank of Russia was to issue 900 million USD of the total amount. The Euroasian Development Bank is also under the complete controll of the Kremlin. The loan funds were transferred to Belarus on 15 December 2011, i.e. less than a month after the contract was signed.
Lukashenka reads reports from state analytical centers at the end of each week. A list of analytical labs includes the Chief Department of Social and Political Information of the Presidential Administration, the Analytical Center of the Presidential Administration, the Security Council’s Operational and Analytical Center, the KGB Analytical Center, the Analyses and Information Department at the Ministry of Internal Affairs. At least some of these reports contained chapters dedicated to the situation in Belarus-Russia relations.
According to Lukashenka’s statements, it looks like his aids and advisors considered the political and economic risks caused by the sale of ‘Beltransgas’ to ‘Gasprom’.
On December 16, 2011, Lukashenka gave an interview to a popular Russian journalist and the Russian News Service editor-in-chief Sergei Dorenko. Lukashenka was talking without any prior preparations and did not bother to think over his words. Dorenko disseminated a range of boorish and non-censored quotations by Lukashenka in relation to the leaders of Western democracies. He was eager to produce a positive impression on the Russian audience. Dorenko gave the following title to the interview: ‘Lukashenka is cool!’
Lukashenka's Attitude Towards Russia
Despite the present-day rhetoric, Lukashenka’s attitude towards Russia remains the same. He considers Russia a backward country with poverty, high levels of corruption, and election fraud. He underscores that ‘the oligarchs’ are ruling the country in Russia.
According to Lukashenka’s statements, he continues to stake out the geopolitical importance of Belarus for Russia. In his opinion, none of interstate organizations, created by Russia for the sake of integration, i.e. foundation of its sphere of influence, can operate without Belarus. He believes that the presence of Belarus as an ally is a compulsory condition for Russia’s might.
It is noteworthy that Lukashenka considered Putin’s actions on the use of ‘Beltransgas’ as a tool of influence on him to be funny. Everything that exists in Belarus-Russia relations and mainly suits the Kremlin, including the Union State of Belarus and Russia, the Collective Security Treaty Organization, the United Economic Space, the sale of ‘Beltransgas’ to ‘Gasprom’, the choice of the Russian project for the construction of Belarusian nuclear power plant, has appeared due to Lukashenka’s own direct contribution. He is regarded as an illegitimate politician by his opponents in Belarus and in the West. Quite a few things that link Belarus to Russia, link Russia to Lukashenka.
It is risky for Russia to attack Lukashenka with the purpose of changing him for a more suitable figure, since Russia stands to lose everything that was created with his assistance. Lukashenka has good grounds to believe that Russia, to remain on the safe side, will not take the risk.
Lukashenka has often stated that in any case he remains the most pro-Russian politician in Belarus. He makes it clear with his actions that Russia will not find a more pro-Russian politician than him in Belarus.
Moreover, Russia does not have any lobbyists in the Belarusian government. The high-level officialdom does business with Western companies, those who dared come to Belarus, through their representatives in commercial structures. There has yet to take place a single trial against civil servants for profiting from the hidden cooperation with Western businessmen under Lukashenka’s rule.
However, top governmental officials’ attempts to assist Russian companies in the purchasing of small, medium, and large-sized Belarusian enterprises are nipped in the bud.
Show Trials of Russian Lobbyists
Show trials against disloyal public officials who have betrayed their nation, those who “carve the Russian oligarchs’ way” in to Belarus, take place regularly in the country.
The Chairman of the Krupki District Executive Committee Uladzimir Siniak was sentenced to 9 years of imprisonment and his property was confiscated in the summer of 2008. This regional top official was charged with taking a bribe in the amount of 6,300 USD from Russian businessmen, who wanted to purchase a construction materials plant, located in the Krupki district.
The court toughened the punishment to 11 years of imprisonment, following a supplementary investigation in March 2009. (Siniak appealed to Lukashenka for mercy then.)
Two top officials from the Minsk City Executive Committee were sentenced to 10 and 11 years of imprisonment and the confiscation of their property for rendering assistance to Russian companies in the process of buying workrooms in 2009.
On 9 December 2011, Lukashenka delivered a keynote speech at the Congress of Belarusian National Youth Union (the so-called, “Lukomol”). “Concrete business tycoons, armed with the most up-to-date weaponry, including mass media, can be found behind each action, directed against our country”, Lukashenka noted.
This statement is reminiscent of the traditional style used by Lukashenka in his current anti-western rhetoric. Until 19 December 2010, he used to underscore that the Russian oligarchs had plundered their country and dashed towards Belarus, in order “to lay their hands on the tasty morsels of Belarusian property.”
Despite his rhethoric, Lukashenka manages to extract significant rents from Russia, which helps to keep the Belarusian economy afloat. However, he fails to understand that the Kremlin’s present-day generosity is explained by a burning desire to push Belarus aside, isolate it from the West, and exert further pressure on the country under more favorable conditions.
Andrei Liakhovich is a contributing author. He directs the Center for Political Education in Minsk.
The Russian Expansion: Tricolor, Mercedes and a Three-Fold Increase in Salary
November and December events clearly show that Russia's policies towards Belarus are dictated primarily not by economic considerations but political. Russia is willing to spend billions of dollars in subsidies to keep the status quo in Belarus. The European Union, on the other hand, is more and more busy with its own problems, the most important of which is the crisis of the Eurozone.
In the coming year, Russia will increase the amount of economic support to Lukashenka's regime. Apart from the significant discount in the gas price, the Belarusian side will benefit from refining larger volume of Russian crude oil.
Beltransgaz as a Signal For Belarusians
The next day after Beltransgaz was sold to Gazprom in November, the Belarusian flags were taken off flagpoles near the buildings of Beltransgaz' agencies. The flags of Russia and Gazprom remained on the flagpoles.
A few days later Chairman of Gazprom Alexey Miller came to Minsk to annouce that the salaries of Beltransgaz' staff (the company was renamed to Gazprom Transgaz Belarus) would be tripled. A new posh office of the company with a ultra-modern gym would be built. Mercedes Benz cars would be bought for the senior staff of the company. The charity program "Gazprom to Children" will be expanded to include Belarus.
According to Gazprom, Beltransgaz' losses in 2011 amounted to about USD one billion. Even if we consider that these data may be inaccurate (Gazprom had an interest to understate Beltransgaz' profitability before buying it), and Gazprom's plans to increase the gas transit through Belarus to 44,5 billion cubic meters, a threefold increase in salaries of Beltransgaz' staff is not justified from the business point of view.
According to Miller, Putin himself ordered to triple the salaries of Beltransgaz' staff. It was a political and not an economic decision. The Russian leadership wants to use Beltransgaz as a platform for sending a signal to the Belarusian society that the staff of the enterprises bought by Russian companies will receive much higher salaries and get a better benefits package.
Miller did not announce any personnel replacement in the Beltransgaz management. In early December, General Director of Beltransgaz Uladzimir Majorau made a number of statements about the company's activities in 2012.
The Russian leadership wants to send a signal to the Belarusian directorate: if their enterprises are bought by Russian companies, the top management will retain their posts and will gain in salary, they will drive new Mercedes. Besides, Russian partners always turned a blind eye to how their Belarusian colleagues pull their ranks, because this is how they use to do it in Russia.
Editor of the Belarusian independent publication Arche Valery Bulhakau aptly said that the Kremlin wanted to use Beltransgaz to "promote the imperial appeal".
Geopolitical Implications of the Beltransgaz Sale
The purchase of Beltransgaz by Gazprom will have consequences not only for the relations between Belarus and Russia. Russia gets a guarantee that a union of transit states – Belarus and Ukraine – will never be created. There was a time when the possibility of emergence of such a union worried the Kremlin a lot. Now, Russia is able to stifle Belarus and Ukraine one by one.
The web site Regnum.Ru, which publishes articles written by political analysts close to the Kremlin, describes the following sequence of actions of Russia in regard to Belarus and Ukraine. Three years later, when the discount for the gas price under the agreement of November 25 expires, the Russian side will significantly increase the gas price for Belarus. Lukashenka will have to sell major Belarusian enterprises.
Typically, they work for the Russian market, and get their components and raw materials from Russia. They will be bought only by Russian companies. The special gas price will be given only to those Belarusian enterprises, which will be sold to Russian companies. The Russian ruble will be introduced as the national currency in Belarus. The Russian military presence will be expanded. Lukashenka will retire and give up his chair to an appointee of the Kremlin.
The Nord Stream pipeline will be used at full capacity. The pumping of gas through the territory of Belarus through the newly Russian pipeline will be increased to a maximum. Ukraine will have to sell its pipeline system to Gazprom. It will create additional opportunities for the Russian economic expansion in Ukraine.
Regardless of what fate is meant to Ukraine by Moscow, the Belarusian issue is seen by many Russian analysts as closed: sooner or later, Russia will get everything it wants from Lukashenka. To achieve this end Russia is willing to spend billions in subsidies, which will make Belarusian economy increasingly dependant upon its eastern neighbour.
Russia Gets Belarus Hooked on Oil and Gas
On December 15 in Moscow, an agreement was signed between the Ministry of Energy of Belarus and the Ministry of Economic Development of Russia on crude oil deliveries to Belarus in 2012. Russia agreed to supply 21,5 million tons of crude oil in Belarus by pipelines, or 3,5 million tons more than in 2011.
Also, an agreement was signed between the management of the concern Belnaftakhim and a number of Russian oil companies, in particular, Lukoil, Rosneft, and Surgutneftegaz, on crude oil supplies to the Belarusian refineries.
Already back in late November, Russia's ambassador Aleksandr Surikov said that the Russian side was not considering the possibility of reducing the size of the bonus for the Russian oil companies, which supplied crude oil to Belarus. In accordance with the agreement of December 15, the size of the bonus for the Russian oil companies was reduced down to USD 20 to 40 a ton.
The Russian party has met the wishes of Belarusian officials, concerning another important issue. Over the recent years, the Belarusian government repeatedly asked Russia to get back to the so-called tilling-based operations of Belarusian refineries, all in vain. According to the schemes, Russian companies supplied crude oil to Belarusian oil-refining plants and received petrochemical products in return. Applying the schemes, both the Russian oil producing companies and the Belarusian refineries used to gain significant profit for a long period of time.
The treaty of December 15, 2011 provided for the possibility of applying the tilling-based operations again. The sum to be gained by Lukashenka regime in 2012 due to signing the oil supply contracts remains unknown. Commenting upon the negotiation results, the ‘Belnaftakhim’ concern management stated that the contracts provided for the most profitable conditions of oil supply from Russia for the recent five years.
Economists have grounds to state that broadening of cooperation between Belarus and Russia in the oil refinery field has certain economic reasons. Thus, the number of cars is rapidly growing in Russia. Consequently, the eastern neighbour lacks petrol and diesel fuel.
However, political motives are apparently present here to this or that extent too. The author mentioned in the previous report that the Kremlin’s significant overpayment for ‘Beltransgas’ was politically reasoned.
An independent Belarusian economic expert Leanid Zaika noted that according to his calculations Lukashenka regime would get around USD 3 billion of Russian subsidies, due to the discounted gas price in 2012. The contracts of December 15th can also be regarded as a lavish Russian new year present to Lukashenka regime.
Following the statements, delivered by Lukashenka and the Prime-Minister of Belarus Mikhail Miasnikovich, as well as according to the official documents, the governmental authorities count on using the funds to cover the foreign debt in 2012. The public expenses, including a part of welfare programs will be cut down at that. Also, the salaries of budget staff and pensions will be increased insignificantly next year.
Lukashenka looks more optimistic than the government. As soon as there appeared information about the outcome of negotiations on oil supply in Moscow on December 16, 2011, Lukashenka stated that it would be realistic to reach the positive balance of foreign trade in the amount of USD 1.5 billion in 2012.
Moreover, Belarus received a loan from the Savings Bank of Russia (Sberbank Rossii) and the Euroasian Development Bank in the amount of USD 1 billion on December 15, 2011. The First Deputy Minister of Finance Uladzimir Amaryn noted that a significant part of the loan could be transferred to the Belarus’ gold and foreign exchange reserves.
The Prime-Minister Mikhail Miasnikovich stated that according to the reached agreements, the Savings Bank of Russia would issue extra USD 4 billion of loans for implementation of various projects in Belarus shortly.
Andrei Liakhovich is a contributing author. He directs the Center for Political Education in Minsk.