Russia – Belarus: no surprises

Last week leaders of Russia and Belarus have been determining conditions of cooperation on gas issue for the next three years.

Belarus anticipated to use the sale of 50% of stakes in Beltransgaz and to conclude another medium-term contract for gas supply and transit in order to secure gas supplies by Gazprom.

Moreover, the Belarusian leadership hoped that such guarantees will be extended for a longer period, up to 10 years and will cover both, the supply and the price of gas. Belarus believes, the price of Russian gas for Belarus should be equal to the price of gas for Russian consumers (plus shipping costs) and on principle should follow patterns conventional for domestic market. Russia is ready to sell gas to Belarus cheaper than to other countries in the region, considering it as a fee for securing safe and stable transit through Belarus. At the same time the size of preferences for Belarus depends on the capabilities of alternative transit routes of Russian gas to Europe: the higher the capabilities the lower the preferences. Construction of the “Nord Stream” pipeline significantly reduces the value of Belarusian route for Gazprom.

Belarusian – Ukrainian relations concerning gas issue (as the primary transit pillar of Russian gas to Europe) have always been determined by the degree of concessions to Belarus (the second most important gas transit route). The general rule is that Gazprom cannot fight two fronts. Its relations with Ukraine are either not resolved or there is a danger of review of conditions, while its relations with Belarus are easier and concessions are achieved quicker. Currently Ukraine has shown willingness to revise the rules of engagement with Russia on issues of transit and gas supplies.

Preliminary agreements reached between Russia and Belarus as follows: the sale of 50% of stakes in Beltransgaz to Gazprom (de facto that would transfer the Belarusian gas transportation system under the full control of Gazprom) and the introduction of an “integration discount” for three years. During 2012-2014 Belarus will buy gas cheaper than other countries in the region, maintaining a competitive advantage in this regard. While purchasing large blocks of shares of national gas transportation companies, Gazprom usually proposed gas supplies at a reduced price for three years (Lithuania, buying 50% of Beltansgaz in 2007, Poland).

However, the final conditions of cooperation on gas transportation have not yet been defined and are still a matter of bargain, which, however, taking into account all the circumstances, does not imply surprises or violent conflicts.

Also, Russia is interested in ensuring security and stability of other types of transit – oil and inland (trains, rail transit). Therefore it is important to maintain the Belarusian economy in a state that does not allow for a full-scale social destabilization, while at the same time not necessarily being a well-being state. Therefore it would be logical to expect USD 2-3 billion loans from Russia to Belarus in case negotiations about the sale of Belatransgaz to Gazprom are dragged out.