Russia puts political integration as a precondition for oil and gas price levelling

On December 13^th, at the Prime Ministers’ meeting of the Union State, Russian Prime Minister Medvedev effectively preconditioned the levelling of oil and gas prices by further political integration within the framework of the 1999 Union State Treaty.

It goes without saying that when offering an ‘advanced’ integration to Belarus, Medvedev was hardly looking forward to Belarus’ consent. Medvedev was already Russia’s prime minister when the Union State project was effectively inactivated due to the fact that Russia refused to accept the principle “one country, one vote”, and Belarus opposed to the redistribution of political and economic powers proportionally to the political and economic weight of the participants in the Union State, of which there were only two – Russia and Belarus. Such insoluble contradictions, and the fact that according to the Union State Treaty decisions require a consensus, the Union State headed to inertial existence.

To promote integration, Russia proposed a new project – the Eurasian Economic Union (EEU) – where the economic power was to some extent distributed proportionally among the participants due to their contribution to the economy. Belarus agreed to participate in this project (as previously in the Union State) primarily because Moscow firmly promised to create “common gas and oil markets” within the EEU. However, later Russia revealed that common markets would be created only when domestic prices on oil and gas in Russia would equalize with the world prices (minus deliveries).

By referring gas and oil issues to the Union State, the Kremlin may put the blame on Belarus for Russia’s failure to meet her commitments as regards common markets. Clearly, the Kremlin does not count on Belarus’ consent in promoting the integration within the Union State to a new level, as the Union State Treaty stipulates an absolute equality of the two states (Putin would have never signed such an Agreement, he inherited it from Yeltsin).

The recent controversy between Belarus and Russia shows that Russia, at least until the presidential elections in Belarus, is unwilling to facilitate Lukashenka’s confidence. On the contrary, the 2010 scenario is likely to repeat, when the Kremlin attacked Lukashenka, shaking his negotiating positions. It is also likely that Lukashenka’s response would be similar to that in 2010, e.g. he would further develop international relations alternative to Moscow.