Accessibility links

Breaking News

Russia: Belarus May Offer Little Gas Relief

An agreement between Russia and Belarus on building a new gas pipeline may advance plans to reach Western Europe by bypassing Ukraine. But the rising gas debts in Belarus may also give Russia little relief from the problems that it is trying to leave behind in Ukraine.

Boston, 1 November 2000 (RFE/RL) -- After months of trying to change its relations with Ukraine over the issue of gas transit, Russia appears to be heading toward many of the same problems with neighboring Belarus.

Last Friday, Belarus jumped into the controversy over Russia's plans to bypass Ukraine with future gas deliveries to Western Europe by signing a protocol with Russia's Gazprom for a new pipeline to link Siberian gas fields with Poland and Slovakia.

The new line is designed to avoid Ukraine, which owes Gazprom at least $1.4 billion and which continues to rely on its role as a transit route for some 90 percent of Russia's gas exports to European customers. Gazprom claims that gas thefts on Ukrainian territory have raised Kyiv's debt to as much as $3 billion.

On Monday in Paris, Russian President Vladimir Putin discussed plans for the bypass route with European Union leaders at an EU summit meeting, but no formal agreement was reached on plans for a 20-year deal to double gas imports from Russia and invest in its energy development.

Despite the uncertainty, Russia has resolved to press ahead with the plan for a pipeline detour that could force Ukraine to reduce its economic dependence on subsidized fuel for the first time since the Soviet collapse. The threat of the bypass, first aired in July, has already driven Kyiv to launch reforms in its electricity sector and to consider privatizing its pipeline system, giving a Gazprom a chance to control some of its shares.

But there are signs that shifting the transit route to the north might only move the problem of energy dependence around. Like Ukraine, Belarus is highly reliant on Russian imports and heavily indebted for gas.

According to Agence France-Presse, Belarus already owes Gazprom $244 million for past supplies, an amount that Prime Minister Vladimir Yermoshin promised would be paid with "real money not virtual" funds. But the figure was reached by allowing Belarus to pay an additional $160 million in debt through barter and promissory notes.

In 1998 and 1999, Gazprom imposed temporary cuts in its gas deliveries to Belarus after the country failed to keep up with its payments and debts rose too high. The arrears mounted despite the fact that Belarus was granted generous terms that let it pay 74 percent of its gas bills with bartered goods.

Such terms are damaging to the country's economic development on several counts. As one of the most highly industrialized nations of the former Soviet Union, Belarus has been the least willing to undertake reforms. Subsidized energy from Russia contributes to a cycle that permits unreformed industries to go on without change. The goods they produce for barter with Russia can remain shoddy and overvalued because they are made only to pay down the debt.

The artificial valuations of barter transactions are easy to manipulate and susceptible to corruption. They also prevent the advancement of economies based on monetary principles, making it hard to assess taxes, manage budgets and fund social services. President Alyaksandr Lukashenka has made clear that he is happy to continue the same course in a country that imports 90 percent of its primary fuels.

Last week, Lukashenka predicted that if the bypass pipeline is built through Belarus, "we will live twice as well." But the government has already made plans to increase its imports of subsidized gas from Russia next year. Meanwhile, the gap in the country's economic development with neighboring Poland can only widen as the European Union expands.

Last week, the International Monetary Fund issued a harsh review of the progress in Belarus, saying, "There have been no major strides in advancing structural reforms." It is hard to see how the country's planned union with Russia will enhance reform prospects as long as Lukashenka stays on the scene.

The new transit route may bring benefits to Poland with its reform economy, but it is likely to be another step backward for Belarus if it falls into the trap of becoming only another transit country for Russia, dependent on ever-increasing energy supplies and barter deals for debt.

The bypass benefits for Russia are also uncertain because it will continue to need pipelines through Ukraine as well as the new line through Belarus if it is to double its exports. If that means paying for either route with supplies of subsidized fuel, Russia may only succeed in exchanging one problem for another by trying to shift its gas transit from Ukraine.