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Belarus, Russia Solve Milk Row, Other Problems Loom

Belarusian President Alyaksandr Lukashenka
MINSK (Reuters) -- The end to a "milk war" bedeviling relations between Belarus and Russia could prove a mere truce masking strategic differences over trade, recurring gas disputes, and Belarus's drive to move closer to the West.

Analysts say the two ex-Soviet states, linked by a nebulous "union treaty" dating from the 1990s, are pursuing conflicting agendas -- with Russia trying to extract as much as it can from its smaller neighbor and objecting to President Alyaksandr Lukashenka's rapprochement with the European Union.

Russia on June 17 ended its ban on Belarusian dairy products, prompting Belarus to suspend new customs controls within 24 hours of their imposition. The row was the latest in a long series between neighbors once committed to restoring a Soviet-era alliance between two Slavic nations.

But at the same time, Russian gas-export monopoly Gazprom demanded Belarus pays $230 million in arrears for natural-gas supplies so far this year.

"This peace is clearly no more than a truce," said independent political analyst Alexander Klaskovsky.

"We can already hear the drums of a new gas war. Constant conflict is the basis of relations between two allies who, despite a formal alliance, have diametrically opposed interests."

Lukashenka, he said, would "gain new confidence and act more decisively after Moscow's quick retreat."

The Belarusian leader, long ostracized by the West over allegations that he mistreated opponents and ignored human rights concerns, has been seeking improved ties with the West since quarrelling with Russia two years ago over energy prices.

Belarusian Concessions To The West

Belarus made several concessions, releasing the last detainees considered political prisoners in the West and holding an election deemed to be an improvement over previous contests.

That culminated in an invitation for Belarus to attend the European Union's Eastern Partnership summit last month with former communist countries -- an initiative viewed with suspicion in Moscow.

Russia froze a $500 million credit for Belarus and a top minister said Minsk was on the brink of insolvency. A furious Lukashenka stayed away from a security summit in Moscow.

Russia, in the meantime, said it would make its bid to join the World Trade Organization a joint effort with Belarus and Kazakhstan -- its partners in a new customs union.

"I think Lukashenka won the milk war on points. But there is a deeper problem in that the Belarusian state is seriously strapped for cash. It is surviving from hand to mouth," said Andrew Wilson of the European Council on Foreign Relations.

"Both sides have got incompatible positions. Russia wants to scale down its subsidies or get more in return while Lukashenka clearly wants to survive as an independent player. So he will carry on maneuvering between East and West."

The issue of gas arrears and pricing remains the thorniest, with 20 percent of Russian shipments of gas to the West still passing through Belarus. Minsk says Russia's payment demand violated a gentlemen's agreement.

"In talks between the two presidents, an oral understanding was reached calling for payment over the course of the year at a rate calculated to be the average price," said Natalya Petkevich, Lukashenka's first deputy chief of staff.

Lukashenka, clearly taking no chances, asked top officials in the past week to draw up a list of actions that might be taken by Russia "liable to cause economic damage to Belarus."

"This conflict demonstrated that our partners are not always predictable and we must be ready for anything," Petkevich said. "Given that Russia is our main trading partner, we must take account of all possible consequences."

Russian actions may underscore the notion that Moscow may have lost patience with Lukashenka once and for all and that the notion of the "union state" may be all but buried.

"These contradictions are all about strategic issues," said Kirill Koktysh of the Association of Political Experts and Consultants in Moscow.

"The main problem is that Russia has at last concluded that it cannot come to any agreement with Lukashenka."