Gas and the EEU: What are Belarus and Russia arguing about?

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March 9, 2017 – Fort Russ – 

Evraziya Ekspert, Vyacheslav Sutyrin – translated by J. Arnoldski – 

Belarusian PM Andrey Kobyakov with Russian PM Dmitry Medvedev

On March 7th, the first session of the Eurasian Intergovernmental Council of the Eurasian Economic Union was held in Bishkek, Kyrgyzstan. The heads of government of the EEU’s member countries discussed a number of integration issues, but the main news item from the event was Belarusian Prime Minister Andrey Kobyakov’s criticism of Russia and the EEU, and Russian Prime Minister Dmitry Medvedev’s parry. 

What’s behind this swordplay between the two heads of government, and why has the EEU neared such a very dangerous precedent?

Andrey Kobyakov and Dmitry Medvedev differed in their appraisals of Eurasian integration and Russian-Belarusian relations. The Belarusian PM stated that “problems in bilateral relations [between Belarus and Russia] fundamentally affect our participation in multilateral integration processes. We do not share these two tracks.” Kobyakov accused the Eurasian Economic Commission of “inactivity” concerning problems in the oil and gas sector. In fact, he was talking about the dispute between Minsk and Moscow over Russian gas prices that has dragged on from 2016.

Dmitry Medvedev, responding to his Belarusian colleague’s criticism, pointed out that Belarus today buys gas at much lower prices than other European consumers. In addition, Minsk itself unilaterally reduced payments for Gazprom in 2016, insisting on equal prices for domestic and Belarusian consumers. Meanwhile, during the same meeting in Bishkek, Kobyakov confirmed that the transition to a single gas market in the EEU (and therefore common prices) is planned for 2025.

Medvedev expressed concern that Minsk is taking “problems of bilateral relations to the multilateral level” of the EEU. “Here we are considering issues which concern absolutely everyone, not only two parties, and no single party should try to make trade-offs at the common expense,” the Russian Prime Minister stated.

Belarus’ PM, however, did not limit himself to problems of bilateral negotiations with Moscow, but also pointed to an “escalation of restrictions” in the EEU, specifically the emergence of new trade barriers and national import substitution programs “in which goods produced in other EEU countries for some reason turn out to be [treated as] foreign.” 

Economic disputes are a rather normal affair in Russian-Belarusian relations. Yet both sides have consistently found solutions and will surely find them this time. Logically enough, the Belarusian leadership is simply striving to find leverage to get its Russian partners to offer more favorable commercial conditions. 

No one denies that Belarus is receiving Russian oil and gas at very enjoyable prices when compared to neighboring countries, Europe, or CIS. This allows Belarus not only to save economically, but to earn billions of dollars by selling oil products made out of cheaply-purchased Russian oil. However, this does not negate the need for Russia and Belarus to move towards equal gas prices within the framework of the energy union by 2025. 

The main message in Medvedev’s response was that it is not necessary to bring up bilateral disputes at the level of the Eurasian Union, where there are more participants than just Russia. This concerns, for example, the Customs Code of the EEU signed by all of the union’s states except Belarus. As a result, contradictions in Russian-Belarusian relations affect all members  of the union.

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Minsk’s desire to use the EEU as a platform to strengthen its positions in negotiations with Moscow is explainable from a tactical point of view. But how effective are these actions from a strategic point of view?

It is telling that after Lukashenko’s February press conference at which he criticized Russia, the Kremlin emphasized the strategic character of relations with Minsk, answering Belarusian criticism straightforwardly and in detail. This rarely happens.

During his recent visit to Bishkek, Vladimir Putin once again returned to this topic. The strategic value of relations with Belarus was once again stressed and principled assessments were offered without any accusations, humiliation, or claims. 

Bringing bilateral disputes to the pan-Eurasian level will not succeed in winning any strategic gains. Yielding to such pressure sets a landmine under the Eurasian Union by establishing a dangerous precedent at the very get-go. 

In this case, it is clear that the Eurasian Union is becoming not only a common development project, but also a lever for resolving bilateral disputes. There are more than a few such disputes between members, but a wedge has not been forced in Russian-Belarusian relations. Therefore, there will be no such precedent.

Certainly, a crisis of the EEU is not in Minsk’s long term interests, since it has won more than anyone else in economic terms from integration thanks to new market niches and energy and financial cooperation.

Each of the EEU countries has their own special relations with Russia and their own reasons for joining the EEU. Thus, Belarusian-Russian disputes are often condescendingly seen as local “Slavic showdowns,” approximately in the same way that Minsk might perceive Armenia’s claims to the Collective Security Treaty Organization.

Minsk and Moscow will eventually find a compromise. However, if this dispute gets wings on the pan-Eurasian level, this would only delay its resolution by undermining confidence in bilateral relations. And this is a question of strategy.

Perhaps today we should start thinking through how Russian-Belarusian relations will be built after this oil and gas dispute is overcome. What about thinking how they’ll be in the next 5, 10 years? The state of “neither integration nor disintegration” might seem to be a tactical win, but it is a strategic loss. It creates uncertainty deterring any major projects and investments.

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Both Moscow and Minsk should think through this seriously.   

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