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Gas War, Chapter II: Belarus

New Year’s seems to be the preferred time for Gazprom to squeeze its customers – right as the temperature drops to sub-zero levels, and demand soars for natural gas to heat homes and businesses. It was around this same time of year that Russia put the squeeze on the Ukraine, and cutoff supplies to Europe in order to force higher prices and destabilize a pro-Western government. minsk.jpg Winter in Minsk is no time to argue about gas This year, it is Belarus’ turn, and even more important than the doubling of prices and the bullying of a poor country, was the acquisition of Beltransgaz, Belarus’ state-owned gas transmission company. As Derek Brower has written on this blog, on the subject of prices, Gazprom has every right to complain – there is no reason that the company should be subsidizing gas to Belarus at a fraction of the price Western Europe pays. But Chapter II of the Gas Wars is not about prices. The problem is a tactical one – there are rule-based ways of negotiating new prices and supply agreements, and there are less scrupulous tactics which involve breaking deals and unfairly using the leverage to forcefully acquire infrastructure assets. Gazprom, as Brower wrote, seems to be addicted to conflict. Today, the International Herald Tribune weighed in on the issue:

A year ago, when the democratic revolutions in Georgia and Ukraine were seen as serious threats to the Kremlin’s influence, Putin was eager to prop up Lukashenko. But once Lukashenko successfully stole the March presidential election, the new gas bill arrived in Minsk. It included half ownership for the Kremlin of Beltransgaz, the state pipeline operator that not only fuels Belarus but also supplies a fifth of Europe’s gas. Russia’s European customers could increase their leverage — and possibly improve the Kremlin’s behavior — if they negotiated jointly with Gazprom, rather than scurrying to cut separate deals. Western companies and governments also need to warn Moscow that its leverage has limits. Russia still needs the expertise and capital of foreign companies to developing its natural resources. No one wants to do business with a bully.