Almost a year after a tumultuous election season rocked Belarus politically and economically, Russia has done what many analysts predicted it would and used its eastern neighbor’s weakened state to boost its influence in the country.
Belarus agreed last week to sell its national pipeline operator to state-owned Russian energy giant Gazprom for $2.5 billion and the promise of reduced-rate gas supplies.
The deal, long-sought by Gazprom, was brokered at a time when Belarus could scarcely refuse. Struggling to control a gaping current account deficit and with the potential of social unrest steadily brimming closer to the surface, Belarus needs all the financial help it can get.
And the deal was sweetened by a string of other economic incentives – an agreement to restructure $100 million-worth of gas debts and the provision of credit for the construction of a nuclear power plant.
Russia also ensured that the Eurasian Economic Community’s anti-crisis fund handed over the second tranche of a $3 billion rescue package, which had stalled due to the Belarusian government’s failure to implement the economic reforms agreed to in the terms of the loan.
“Tactically for the Belarusian authorities this is a huge victory,” said Yauheni Preyherman at the Minsk-based Discussion and Analytical Society. “They will be able to delay some of the difficult decisions which are sensitive politically and socially. So the deals solve some of their problems for the time being.”
For Gazprom, the financial terms of the deal were far from favorable and are bound to have raised a few eyebrows among shareholders. Beltranzgaz is an inefficient asset, badly in need of investment.
“This asset does not create much value for Gazprom,” said Vyacheslav Smolyaninov, a strategist at the Uralsib investment bank. “There are assessments that the current state of the transportation network needs more capital expenditure and high capital expenditure for Gazprom has always been an issue for minority investors.”
But for Russia politically, the deal is well worth the high price tag, mainly because it provides it with the invaluable power of being able to transport gas securely to the European Union, its biggest customer.
Political disputes between Russia and its easterly neighbors have disrupted (or in the case of Belarus, threatened to disrupt) gas supplies between Russia and the EU in the past, prompting the EU to look for alternative suppliers. Although the North and South Stream pipelines have already taken some of the pressure off the supply issue, the Beltransgaz deal only secures it further.
“Gazprom will now have absolute control over a transit route to Europe that, with a bit of modification and a small extension, could theoretically reach several countries that could heretofore only be reached via the Ukrainian pipeline system,” Citibank said in a comment this week.
And the event also has wider implications for Russia’s own domestic policy, currently focused solidly on two forthcoming election seasons.
By buying Belarusian companies and showering the country with loans and financial assets, Russia is bringing its former Soviet comrade snugly back under its wing – a notion that strikes positive chords among the significantly-sized nationalist portion of the electorate.
Last month, Belarus signed an agreement with Russia and Kazakhstan to turn their already existing customs union into a Eurasian version of the EU, a move which critics have dubbed a Russian ploy to show voters it is making attempts to recreate the Soviet Union.
The process of reintegration is also well-timed on Russia’s part, since it comes at a time when Belarus is alienating itself from its potential allies in the West through human rights abuses and, most recently, the jailing of a prominent rights activist.
“When you don’t really have efficient soft power in the countries which you want to become part of your geopolitical arena, you need to pay for their loyalty,” said Preyherman, of the Discussion and Analytical Society. “To prevent [Belarusian leader Alexander] Lukashenko from creating problems, they have to provide him with the things he really needs, and that is cash.”
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