Gas, Rus’, and Belarus’
By Segei Roy, editor, intelliegnt.ru
The big news in the business/political world last week was Gazprom’s proposed threefold hike in the price of gas the company supplies to Belarus. The spin on that started almost before the press conference where the announcement was made ended. Figuring prominently in that spin is the idea, already showing clear signs of wear and tear, that Russia is using its energy potential as a political (some say imperialist) weapon. Sure, sure. When OPEC plays with oil quotas, it is pure economics. When the US bars foreign entities from bidding for its oil company of umpteenth magnitude, it’s nothing but good economics sense. When Russia decides to stop subsidizing the economies of its neighbors, it is sheer imperialism. One might call this the theater of the absurd, except that theater is (sometimes) entertaining while pundit spin is so boring you can break your jaw yawning. Except, of course, that some of the spin is so idiotic as to stop one yawning even. An anonymous source informed The Moscow Times the other day that “Western criticism that Gazprom had become a political instrument ‘was one of the factors in deciding to raise prices to Belarus.’” Side-splitting, that’s what it is. Side-bloody-splitting.
Let’s recall some facts, okay? Since long before the “energy as a political weapon” spin was first spun — since 1993, to be precise — Gazprom has tried to muscle in on the Belarusian transit and supply infrastructure by taking control of Beltansgaz that runs these facilities. To a non-pundit brain that would appear to be sound economics: if you want to have secure transit routes, you ought to have a say in their running. Concurrently, Gazprom has tried to make Belarus (for which read Lukashenko) pay something at least remotely resembling market prices. In cash terms, it has tried to plug a hole through which four billion good old US dollars vanished each year. Actually, the sums were bigger, as even the ridiculously low prices (at times lower than the price of gas in adjacent Russian oblasts) were not paid, arrears accumulated, and Gazprom had to cut supplies partly or completely — in 1994, in 2002, in January 2004, and now it looks like early 2007 will see a repeat of Lukashenko’s antics, tantrums, rabid rhetoric, insults, protestations of eternal friendship, etc. that have so far helped him secure political decisions to keep the gas price at about one fifth of the European levels. This time, it seems (or one hopes) that his luck has run out.
That this was bound to happen some day soon has been clear to any observer worth his salt ever since Putin’s famous, if a bit colloquial, pronouncement after one of his regular skirmishes with Lukashenko: Mukhi otdel’no, kotlety otdel’no “Let’s keep the chops separate from the flies.” Meaning: pledges of eternal friendship between fraternal peoples are one thing; gas prices, quite another. There has been a delay in the implementation of that principle, but that was only natural: Putin, even better known for his caution than for his colloquialisms, has been “otherwise engaged,” as Jeeves might put it. Waging two gas wars simultaneously would not be very intelligent. Now that Ukraine knows exactly where it stands with Russia and Russian gas (if it is capable of learning anything), it is Lukashenko’s turn.
Ever since the presidential election in Belarus the president elect, who also happens to be the incumbent, has disappeared from public view, making one brief appearance (for 19 seconds, as reported by sources who love this sort of thing) during which he was, incredibly, absolutely silent. Those who ought to know better link this sudden lapse in Lukas’s health to EU and US crying foul over the fairness of the election — which is patent nonsense, as for years the guy has positively thrived on baiting the West and kicking his feeble, West-supported opposition. What could really have caused a stroke or heart attack in the winner glowing with his 83 percent victory might be some such text arriving from the east: “Congratulations and all that rot, man. Now to business. You want $5 billion for Beltransgaz. We are prepared to pay $600 million, not a cent more. If you don’t like our price, try to sell your company on the world market and see what it will get you. You will have a problem — and here’s another: how would you like a three-fold price hike? That’s just for starters.” And so on.
Plenty of people here in Russia would approve of this imaginary text, I guess, for no one likes to be made a fool of, and Luka’s theatricals have gone on for what seems ages. However pleasing this business of gloating, though, I would like to touch, in conclusion, on a completely different aspect of increased gas prices, one that most commentators seem to miss.
Let me put it in a nutshell: increased gas prices are an economic necessity — and that concerns not only Belarus, Ukraine, Moldova, etc., but, most importantly, Russia itself. Prices must rise inside Russia, too — and it would be absurd to keep the selling price for Belarus or any other outside buyer lower than the internal prices.
Now, why this pressing need for raising internal prices? Elementary: cheap gas thwarts technological progress. As Anatoly Chubais, head of Russia’s Unified Energy Systems, reminded the public in a recent TV appearance (it is not Chubais’s discovery, of course, but a commonplace among theoreticians and industrialists alike): as long as gas is cheap, there is no incentive to replace ancient technology in the energy producing sector; installing new technology (which would represent, roughly, a fifty percent saving of resources in power production) is more expensive than burning cheap gas. In a truly market economy, who would do a stupid thing like investing in the future?
The state of affairs is not much different in the other sectors of the economy, one can bet on that. Such a situation may seem okay for the present — but what will happen when cheap oil and gas run out, and Russia is left with antiquated machinery (already replaced in most of Europe) and nothing to feed it with?
Well, it is not hard to imagine: one need only look at what will happen in Belarus in the very near future. And not in Belarus alone, either.
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