Russia in Review is a weekly intelligence summary (INTSUM) produced by
the Institute for the Study of War (ISW). This ISW INTSUM series sheds light on
key trends and developments related to the Russian government’s objectives and
its efforts to secure them. Receive future Russia in Review INTSUM products
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Key Takeaway: Belarusian President Alexander Lukashenko is using energy policy in his
latest efforts to resist growing Russian pressure to integrate into
Russia-dominated structures. Lukashenko’s efforts to diversify Belarusian oil
imports will likely provide him with sufficient leverage to secure higher payments
from Russia on Russian oil transiting Belarus. However, Lukashenko lacks
leverage on the issue of Russian gas subsidies to Belarus. Lukashenko will not,
in the long run, be able to prevent further integration with Russia. However, through
selective resistance with Western support, Lukashenko may be able to shape the
nature of the Union State relationship to limit Russian President Vladimir Putin’s
growing control over Belarus.
The Kremlin’s campaign achieve
greater control over Belarus slowed in 2019 but has not stopped. In 1999,
Belarus and Russia formed the Union State – a supranational agreement with the
stated goal of the federal integration of the two states under a joint
structure. The Kremlin intensified its political and economic pressure campaign
to integrate Belarus through the Union State structure throughout 2019. [1]
Lukashenko stepped up his balancing act in response – resisting Russian
pressure while maintaining a strategic relationship with the Kremlin. Lukashenko
successfully slowed the Russian campaign by the end of 2019. Putin left
December 7 negotiations with Lukashenko without a joint press conference and
without a Union State roadmap – a key Kremlin objective for 2019. [2]
The Kremlin still intends to integrate Belarus.
Lukashenko’s leverage is
limited, but he is attempting to use energy policy to counter the Kremlin’s
pressure for greater integration. Lukashenko stated that unequal energy
relations are his main problem with Russian demands prior to the December 7
meeting.[3]
Lukashenko is currently countering Russia’s pressure on two major energy issues
– Russian oil transit and Russian gas supply to Belarus. Lukashenko is likely using his limited advantage in the oil trade
to resist Russian pressure on gas. Belarus derives income from tariffs on
Russian crude oil transit through two Belarusian oil refineries, purchasing
crude oil from Russia before selling the refined product to European consumers.
Lukashenko holds slight leverage in oil politics through the threat of increasing
tariffs and pursuing alternative suppliers of oil. In contrast to oil, which is
a source of income for Belarus, Belarus is reliant on cheap Russian gas for its
domestic use. Lukashenko has little leverage in his ongoing effort to retain
low prices for Russian gas.
Lukashenko is attempting to make
Russia pay a higher tariff rate on oil transit but is weakened by a reliance on
Russian shipments. In 2019, Belarus demanded Russia pay a tariff increase
of 16.6 percent starting in 2020.[4]
Belarus argued even such increase would be a concession, as a 21-percent increase
would be necessary to cover damage to Belarusian oil refineries caused by
contaminated oil Russia shipped to Belarus earlier in 2019.[5]
Russian state-owned oil company Transneft refused the increased tariff on
December 17.[6]
Russia’s Federal Antimonopoly Service stated Russia only forecasted a 3-6.8-percent
increase in Belarusian tariffs for 2020. Negotiations stalled, and Russia
halted all oil supplies to Belarus on January 1.[7]
Belarus agreed January 4 to a reduced amount of Russian oil imports – 133,000
tons, roughly 9 percent of the average monthly shipment in 2019 – at current
tariff rates for the month of January while negotiations continue.[8]
Lukashenko is using alternative oil
sources to resist the Kremlin’s pressure. Lukashenko quickly adapted to the
Russian shutoff by pursuing diversified oil imports. Belarusian state oil
company Belneftkim reportedly began holding near-daily talks with potential oil
suppliers, including Ukraine, Poland, the Baltic States, Kazakhstan, and
Azerbaijan, on January 14.[9]
Lukashenko said January 24 that Belarus will attempt to import American, Saudi,
and Emirati oil to keep its refineries running.[10]
Belneftkim stated Belarusian refineries have run on minimum loads in 2020 due
to Russian cutoffs and required substitutions to remain functional.
Belarus purchased 80,000 tons of crude oil – roughly equivalent to 6
percent of the pre-2020 monthly shipments to Belarus from Russia – from Norway on
January 21. Norway will deliver the oil over two weeks beginning January 26.[11]
Belarus also agreed to purchase an additional shipment from Kazakhstan, which
Russia blocked on January 21. [12]
Lukashenko denounced Russia for blocking oil deliveries between two of its own
allies in response. Lukashenko continues to take escalating actions aimed at
squeezing concessions from Russia. Lukashenko raised tariffs to 6 percent on
February 1 to “adjust for inflation” despite ongoing negotiations with Russia
and the apparent stability of the Belarusian ruble.[13]
Lukashenko is trying to resist
the Kremlin’s efforts to use gas prices as a tool to pressure Belarus into
integration with Russia. Belarus is fully dependent on Russia for gas. Lukashenko
is trying to keep prices at their 2019 levels, which Russia frames as a subsidized
price but Belarus frames as a fair market price. Russia openly uses gas prices
as leverage to influence Belarus. The Kremlin links continuing gas subsidies to
Belarusian concessions on integration, claiming it would be a “mistake” to retain
low gas prices to Belarus for 2020 prior to a concrete Union State roadmap.[14]
Lukashenko and Putin negotiated the prices of Russian gas subsidies to Belarus
throughout December 2019. Belarus and Russia reached a last-minute deal on
December 31 to freeze gas prices at 2019 levels for January and February 2020
pending further negotiations.[15]
Lukashenko took an opposing stance on January 9, accusing Russia of price
gouging and stating Belarus will not sign a deal to purchase gas without
continued lower pricing.[16]
Belarusian officials stated on January 16 that Belarus and Russia would resume
talks on gas pricing by the end of January; it is unclear if these talks have
occurred.[17]
Despite the conflict over
energy, Lukashenko continues cooperate with Russian integration in other
sectors and prioritize friendly ties with Russia. Lukashenko explicitly expressed
his dissatisfaction with Russian policies on oil and gas on January 9 but
emphasized that he seeks fair energy relations, not ending ties.[18]
Lukashenko continued to describe Russia as “brotherly Russia” in January 2020
despite his strong criticism of Russian energy pressure. Lukashenko has focused
his resistance on the energy sector while assenting to other Russian
integration demands.[19]
It is unclear if Lukashenko intends to broaden his resistance to Russian
integration efforts to include other sectors.
The Kremlin will likely
successfully pressure Belarus into accepting increased gas prices or further
Union State integration in ongoing negotiations, but Lukashenko might be able
to slow and shape the process. Lukashenko has conducted a delicate
balancing act between Russia and the West for decades. His ability to resist
Russian pressure will rely on his ability to bundle various issues to dilute
Russia’s leverage, keep Putin on the defensive in the information space, and
get Western support on key issues, such as diversifying Belarus’s oil supplies.
US Secretary of State Mike Pompeo met with Lukashenko on February 1 and stated
that American energy producers are ready to sell oil to Belarus. Pompeo also
dispelled rumors that Belarus might be added to the administration’s travel ban.
This meeting, and Pompeo’s statements, will likely empower Lukashenko to resist
Russian pressure.[20] Belarus
will be unable to fully replace Russian supplies, but will likely be able to
replace the minimum requirements to keep Belarusian refineries open during
continued negotiations with Russia, allowing for leverage in tariff
negotiations. Greater American and European supplies to Belarus during the
negotiation process will strengthen his hand against Putin. However, Lukashenko
has little leverage on gas subsidies, particularly following Russian successes
in opening new avenues of gas transit in Ukraine and the ongoing NordStream and
TurkStream projects in the Baltic and Turkey, respectively.[21]
Lukashenko likely understands he cannot wholly resist Russian
integration, and will attempt to use sectors in which he has leverage, such as
oil, to shape the Union State roadmap by stalling negotiations to attain
limited Russian concessions. A Kremlin victory by increasing control over the
Belarusian economy would further empower Putin, freeing up economic resources currently
going to Belarus for other malign actions, and further the Kremlin’s goal of
dominating the post-Soviet space. The West should support Lukashenko diplomatically
and by providing oil import substitutions to protect Belarusian sovereignty
and reduce the likelihood of an empowered Kremlin dominating Belarus.
[1] Nataliya
Bugayova, Darina Regio, Mason Clark, and Michaela Walker with Alexandra
McClintock, “Russia in Review: Domestic Discontent and Foreign Policy,” Institute for the Study of War, August
6, 2019, https://iswresearch.blogspot.com/2019/08/russia-in-review-domestic-dissent-and.html.
[2] “Lukashenko
Calls on Putin to Resolve All Disputes Before December 8,” TASS, July 18, 2019, https://tass((.))com/world/1069256;
[“Everything Secret Becomes Equal,”] Kommersant,
December 9, 2019, https://www.kommersant((.))ru/doc/4187269;
[“Putin and Lukashenko Talked for Five and a Half Hour. How did the
Negotiations End?”] BBC Russia, December
8, 2019, https://www.bbc.com/russian/news-50695675;
[“Negotiations between Putin and Lukashenko Lasted more than Five Hours,”] Vedemosti, December 7, 2019, https://www.vedomosti((.))ru/politics/news/2019/12/07/818129-peregovori.
[3] “Lukashenko
Calls on Putin to Resolve All Disputes Before December 8,” TASS, July 18, 2019, https://tass((.))com/world/1069256;
[“Everything Secret Becomes Equal,”] Kommersant,
December 9, 2019, https://www.kommersant((.))ru/doc/4187269;
[“Putin and Lukashenko Talked for Five and a Half Hour. How did the
Negotiations End?”] BBC Russia, December
8, 2019, https://www.bbc.com/russian/news-50695675;
[“Negotiations between Putin and Lukashenko Lasted more than Five Hours,”] Vedemosti, December 7, 2019, https://www.vedomosti((.))ru/politics/news/2019/12/07/818129-peregovori.
[4] [“Belarus
Wants in 2020 to Increase the Tariff for Oil Transit from Russia by 16.6%,”] Kommersant, December 17, 2019, https://www.kommersant((.))ru/doc/4197537.
[5] Ariel
Cohen, “Russia Loses Billions in Druzhba Oil Pipeline Contamination Crisis,” Forbes, May 10, 2019, https://www.forbes.com/sites/arielcohen/2019/05/10/russia-loses-billions-in-druzhba-oil-pipeline-contamination-crisis/#654d5d797795.
[6] [“Belarus
Wants in 2020 to Increase the Tariff for Oil Transit from Russia by 16.6%,”] Kommersant, December 17, 2019, https://www.kommersant((.))ru/doc/4197537.
[7] “Russia Halts Oil
Supply to Belarus Amid New Contract Dispute,” RFERL, January 3, 2020,
https://www.rferl.org/a/russia-halts-oil-supply-to-belarus-amid-new-contract-dispute/30358774.html.
[8] Belarus
received an average of 1.5 million tons a month in 2019. Olga Yagova, Andrei
Makhovsky, Gleb Gorodyankin, “Lukashenko Asks to Meet Putin with Russian Oil
Supplies to Belarus Set to Dry Up,” Reuters,
Jnauary 24, 2020, https://www.reuters.com/article/us-belarus-oil-russia/safmar-seen-as-sole-supplier-of-russian-oil-to-belarus-in-february-idUSKBN1ZN1H0;
“Russia
Resumes Limited Oil Supplies to Belarus Amid Talks,” Associated Press, January 4, 2020, https://apnews.com/1bfde0f0a13627c17c1d6ec834b7f919;
“Belarus, Russia Officials Reach Deal to Reopen Oil Deliveries,” RFERL, January 4, 2020, https://www.rferl.org/a/belarus-russia-officials-reach-deal-to-reopen-oil-deliveries/30360183.html.
[9] “Belarus
Scrambles for Oil amid Supply Standoff with Russia,” RFERL, January 14, 2020, https://www.rferl.org/a/belarus-scrambles-for-oil-amid-supply-standoff-with-russia/30376740.html.
[10] “Lukashenka
Accuses Moscow of Pressuring Belarus into Russian Merger,” RFERL, January 25, 2020, https://www.rferl.org/a/lukashenka-belarus-accuses-russia-pressuring-merger/30396235.html.
[11] Yuras
Karamanau, “Belarus Imports Oil from Norway after Russia Halts Supplies,” Associated Press, January 21, 2020, https://apnews.com/d9da311459fa561e4db06e9c4b0c8e85;
“First Batch of Norwegian Oil Reaches Belarus,” Belsat, January 27, 2020, https://belsat.eu/en/news/first-batch-of-norwegian-oil-reaches-belarus/.
[12] “Lukashenka
Says Russia Blocking Kazakhstan from Delivering Oil to Belarus,” RFERL, January 21, 2020, https://www.rferl.org/a/lukashenka-says-russia-blocking-kazakhstan-from-delivering-oil-to-belarus/30389521.html.
[13] “Tariff
on Russian Oil Transit via Belarus to Rise by Over 6% as from 1 February,” Belarussian Telegraph Agency, January
30, 2020, https://eng.belta((.))by/economics/view/tariff-on-russian-oil-transit-via-belarus-to-rise-by-over-6-as-from-1-february-127711-2020/.
[14] “Russia
Agrees to Short-Term Gas Deal with Belarus amid Union Push,” RFERL, December 31, 2019, https://www.rferl.org/a/russia-agrees-to-short-term-gas-deal-with-belarus-amid-union-push/30354289.html.
[15] “Russia
Agrees to Short-Term Gas Deal with Belarus amid Union Push,” RFERL, December 31, 2019, https://www.rferl.org/a/russia-agrees-to-short-term-gas-deal-with-belarus-amid-union-push/30354289.html.
[16] [“’Where
is this Seen?’ – Lukashenko Spoke about Russia’s Desire to Sell Oil to Belarus above
World Prices,”] Belarus Telegraph Agency,
January 9, 2020, https://www.belta((.))by/president/view/gde-eto-vidano-lukashenko-rasskazal-o-zhelanii-rossii-prodavat-belarusi-neft-vyshe-mirovyh-tsen-375416-2020/.
[17] “Belarus
to Resume Gas Talks with Russia in January,” Belarus Telegraph Agency, January 16, 2020, https://eng.belta((.))by/economics/view/belarus-to-resume-gas-talks-with-russia-in-january-127311-2020/.
[18] [“’Where
is this Seen?’ – Lukashenko Spoke about Russia’s Desire to Sell Oil to Belarus above
World Prices,”] Belarus Telegraph Agency,
January 9, 2020, https://www.belta((.))by/president/view/gde-eto-vidano-lukashenko-rasskazal-o-zhelanii-rossii-prodavat-belarusi-neft-vyshe-mirovyh-tsen-375416-2020/.
[19] “Lukashenka
Accuses Moscow of Pressuring Belarus into Russian Merger,” RFERL, January 25, 2020, https://www.rferl.org/a/lukashenka-belarus-accuses-russia-pressuring-merger/30396235.html.
[20] “Pompeo:
Belarus Doesn’t Need to Pick Between U.S. and Russia,” RFERL, February 1, 2020, https://www.rferl.org/a/pompeo-belarus-relations-normalize-counter-russian-aggresion/30411255.html;
“Secretary Pompeo’s Meeting with Belarusian President Lukashenka,” US Department of State, February 1,
2020, https://www.state.gov/secretary-pompeos-meeting-with-belarusian-president-lukashenka/;
[“Meeting with US Secretary of State Michael Pompeo,”] President of Belarus, February 1, 2020, http://president.gov((.))by/ru/news_ru/view/vstrecha-s-gosudarstvennym-sekretarem-ssha-majklom-pompeo-22969/.
[21] George
Barros and Nataliya Bugayova, “Europe Cedes Opportunity in Russia-Ukraine
Energy Deal,” Institute for the Study of
War, January 30, 2020, http://iswresearch.blogspot.com/2020/01/europe-cedes-opportunity-in-russia.html.
