Date: Wed, 18 Jan 2006
From: Alexander Mikhailenko (anmikh@mail.ru)
Subject: Discussion on differences in price for gas to Belarus and Ukraine
The gas dispute between Gazprom and Naftogaz Ukraini is still high on the agenda of information sources, including JRL. One of its aspects is difference in gas prices to Belarus and Ukraine. Authors propose several arguments to explain existence of such a difference. For instance, Dimitri K. Simes (JRL # 14) writes that Belarus pays Russia slightly less than $50 per thousand cubic meters, but it agreed to put its major pipeline under Gazprom's control, an arrangement adamantly rejected by Ukraine. Another argument is that Ukraine's price of $50 per thousand cubic meters was not guaranteed beyond Jan. 1, 2006. That deal was based on an economic partnership with Russia that Yushchenko has rejected. D. Simes obviously means Single Economic Space, which is currently rejected by Ukraine and supported by Russia, Belarus and Kazakhstan.
Several other arguments uncommon to JRL Western readers may be added to substantiate a special price of Russian gas to Belarus. Under the Treaty on Creation of Union State Russia and Belarus are forming a single state. In its framework a number of laws have been adopted and came into force. One of them is the Agreement between the Russian Federation and the Republic of Belarus on creation of equal rights for economic subjects (1998). Its aim is to create equal possibilities for competition between Russian and Belarusian enterprises. The Belarusian partners are obviously right stressing that difference in prices of energy would distort the real picture of industrial competitiveness in the Union State. In this sense the position of the Belarusian socialist" state is much nearer to the rules of the WTO than the Russian one in what concerns the difference between internal and external prices. From this viewpoint it would be logical to expect the linkage of announced gradual price! rise for Belarus with corresponding hike of Russian internal gas prices.
The next argument is tightly connected to the above-mentioned one. The trade between Russia and Belarus in 2004 was almost $18 bn, followed by Ukraine ($17 bn). The bulk of Belarusian energy-consuming machine-building production is exported to Russia and a considerable part of these products are unique and irreplaceable now. Thus higher prices for Russian gas will simply mean redistribution of profits between Russian exporters of energy and Russian importers of Belarusian machines.
No doubt there is a connection of economic and political factors in cooperation between Russia and Belarus, as well as between any other states. Belarus is the leader among CIS countries in economic integration with Russia. In 2004 Belarusian share of Russian exports was 6.1% (Ukraine - 5.9%, Kazakhstan - 2.6%), while in Russian imports Belarusian share was 8.6% (Ukraine - 8.1%, Kazakhstan - 4.6%). Looking at these percentages we should bear in mind that population of Belarus is around 10 ml people (Ukraine - around 50 ml, Kazakhstan - 15 ml). In my view such deep economic integration should be supported politically. Chairman of the Russian State Duma B. Gryslov and Russian Foreign minister S. Lavrov said recently that new steps will be taken in 2006 to deepen cooperation within the Union State.