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May 28, 2010 | 15:14 GMT

Belarus, Russia: Another Economic Spat

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Belarusian Prime Minister Sergei Sidorsky will not participate in a May 28 customs union meeting between Russia, Belarus and Kazakhstan in St. Petersburg, Sidorsky's press secretary announced the same day, without giving any reasons for Sidorsky's absence. This development comes as no surprise to STRATFOR, as it is only the latest move in a series of arguments and holdouts between Russia and Belarus over Minsk's dissatisfaction with how Moscow has treated it economically. The customs union that Russia, Belarus and Kazakhstan launched Jan. 1 has had a rocky start involving several disputes among its members, and Belarus has been particularly argumentative. The union, a Moscow-led project that aims, gradually and through multiple stages, to increase economic integration among the three former Soviet countries, is only the beginning of the "common economic space" Russia hopes to create by 2012. In between are multiple phases, such as common customs duties and a common customs code, the technical and legal details of which the countries have agreed to work out between the phases. But this on-the-fly legislation has been problematic, and Russian Prime Minister Vladimir Putin has recently said that it could delay the completion of the next stage, originally scheduled for July 1. Belarus' current point of contention is that Russia is charging it too much for energy and for oil export duties (which are, in theory, to be abolished eventually among the customs union members). Russia has refused to give in on the issue, instead arguing that Belarus pays less for natural gas than the agreed-upon price between the two countries, and that Belarus owes Russian gas giant Gazprom nearly $200 million for supplies. Belarusian President Aleksandr Lukashenko offered Russia a controlling stake in Beltransgaz, the state-owned pipeline operator, in exchange for lower oil and gas prices. However, Russia refused the offer, as a $625 million buyout deal in February gave it a controlling stake in Beltransgaz. Moscow is not giving in to Belarus' demands because the customs union was not designed to benefit the three member countries equally; rather, it is meant to give Russia an economic stranglehold over the other two members, with the majority of the other countries' export duties converging to match Russia's. It is perhaps not a coincidence that on the same day that Sidorsky announced he would not attend the customs union meeting in St. Petersburg, Putin signed a decree on a higher oil export duty, raising it from $284 per ton to $292.10 per ton as of June 1. Russia is sending a message that Belarus' antics will not be tolerated and that it is willing to act in its own interests, even toward its own customs union member countries. And because Russia has recently gained the legal right to deploy troops in Belarusian territory, STRATFOR anticipates this friction only to increase in the near future.
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