Robert Amsterdam

Last night, it was Belarus

By Derek Brower, journalist

THEY left it late, to within two minutes of the midnight deadline for a deal, but Gazprom and Minsk reached an agreement last night to keep Russia’s gas flowing to and through Belarus. Once again, Gazprom used a brutal tactic – the threat to cut gas supplies to a relatively poor country in the middle of winter – to win a strategic battle. Once again, the security of energy supply of Russia's customers was at stake.

And having threatened to cut off supplies to a neighbour that has been Moscow’s most loyal ally in the past five years, Gazprom got what it wanted: control over Beltransgaz, Belarus’ state-owned gas transmission company.

Gazprom pretended that the latest crisis was about the price it gets for its gas. On those terms, the company has every right to complain – and so do Gazprom’s European customers. Gazprom should not be subsidising Aleksandr Lukashenka’s regime in Belarus by charging Minsk a fraction of the price Western Europeans pay for their Russian gas.

That arrangement stinks for several reasons. First, it keeps Belarus’ economy artificially afloat on cheap energy. That helps to keep the country’s dictator in power. Second, the low prices for Gazprom’s gas paid by countries like Ukraine and Belarus hurt all of Gazprom’s customers: it gives the company less money to spend in the upstream developing its reserves. Of Russia’s FSU neighbours, only Azerbaijan and Georgia pay the kind of prices ($235 per 1,000 cubic metres) that Western Europeans pay.

And Europe has no real right to complain – as it did during the so-called “Gas War” between Russia and Ukraine a year ago today – about Gazprom increasing these prices. It is a stipulation laid down by the EU and the US, among others: that Russia increase its natural gas prices before it can join the WTO.

But it ain’t about the gas prices
But whatever Gazprom says, its battle with Belarus – like the Gas War with Ukraine – is not really about the price of gas. And it will be difficult to quantify how much money Gazprom makes through the increased price, anyway. Russia will continue to subsidise Belarus’ economy in other less obvious ways as a means of softening the price increase. That is an established means of Russian operations in Belarus, as it in other allies, like Armenia.

But securing control of Belarus’ state-transmission company, Beltransgaz, was the true prize on the table at last night’s high-stakes poker game. According to the deal signed between Gazprom and Minsk, Belarus will pay $100 per 1,000 cubic metres of gas – more than double the rate it was paying previously, but half the rate paid in Western Europe. But part of the $100 will be paid in shares of Beltransgaz until Gazprom owns 50% of the company.

Gazprom says that at 50% its stake will not be a controlling one. Nonsense. As it fills the company’s pipelines with gas, Gazprom was already Beltransgaz’ dominant partner. Added to that, the new share structure makes it a dominant owner, too.

Gazprom also says that it generously accepted a “high valuation” of Beltransgaz that priced the company at $5bn. That valuation came from ABN Amro, one of Gazprom’s favourite banks. But control over Belarus’ transmission network has a value for Gazprom that is difficult to quantify, given that it secures some 24% of the company’s exports of gas to the EU. It is surely worth more than $2.5bn, however.

So what’s next?
Had Gazprom shut off exports to Belarus this morning, Minsk would have shut down the onward supplies to the EU, as Ukraine did last year for the same reasons. It wouldn’t have been as dramatic – Belarus transits a quarter of Russian exports to Europe, not three-quarters as Ukraine does – but it would have hit European consumers. Again.

Has a new New Year’s tradition been established? Will supply threats to Russia’s neighbours become as much a part of the season as a re-run of Ironiia sudby, the classic Soviet romantic comedy watched by Russians every New Year’s Eve?

Not likely. Arguably, Gazprom has now thwarted its two problem countries. Last year’s Gas War gave it control – through RosUkrEnergo – of supplies through Ukraine. Last night’s show-down gives it control of Belarus. But Ukraine’s transmission network is still up for grabs. Ukraine wants Western firms to help modernise it. Russia wants Gazprom to do it. That is a future battle in the making. And despite Kyiv’s greater leniency to Russia these days, it is unlikely to cave in so easily to Gazprom’s demands for infrastructure.

But last night’s events should have ramifications in Europe. The supply cut was averted – just. But 10 days ahead of the EU’s Energy Review, Brussels got another reminder about its security of supply problem. This year’s crisis centred on Belarus – the forgotten country of Europe – and not Ukraine, so it got less coverage. But a crisis it was. And it should have reminded the EU of Gazprom’s nature.

It is a company addicted to conflict. And one whose confidence in its own power is so great that it remains unworried about how these conflicts damage its reputation. That is a combination that should continue to worry Europe.

Today the Wall Street Journal is reporting that the European Bank for Reconstruction and Development is likely to abandon a loan to Sakhalin-2 following the Kremlin's bullying and extortion through the use of trumped-up environmental investigations.

Europe Wary of Sakhalin Loan By GUY CHAZAN January 2, 2007; Page A4

MOSCOW -- A potential about-face by the former Communist bloc's biggest single investor over a massive Russian energy project comes amid rising Western concern about increasing state control of that nation's energy sector.

The European Bank for Reconstruction and Development is likely to abandon a loan to Sakhalin II, the huge energy project in the far east of Russia, after Royal Dutch Shell PLC and its two partners were forced to sell a 50% stake in the venture to Russian natural-gas giant OAO Gazprom. The European development bank -- set up in 1991 by Western governments to support the private sector in former Communist states making the transition to a free market economy -- had planned to lend Sakhalin II about $300 million.

Many observers saw Gazprom's entry into Sakhalin II as tantamount to nationalization. The mandate of the European bank, known as EBRD, would probably preclude it from lending to a project now dominated by a state-run company like Gazprom. "It doesn't invest in projects that have just been nationalized," said a banker familiar with EBRD's work.

A decision not to approve the loan likely won't jeopardize the $22 billion project. Furthermore, it likely won't threaten overall funding for big Russian energy projects, as Western investors remain interested in Russia in general and its vast natural resources in particular.

But the bank's potential change of heart shows the repercussions in the West over increasing state control in the Russian oil and gas industry and the Kremlin's treatment of foreign investors.

The emergence of Gazprom as a shareholder was "a new development and it makes things more difficult," said Anthony Williams, a spokesman for the EBRD. "It might mean the bank is less needed now," he added. He said no decision on the loan had yet been taken.

Last month, Gazprom announced it was paying Shell and its two Japanese partners, Mitsui & Co. and Mitsubishi Corp., $7.45 billion to take a stake of just over 50% in Sakhalin II. The move came after nearly a year of sustained attacks on the project by Russian regulators regarding cost overruns and alleged environmental violations.

A few days after the deal was announced, it emerged that the three foreign shareholders would have to pay for a third of Sakhalin's cost overrun by themselves. Shell, Mitsui and Mitsubishi will be required to absorb $3.6 billion of the additional costs, and will have to give the Russian government a share of Sakhalin's production earlier than they had hoped.

The deal reflected Kremlin frustration over the fact that the ballooning cost of Sakhalin II meant the government would have to wait much longer for tax and royalty payments.

Shell announced last March that it was hoping for funding of up to $7 billion for Sakhalin II from international financial organizations, including the EBRD, the Japan Bank for International Cooperation, and the Export-Import Bank of the U.S. But the banks delayed disbursal of the funds after a barrage of complaints about Shell from environmental groups. They worried about Sakhalin II's impact on the feeding grounds of the endangered gray whale and the wild salmon population of Sakhalin Island.

Those complaints grew more serious last fall when Russian regulators stepped into the fray, warning they might withdraw key permits from Sakhalin II and even threatening criminal investigations over alleged environmental damage. The EBRD had expected to take a decision on whether to approve its loan to the Sakhalin consortium last September but put it on hold as Shell's regulatory problems piled up.

Analysts say an about-face by the bank would have little impact on the financing of Sakhalin, Russia's biggest foreign investment. The loan was seen as an important stamp of approval by a bank that requires borrowers to meet strict environmental standards. But President Vladimir Putin, presiding over the deal last month that brought Gazprom into the Sakhalin consortium, said the project's regulatory problems were now resolved. "That means commercial banks will be queuing up to lend to Sakhalin II," said one Moscow banker.

Vladimir Socor at EDM has posted a column on the Russian military withdrawal from Tbilisi.

GEORGIA’S HARD-EARNED CHRISTMAS PRESENT: RUSSIAN MILITARY OUT OF TBILISI

By Vladimir Socor

Tuesday, January 2, 2007

On December 25, 2006, the last personnel of Russia’s garrison in Tbilisi and the rump Headquarters of the Group of Russian Forces in the Transcaucasus (GRVZ) pulled out of Georgia’s capital and of the country altogether. Their unwilling, though ultimately precipitate, withdrawal crowns 15 years of Georgian efforts toward this goal. Moreover, the evacuation brings to a close more than 200 years of the Russian garrisoning of Tbilisi. The imperial Russian army under General Ivan Lazarev occupied Tbilisi in November 1799, using an invasion route from Ossetia (Itar-Tass, December 24). ...

In a year-end address to a business audience, Saakashvili reviewed overall Russia-Georgia relations in 2006: “Their idea was to shake Georgia until it finally collapsed,” he noted, listing: The energy blockade in the coldest winter on record, January/February 2006; the series of embargoes on Georgian fruit and vegetables, wines, and mineral water, the full closure of Russia’s market and the transportation blockade against Georgia, the orchestrated propaganda against the country, recruitment of shadowy politicians “hoping to return criminal chaos to Georgia,” the incidents staged in Abkhazia and South Ossetia and the freezing of the negotiations on those conflicts. Nevertheless, Georgia succeeded in preserving democratic stability, developing transport infrastructure, creating attractive conditions for business, and pursuing its Western course (Rustavi-2 TV, December 27).

Read the complete article here.

Interesting Forbes piece today addressing the "free market stimulus" being administered to Belarus via Moscow's decision to muscle through a big price hike.

Belarus May Face Problems From Russia Gas Deal Parmy Olson

Belarus has long propped itself on heavily subsidized raw materials from Russia, but today its former Soviet sugar daddy is dishing out a cold, harsh lesson in market economics. ...

Mechislav Grib, a former head of the country’s parliament, told the AFP news agency that, “after Moscow’s latest decisions, Belarus’ so-called economic miracle will break down.”

Denis Maslov, an analyst for Europe and Eurasia at Eurasia Group, told Forbes.com that the deal would make things difficult for Belarus' economy, but in the long run it could help make its industry more competitive. "The phasing out of Russia's subsidies on energy might give Belarus' leadership more ideas to help reform the economy," Maslov said.

The problem is, Belarus doesn't have the domestic economic mechanisms to respond to changes in the market, and its president may not be willing to push through changes.

Global Insight analyst Andrew Neff predicted the Belarussian government would probably step up its ideological work to avoid any social unrest, and start painting itself as a victim of Russian oppression. "Throughout the negotiations with Gazprom, the state officials and the media put the blame for the upcoming economic difficulties squarely on the Russian side," said Neff. "Just as the Belarusian government turned its back on Western pressure to democratize, it will now face away from Russia, closing down the country altogether."

The First Post is running a recent column by Edward Luttwak, a senior fellow of the Center for Strategic and International Studies. The e-zine is also running a cover story on the extradition of Russians living in London.

"Once again, whoever sits in the Kremlin is not subject to the law and, instead, controls its application."

Old Russia returns – with a new Tsar Litvinenko’s murder is the latest evidence of Putin’s dictatorship, says Edward Luttwak

The accusation that the former KGB/FSB secret policeman Alexander Litvinenko was poisoned by his former colleagues to stop his denunciations of President Putin is all too plausible.

But there is really no need to speculate about the murder of Litvinenko - only one of several recent victims - to form an opinion of Vladimir Putin's regime. The fact is that we are witnessing a return to Old Russia.

When the neat and Western-looking young law graduate from St Petersburg first became president in 1999, it seemed certain that he would strive to westernise Russia. His favourite subject was Russia's urgent need for more legality in all things, with fair and independent courts, honest and professional police forces, even competent lawyers. Putin also seemed to favour foreign investment and the continued liberalisation of the Russian economy. Not much remains of these hopes.

When Mikhail Khodorkovsky, then Russia's richest man, started to campaign for the presidency in 2003, he was arrested and charged with tax evasion. In the ensuing trial, the judges rejected almost every defence motion, and accepted almost every prosecution motion, and their 662-page verdict in May 2005 repeated the prosecution's accusations almost word for word.

Even as Khodorkovsky's giant oil company, Yukos, was taken away from him by further court actions of dubious legality, Western oil companies continued to invest vast sums in Russian oil and gas ventures. They may come to regret this, and soon. Russian authorities have now started to accuse Western oil companies that are investing some $37 billion in Sakhalin of ruining the environment.

That could be true, even likely, except that the concerted Soviet-style propaganda campaign now underway to take away their property is based on showing again and again TV footage of dead salmon - which die every two years in a regular spawning cycle. That accusation could be true too, but that production consortia also include Russian companies - and it is only the Western partner that is accused.

At the border crossings on the river Narva, between Estonia and Russia, there is an even more obvious indication of the way things are going. Because of a dispute with Poland, Khodorkovsky's oil company, Yukos, was taken away from him by court actions of dubious legality.

Russia is retaliating against all members of the EU by drastically slowing down customs procedures. Hundreds of trucks must wait for days on end to cross the border, some coming from as far away as southern Spain.

It is now very cold in Narva, there are no facilities for the drivers to eat or wash, and they must keep engines running to keep warm. Elsewhere, some temporary arrangement would soon be found to avoid this unnecessary hardship, but the Russian officials at the border are entirely unmoved, as are their superiors, who indeed find it curious that anyone should ask them to care for the wellbeing of anonymous truck drivers.

The FT website just published the full text of an interview with German Chancellor Angela Merkel. Here are some extracts:

Russia’s attitude towards non-governmental organisations gives ground for concern, says Merkel

How should Europe’s policy towards Russia develop, given that we are not even capable of starting negotiations as planned on a new partnership agreement?

The existing partnership agreement runs out in the autumn. I am very optimistic that we will solve the problem of Polish meat exports to Russia. Then we can start the negotiations, although I am not saying they will be very easy.

How dangerous is Europe’s reliance on Russian energy imports?

We had a very frank discussion with President Putin at the EU summit in Lahti. We need reliable energy supplies from Russia and Russia needs us as reliable consumers. I think it’s perfectly legitimate for Russia to seek greater access to western European markets. Having said that, we must have reciprocity. If obstacles are being erected to protect Russian companies from European investors, nobody should resent it if the Europeans take reciprocal action.

Do you understand the concerns many people have about democracy, freedom of the press and the situation of human rights organisations in Russia?

We have seen some incidents that we ought to be concerned about. This is not necessarily a criticism of the government. I have told the Russian president many times that contrary opinions are a normal part of society. One just has to live with it. Not everything the press writes about German politicians is flattering. Yet in the end, it is much preferable to have a genuinely free press. Likewise, Russia’s attitude towards non-governmental organisations gives ground for concern. The reports we are receiving tell us that the NGO legislation, while not problematic in itself, creates in its application a lot of red tape and insecurity for NGOs. We always mention such observations (to the Russians) and so does the foreign minister.

And yet did you not criticise the human rights section of the foreign ministry’s strategy paper as being too soft?

I did not. The paper’s theme was about rapprochement through integration. That thinking is correct. Co-operation projects, for instance in the energy sector, create partnerships. That’s why we call our relationship with Russia a strategic partnership. As far as this strategic partnership is concerned, there are no differences of opinion within the German government.

New Year's seems to be the preferred time for Gazprom to squeeze its customers - right as the temperature drops to sub-zero levels, and demand soars for natural gas to heat homes and businesses. It was around this same time of year that Russia put the squeeze on the Ukraine, and cutoff supplies to Europe in order to force higher prices and destabilize a pro-Western government.

Winter in Minsk is no time to argue about gas

This year, it is Belarus' turn, and even more important than the doubling of prices and the bullying of a poor country, was the acquisition of Beltransgaz, Belarus’ state-owned gas transmission company. As Derek Brower has written on this blog, on the subject of prices, Gazprom has every right to complain - there is no reason that the company should be subsidizing gas to Belarus at a fraction of the price Western Europe pays.

But Chapter II of the Gas Wars is not about prices. The problem is a tactical one - there are rule-based ways of negotiating new prices and supply agreements, and there are less scrupulous tactics which involve breaking deals and unfairly using the leverage to forcefully acquire infrastructure assets. Gazprom, as Brower wrote, seems to be addicted to conflict.

Today, the International Herald Tribune weighed in on the issue:

A year ago, when the democratic revolutions in Georgia and Ukraine were seen as serious threats to the Kremlin's influence, Putin was eager to prop up Lukashenko. But once Lukashenko successfully stole the March presidential election, the new gas bill arrived in Minsk. It included half ownership for the Kremlin of Beltransgaz, the state pipeline operator that not only fuels Belarus but also supplies a fifth of Europe's gas.

Russia's European customers could increase their leverage — and possibly improve the Kremlin's behavior — if they negotiated jointly with Gazprom, rather than scurrying to cut separate deals. Western companies and governments also need to warn Moscow that its leverage has limits. Russia still needs the expertise and capital of foreign companies to developing its natural resources. No one wants to do business with a bully.

From the Associated Press:

"If they are drowning in petrodollars and other currency income and have decided ... to place us in conditions worse even than Germany and other European countries, then let's ask this rich Russia to pay us for our services," said an agitated, pale-looking Lukashenko, shouting at times in televised remarks during a government meeting. ...

Lukashenko said he had ordered the government "to send Russia a proposal on payment for everything they get here for free _ from military facilities and transit." ...

Lukashenko, who gave in to long-standing Russian pressure to sell a half share in his country's gas pipeline system as part of the gas price agreement signed in the final minutes of 2006, said that he had fulfilled Russia's demands and now wants Russia to fulfill his.

He said he had issued Sidorsky "a direct order to sign an unfavorable agreement on gas" because, he claimed, Russian Prime Minister Mikhail Fradkov had promised that reaching a gas deal would bring a resolution to disputes on the oil customs duty and what Belarus says is blockage of its sugar exports. ...

The outspoken Lukashenko said it would bring the oil price to levels that would put "millions of people in Belarus" out of work _ an apparent reference to refineries that are now operating on reserves and other industrial enterprises that could be affected in the nation of 10 million.

This week the Russian Air Force accepted delivery of two new
state-of-the-art Sukhoi Su-34 fighter jets, the first of an order of 200.

Russia will not export the Su-34 until its own Air Force is modernized

According to Flight International:

The multi-role fighter-bombers will initially be based in Lipetsk at the air force's combat training centre, where Su-34 tactics and weapons delivery techniques will be developed.

Together with six more Su-34s due to be delivered in 2007 and 10 in 2008, the aircraft will join Russia's front-line bomber force and be declared operational in 2010. The Russian air force plans to operate 57 aircraft by 2015 and eventually a total of 200, says commander-in-chief Gen Vladimir Mikhailov.

As many people have noted, the Russians arms industry of is of extraordinary importance to the economy. Here Robert T. McLean of the Washington-based Center for Security Policy shares some of his views on Russian defense issues in a 2006 article in The American Spectator:

The Russian economy remains largely dependent on weapons sales. When the Soviet Union collapsed, Russia's vital defense industry faced an enormous crisis. Not only would domestic spending be decreased, but exports to friendly regimes would no longer be necessary in many cases. As a result, even after enormous downsizing in the Russian defense industry -- an estimated 2.5 to 6.1 million lost their jobs between 1991 and 1995 -- by 1996, the sector was working at a capacity of only about 10 percent of its potential. Thus, to maintain the country's military industrial complex the Kremlin has taken on the role of the world's weapons supplier. From Algeria and Venezuela to Syria and Iran, Moscow displays few reservations to arming any regime that can help fuel its defense industry. ...

Equally disturbing have been the further reports of additional Iranian weapons purchases from Russia. According to the Indian national daily the Hindu, "Russian sources said talks were under way to sell Iran long range air-defence systems codenamed S-300PMU1, radar stations, and T-90S tanks." This, however, may turn out to be one area where the Russians decide to use their leverage for a constructive manner. Agence France Presse reports that Moscow has used the potential sale of the S-300 long-range air defense missile system as a means to convince Tehran to suspend the enrichment of uranium. This has largely been ineffective as Iran appears determined to continue its uranium enrichment process. ...

While arms sales are an essential element in the Russian economy, does this indicate that strategic calculations are absent from Moscow's decisions? The evidence does not indicate that this is so. In February 2005 Israel backed out of an arms deal with Georgia due to Russian concerns that the weapons would fall into the hands of terrorists on their way to Chechnya. Similar apprehension has eluded Moscow with respect to state purchasers that are not considered to be unfriendly. To the strong rejection of the United States and Israel, Russia agreed to sell Syria the SA-18 short-range anti-aircraft system. ...

Russia is using the export of arms to its benefit both domestically and internationally. Unfortunately, this revitalized influence from Moscow has produced few benefits for the rest of the world. Many of the world's rogue regimes must be pleased with this development, but international security is being severely undermined. Russia now finds itself at a crossroads where it will continue to drift east towards China and towards Cold War strategic competition with the United States, or it will continue to democratize and become a responsible world actor engaged in genuine cooperation with the West.

Time Magazine has done a short piece on the Gas Wars between Russia and Belarus.

Excerpts:

Just half an hour into 2007, the mood among Andrei Sannikov's guests is somber. They crowd around the television in his apartment in the Belarusan capital, Minsk, to watch a news bulletin that interrupts the usual festive programming. "We have signed a new natural gas supply contract on unfavorable terms," announces Belarusan Prime Minister Sergei Sidorsky. Sannikov, a former member of the government and now an opposition activist in the country memorably described by U.S. Secretary of State Condoleezza Rice as "the last true dictatorship" in Europe, interprets the statement for his guests. "Russia has given itself a New Year's present by making its grab of the Belarusan economy official," he says. "What the U.S.S.R. sought to do with tanks, Russia is now achieving with pipelines." ...

As the state television returned to scenes of seasonal revelry, Sannikov's guests swapped predictions of how the situation would play out. Most anticipated that Lukashenko will cut subsidies that have kept Belarus' decaying industries and Soviet-style collective farms afloat. Vladimir Khalip, a Belarusan writer and documentary filmmaker, didn't think this would be enough to save the regime. "Now, its collapse is inevitable, come May or June," he said. Such forecasts have proved wrong in the past, but on one point there was consensus: there wasn't much that was happy about this New Year in Belarus.

Media is reporting that Turkey has been cut off without much warning from natural gas supplies from Iran, the country's second largest supplier after Russia.

According to BOTAS, Turkey's state-run pipeline operator, the country imports 20-22 million cubic meters of natural gas from Iran per day.

Turkey is a critical transit country for European energy security

Iranian Oil Minister Kazem Vaziri Hamaneh cited increased domestic shortages as the reason for the cut off, and said that once the new Parsian Refinery was online (which will receive 30.5 million cubic meters of gas per day from Homa and Shanol fields), gas exports to Turkey could resume in as soon as 10 days.

In the meantime, Russia has already stepped up its exports to temporarily seize this market share. Sergei Kupriyanov of Gazprom has told Interfax that "For several days Gazprom has been delivering gas on a greater scale to Turkey - 20 million cubic meters a day in addition to the regular 63 million cubic meters."

Turkey is a critical transit country to supply natural gas to high demand markets in Europe and beyond, and there are urgent calls for both the US and the EU to develop stronger Black Sea energy strategies. Key projects involving Turkey such as the Nabucco gas pipeline are seen as the primary alternatives to avoid dependence on Russian exports and raise competition.

However as Turkey receives continued insults from the EU during the enlargement negotiations and cultivates an ever-worsening image of the United States, the likelihood of a closer relationship with Moscow increases, argues Richard Weitz of the Hudson Institute:

In contrast to Turkey's worsening relations with Europe and America, ties between Ankara and Moscow have noticeably strengthened in recent years. Bilateral commerce and investment have soared due to Russia's role as Turkey's major energy supplier, the millions of Russian tourists who visit Turkey, and the extensive involvement of Turkish contractors in several sectors of the Russian economy, especially construction. With an annual volume of $15 billion, Russia has become Turkey's second-largest trading partner, ranking behind only the EU.

Russia currently supplies well over half of Turkey's natural gas and one fifth of its oil. Since February 2003, the two countries have been using a direct $3 billion "Blue Stream" dual pipeline, which runs under the Black Sea, to deliver oil. In November 2005, Russian President Vladimir Putin announced that Russia and Turkey would explore extending Blue Stream to Greece, Italy, Israel, and possibly other countries. The Russian energy company Gazprom has begun exploring with Turkish officials and firms the possibility of constructing large underground gas storage sites in Turkey and a liquefied natural gas export terminal at the port of Ceyhan, which already receives oil deliveries by pipeline from Iraq.

While frictions have arisen between Turkey and Russia over which country should assume the lead role in supplying Central Asian gas to European importers, both countries have overlapping interests in expanding this market. For instance, the creation of a "South European Gas Ring" would enable Russia to deliver gas to Europe without having to traverse Ukrainian territory, reducing the chances of a repeat of last January's EU-Russia energy crisis. It would also benefit Turkey by providing millions of dollars in transit fees, reducing tanker traffic through the congested Bosphorus Straits, and helping to transform the country from a conduit to an energy hub for the entire eastern Mediterranean.

Interesting article at TheTrumpet.com:

Russian Energy: Redrawing the World’s Geopolitical Map Friday, January 5, 2007 Like it or not, there is a new global power to reckon with: Russia is once again flexing its muscles with seeming impunity. Let the world beware.

The mighty Russian bear is back, and energized as never before. Under President Vladimir Putin’s stewardship, Russia may now be more powerful than at any time it its history, including its peak during the Cold War. However, the West is only beginning to wake up to this new reality. World events will no longer be directed without Russia’s explicit approval. ...

Putin’s plan, according to analyst Jim Willie, editor of the Hat Trick Letter, is for “Russian companies to be made majority partners on any project on its soil, no exceptions.”

Consequently, Russia is confiscating (or what amounts to confiscating) billions of dollars’ worth of foreign-built infrastructure and placing it under control of state-owned corporations. ...

Using similar tactics, it looks like Gazprom is also set to gain control of British Petroleum’s Kovykta gas field, which is the largest in Siberia. French energy company Total is now facing mysterious “back tax” bills. Exxon Mobil’s Sakhalin-1 project is rumored to be the next Kremlin target. ...

U.S. scholar Marshal Goldman says that “Russia is more powerful now than it ever was during the czarist era or the Soviet era. In the Soviet era there was mutually assured destruction. They had nuclear weapons. We had nuclear weapons. We didn’t use them, because we were worried they would and vice versa. Here you don’t have that kind of restraint” (MosNews.com, Dec. 8, 2006).

As energy expert and author Micheal Klare says, “A new era, where energy has replaced nuclear weapons as the medium of superpower rivalry,” has already arrived. “Vladimir Putin believes that. … And he is moving to accumulate as much energy power as he can” (Associated Press, op. cit.).

Read the complete article here.

From the Kansas City Star:

Bullying of Belarus could affect Europe - Russia’s natural gas machinations are worrisome - The Kansas City Star

The recent natural-gas supply deal between Belarus and the Russian gas monopoly, Gazprom, should be seen as a clear warning for Europe. Russia, an important supplier of European gas, is becoming increasingly imperious.

Last year, the Russians cut off gas deliveries to Ukraine and demanded a price increase, even though contract provisions obligated Gazprom to maintain pricing until 2009.

In the negotiations with Belarus there was no cutoff, but the threat was implicit. Belarus must now pay more than double, with prices rising in the later years of the five-year contract.

Gazprom says the move is only an attempt to impose market pricing and end the natural gas subsidies that had been granted to former Soviet republics.

But in supplying countries such as Belarus, Ukraine or Georgia, Gazprom has little or no competition. It is a behemoth monopoly virtually run by the Kremlin, so the notion of a market price for the gas it pumps to Belarus and other countries makes no sense.

Another aspect of the Belarus deal is also troubling: Gazprom gained control of the monopoly that distributes gas throughout Belarus. Gazprom is also trying to gain control of pipelines within the EU — and after its bullying of Belarus, the Europeans ought to take notice.

Twenty percent of Europe’s gas flows through Belarus, and some also flows through Ukraine. The worrisome long-term question for Europe is how to avoid having a significant chunk of its energy supplies taken hostage by the Kremlin in some future foreign-policy dispute.

Will BP's Kovykta project become the next Sakhalin-style seizure?

From Oliver Morgan in the Sunday Observer:

Kremlin Inc ready to take on the West

For Kremlinologists and other followers of Russian affairs, 1 January should perhaps have been Groundhog Day, not New Year's Day. Then, as 12 months before, the mighty Russian bear was growling at a former Soviet neighbour, threatening it not with tanks but with higher gas prices. As with Ukraine in 2006, Belarus was threatened this year with a cut-off if it did not agree to pay more than twice what it had been paying Gazprom, the Russian monopoly, for its gas, as well as allowing that company - in reality an arm of the Kremlin - a 50 per cent stake in its national pipeline network, Beltransgaz. It agreed. …

Analysts agree there remain two obvious targets for the Kremlin - Sakhalin-1 and the TNK-BP joint venture - and think Putin will want control of these by the end of the year. He stands down in the middle of 2008.

There was skirmishing last year over Sakhalin-1, which sits on 2.3 billion barrels of oil and 17.1 trillion cubic feet of gas. The IOC consortium, led by Exxon (with 30 per cent) and including ONGC (20 per cent) and Japanese investment company Sodeco (30 per cent) was accused of licence violations by the natural resources ministry. But this year more significant developments are likely.

Butter says: 'Exxon needs a gas export solution. Gazprom has a monopoly position in gas exports. I would imagine they would be interested in an equity stake.'

That stake would not have to be 51 per cent to secure Russian control, as two subsidiaries of Rosneft already hold a total of 20 per cent. As for TNK-BP, Butter says: 'It is a 50:50 joint venture. The Russian partners in that are Alfa Access Renova, who are old-fashioned oligarchs, not under government control. There has been speculation that Gazprom would be very interested in controlling this stake.'

Here, Gazprom, as the export monopoly, has leverage too. Chief among TNK-BP's assets is the giant Kovykta gas field, which has export potential to China. BP has already said Gazprom could take majority control over the field, but wants assets or cash in recompense. Experts say this is proving a sticking point, and BP may find itself subject to pressure similar to that suffered by Shell last year. The ultimate aim would be for Gazprom to replace Alfa Access Renova, and take a controlling stake in the venture.

Read the complete article here.

The EU has more to worry about

By Tom Nicholls, journalist

The energy dispute between Belarus and Moscow has intensified amid reports that Minsk has blocked flows of Russian oil to Europe.

The European Commission has confirmed an interruption of oil supplies to Poland and Germany through the Druzhba pipeline and is seeking an assessment from both countries of how they will be affected.

Belarus' Lukashenka gets tough

EU energy commissioner Andris Pielbags said the cuts pose “no immediate risk” to energy supplies to the EU, but is seeking an “urgent and detailed explanation” from Belarus and Russia.

Although the EU has oil stocks equivalent to 90 days’ of consumption, a spokesman said that if the problem is not solved “within hours” alternative import plans will be considered.

The Druzhba pipeline is a key part of European oil supply and any interruption would exacerbate fears in Europe about the extent to which the continent is reliant on Russia and other former Soviet Union states for energy supplies. Around 30% of the oil imported in to the EU originates in Russia and half of that crosses Belarus. One EU official pointed out the irony of the pipeline’s name: Druzhba means Friendship.

Those fears are already riding high: the stoppage comes just days after the resolution of a dispute over gas prices between Russia and Belarus that could have resulted in a shortfall in gas supplies to Europe if Gazprom had carried out its threat to stop supplies to Belarus. And a year ago, Europe’s gas supplies were briefly affected because of a dispute over gas pricing between Russia and Ukraine.

According to Russian news reports, Transneft head Semyon Vainshtok has accused Belarus of removing Russian oil destined for Europe from the pipeline since the weekend. Belarus has diverted 79,000 tonnes of oil so far, Vainshtok has been quoted as saying.

The Belarusian foreign ministry has denied blocking the transit of Russian oil and has said Belarus is not responsible for a decrease of the pipeline’s pressure.

The two governments have been at loggerheads twice in recent days. First was the gas dispute. Then, on 1 January, the Russian government introduced an export duty of $181 per tonne of crude oil delivered to Belarus – supplies on which there previously had been no duty.

Two days after that, Belarus hit back by placing a customs tax of $45 per tonne on Russian crude oil in transit to the West through Belarus pipelines.

The 2,500-mile-long pipeline has the capacity to ship over 1.2 million barrels a day to eastern and central Europe and generally works at or close to its full capacity.

The Jamestown Foundation website is hosting an interesting video of the debate event "Putin, Petroleum, Power and Patronage," which took place on December 7, 2006, in Washington DC.

Here is just a small excerpt of the speech by Dr. Marshall Goldman of Harvard - the complete videos can be viewed here.

In the upcoming edition of the Financial Times, Robin Shepherd of the German Marshall Fund of the United States argues that Europe has done "next to nothing" to mount a coherent response to Russian energy imperialism.

Strong response to Putin’s Russia overdue By Robin Shepherd

As Russia and Belarus sought to blame each other on Monday over the suspension of oil supplies through the northern leg of the Druzhba oil pipeline to Poland and Germany, Europe might well have paused to take stock of its own share of responsibility for the latest threat to its energy security.

For, as charge and counter-charge flies between Moscow and Minsk over who is really to blame for the current debacle, the fact is that Europe has done next to nothing in recent years to produce a coherent response to Vladimir Putin’s increasingly authoritarian regime in Russia and far too little to tame Alexander Lukashenko’s brutal dictatorship in Belarus.

The immediate precursor to this deeply worrying state of affairs was Russia’s recent decision to more than double gas prices to Belarus and slap full export duties on Russian crude. Minsk promptly slapped its own duties on Russian oil crossing its territory. The first signs that things were getting really nasty, however, came when Belarus subpoenaed the head of Transneft, Russia’s oil pipeline company, on Saturday for allegedly illegal oil transfers. Transneft’s response was to accuse Belarus of stealing thousands of tonnes of oil from its pipelines.
It would be an understatement to say that Russia miscalculated over this affair, which marks yet another searing indictment of the Kremlin’s handling of former Soviet republics. It is personally humiliating for Mr Putin, who is undoubtedly apoplectic that this spat undid in one night all the hard work that Russia has done in the past year to reassure the west that the halting of gas supplies from Ukraine at the beginning of 2006 was an exception that would never be repeated.

But to argue that the Kremlin initiated the crisis just because it raised gas prices would be unfair. Why, after all, should ordinary Russians pay for other peoples’ energy consumption? If we are going to criticise the Kremlin, we must be clear about where its guilt lies.
The central point is that Mr Putin’s Russia has nurtured the Lukashenko regime for years as a Soviet-style ally that could be relied on to reject the west. When the rest of Europe was slamming the farcical elections held in Belarus last March as blatantly fraudulent, the Kremlin stood alone in upholding them. When the riot police went hell for leather against peaceful demonstrators protesting against those elections, the western world denounced Mr Lukashenko, and Mr Putin supported him.

Having promoted a dictatorship that survives by violence and deceit, Russia cannot be surprised that that same regime fails to respect the rules of fair play. But the extent of the Kremlin’s miscalculation is even greater than that because it really should have known what it was getting into over the last couple of weeks. It has been obvious for years that the Lukashenko regime has been able to survive only by buying off significant sections of the population with state subsidies largely financed through cheap Russian gas supplies. Given the nature and fragility of the regime, it beggars belief that Russia did not realise that raising gas prices would force Mr Lukashenko against the wall.

What happens now is not easy to predict. Mr Lukashenko has shown that, if put under pressure, he is both willing and able to create havoc. Russia, it seems, is daft enough to respond in kind. Europe now finds itself in the absurd situation that its energy security can be compromised by the two most unappealing regimes on the continent. Of course, there are no short-term or easy solutions. But it must surely be time to consider a completely new approach to both countries.

As far as Belarus is concerned, it should now be obvious that there will be no long-term solution to this problem as long as Mr Lukashenko remains in control. He is not only a dictator, he is also a maverick. Russia must have learnt from current events that Mr Lukashenko poses a threat to its interests. There is now an opportunity for Russia and Europe to join forces and do all in their power to bring his regime to an end.

The bigger problem, though, is Russia itself. Europe knows that it must diversify gas and oil supplies and is working out ways to do that. But it must also, finally, recognise that appeasing Mr Putin’s Kremlin as it went from one authoritarian milestone to another has been a mistake. The time for a strong, concerted response from Europe has surely now come. If not now, when?

The writer is a senior transatlantic fellow of the German Marshall Fund of the United States

Today news reports hit the wires reporting a temporary and as of yet unexplained shut down of oil exports from Russia to Europe via the Druzhba pipeline, which passes through Belarus.

Apart from accusations of siphoning, there has been little information about who shut down the flow, or how and when the problem will be resolved. Russian Deputy Trade and Economic Development Andrei Sharonov has told the media that he blames the shut down on a disruption caused by Minsk.

The Druzhba Pipeline has the capacity to deliver 1.2 million barrels of crude a day to Poland, Germany, Ukraine, Hungary, Slovakia and the Czech Republic.

Typical to previous supply disruptions from Russia, the dearth of information is causing some waves in Europe. The European Union has already demanded an "urgent and detailed" explanation from the two countries, and various officials are demonstrating a frayed patience Russia's New Year's tradition of energy shenanigins. German Prime Minister Angela Merkel gave the following statement on German television, as reported by Reuters:

"This has not caused any acute threats to our energy supply. But there have been transit problems again and again over the past few years. We need legal protection, we need contract security."

According to Forbes, the Polish Deputy Minister of Economy Piotr Naimski, gave the following comment to TVN24 Television:

"This shows us once again that arguments among various countries of the former Soviet Union, between suppliers and transit countries, mean that these deliveries are unreliable from our perspective."

Currently most analysts are emphasizing that they believe the Druzhba problem will be solved quickly, and politicians are working their press corps hard to stave off any panic about the impact this cut-off will have. But once again there are too many premature apologies and excuses on behalf of Europe defending Russia. The fact is that we don't know enough about what is going on right now, and just like the Ukrainian gas war of 2005/2006, there is a fundamental unwillingness to provide the transparency necessary for EU energy security. This should not be tolerated any longer.

From the Independent:

Oil market gets the jitters after Russians close Belarus pipeline By Michael Harrison, Business Editor

...

The EU Energy Commissioner Andris Piebags said there was no immediate risk to Europe's energy supplies. Nevertheless, Russia's action will intensify pressure on the European Commission to take steps to bolster the security of Europe's energy supply when it unveils its EU energy review tomorrow.

The review, carried out by the EU Competition Commissioner Neelie Kroes, has principally been about opening up Europe's energy market by tackling the monopolies that continue to exist in many member states. However, Brussels is facing calls for the remit of the review to be widened to take account of Russia's actions.

Robert Amsterdam, defence lawyer for Mikhail Khodorkovsky, the jailed Russian oligarch and former head of oil giant Yukos, said: "The dispute between Belarus and Russia should act as a wake-up call to the EU Commission. It cannot allow Russia to retain its stranglehold over Europe's energy supplies without any transparent agreement to legal principles. The European Commission must use its Strategic Energy Review to address concern over EU energy security. This will be the most important policy statement on energy in the Commission's history."

Mr Amsterdam added that the relationship between the EU and Russia had become "seriously unbalanced" in Moscow's favour and said the Commission needed to negotiate a restructuring of the state-owned Russian energy giant Gazprom and market entry into Russia by European energy companies.

The EU energy review is expected to point to evidence of collusion and market failure in a number of member states and hasten efforts to break up vertically integrated monopolies in countries such as Germany.

From Financial Times Deutschland, via Der Spiegel:

The Kremlin has implemented a package of measures that is likely to push the Belarusian economy to the brink of collapse. The country's scarcely reformed industry is highly dependent on the drip of what had to date been cheap Russian energy supplies.

The EU, which has scaled down its contacts with Belarus to the bare minimum, may be pleased; a dictator who brutally suppresses opposition members and journalists in his country is having his oxygen supply turned off.

But the Russian move again shows how uncompromisingly hard the Kremlin is in enforcing its economic interests. Riding the wave of high world market prices for oil and gas, the Russian leadership has developed frightening arrogance.

For the EU, which still regards Russia as a strategic partner, the warning signs are unmistakeable.

From the IHT:

Iran actually is short of oil By Roger Stern

Iran has ensnared itself in a petroleum crisis that could drive its oil exports to zero by 2015. While Iran has the third- largest oil reserves in the world, its exports may be shrinking by 10 to 12 percent per year. How can this be happening?

Heavy industry infrastructure must be maintained to remain productive. This is especially so for oil, because each oil well's output declines slightly every year. If new wells are not drilled to offset natural decline, production will fall.

This is what is happening in Iran, which has failed to reinvest in new production. Why?

For the mullahs, the short-run political return on investment in oil production is zero. They are reluctant to wait the 4 to 6 years it takes for a drilling investment to yield revenue. So rather than reinvest to refresh production, the Islamic Republic starves its petroleum sector, diverting oil profits to a vast, inefficient welfare state.

Employment in the loss-making state-supported firms of this welfare state is essential to the regime's political survival.

Another threat to exports is the growth in domestic demand. Iranian oil demand is not just growing, it's exploding, driven by a subsidized gasoline price of about 9 cents a liter. This has created a 6 percent growth in demand, the highest in the world.

Read the complete article here.

Published in today's International Herald Tribune:

Get tough with Gazprom

LONDON: European energy security

By Robert R. Amsterdam

The European Commission's Strategic Energy Review, which will be issued on Wednesday, is likely to be the most important statement on energy in the EC's history. To succeed, one of its top priorities must be equal terms of business between the European Union and Russia.

As shown once again this week, when Russia halted delivery of oil to Europe via Belarus, the current situation is dangerously unbalanced.

The Commission must facilitate further integration of Russia's state-owned Gazprom into the EU market through market liberalization and downstream integration. In parallel, it must seek the eventual restructuring of Gazprom, and access to Russian markets for European companies.

Gazprom has evolved into the dominant market maker in gas for Europe. But its actions have made a mockery of EU efforts toward greater collaboration with Russia.

Gazprom deploys three strategies: cooptation — cultivating partnerships with certain countries, political leaders and corporations as levers of its interests; pre-emption — using upstream power and Russian diplomacy to manipulate situations downstream and to scoop up assets, and disaggregation — splitting the EU through bilateral deals.

Gazprom's cooptation of Europe has been achieved mainly through Germany. Partnerships with German energy companies and banks have helped persuade Berlin to collaborate in favor of Gazprom and Russian aims.

Meanwhile, extensive lobbying directly and by proxy is used to persuade European regulators to allow long-term supply contracts in the EU despite their deadening effect on competition.

Pre-emption by Gazprom has been accomplished through a sweep of acquisitions at any economic or political cost. Gazprom has flooded the market in Turkey, withheld gas from Ukraine and oil from Belarus, and offered preferential market access to willing partners like Italy.

Elsewhere, Gazprom engages in pre-emption — like the Caucasus, where the Kremlin has done everything possible to prevent Iran from establishing the infrastructure to allow it to compete as a supplier of gas to Europe. To stop Iran's gas Russia effectively bought the entire energy sector of Armenia.

Gazprom's opacity and market dominance are reinforced by activities coordinated with the Kremlin to impact markets like Spain and Italy by seeking gas deals with rival suppliers, like Algeria. In exchange Russia has offered enticing gifts, such as vast concessions on arms and preferential debt terms.

In other cases, the Kremlin acts punitively, as it did when it cut off oil to Lithuania over its sale of a refinery to a Polish company.

The prime example of disaggregation is the Nord Stream pipeline, which appeals to Germany's interests while angering Warsaw and the three Baltic countries. The undersea pipeline, which connects Russia directly with Germany, serves the political objectives of the Kremlin, undermines the energy security of Germany's eastern neighbors and threatens environmental havoc in the Baltic Sea.

The Commission's Strategic Energy Review must deal with the asymmetry of the EU-Russia energy relationship, which allows Gazprom to use the EU's deficient liberalization policies against European interests.

As long as Gazprom remains opaque, Europe will never know whether its key supplier is spending enough to develop reserves crucial to Europe's future. Indeed, one result of the Kremlin's political battle to win control of Russia's energy sector has been a dramatic reduction in the rate of growth of domestic oil and gas production. That is a problem for Europe.

Brussels must demand transparency, symmetry and the rule of law from Moscow, with the ultimate goal of a revolutionary integration of European and Russian energy markets.

The access Gazprom seeks in Europe is the Commission's trump card. Europe should let Gazprom know that this access is conditional on a reciprocal openness of Russia's energy sector.

The result could be a welcome place in the European energy market for a Russia that is trusted and respected by its international partners.

Robert R. Amsterdam is a founding partner of the law firm Amsterdam & Peroff. He is international defense counsel for Mikhail Khodorkovsky.

From the Independent:

Michael Harrison's Outlook: 'Beware the Russian bear' is the motto Europe must adopt as it reviews its energy future

Today sees the publication of the European Commission's review of energy - a subject which has climbed remorselessly up the political agenda in recent years to the point where it has now assumed the same kind of importance to world well-being and security as international terrorism or global warming.

The focus of Brussels' deliberations, however, is likely to be inward-looking, concentrating on the steps the European Union needs to take to reshape its own markets and, in particular, to unbundle those national monopolies on the Continent which have served to stymie competition and the free flow of energy.

If that is the case, it will be a lost opportunity because the biggest threat to the energy security of the EU is external and it can be summed up in one word - Russia. That the launch of the review by the EU's Competition Commissioner, Neelie Kroes, should take place against the backdrop of another piece of economic imperialism on the part of Moscow - the closure of its gas pipeline to Europe through Belarus - merely serves to underscore the point. ...

Robert Amsterdam, the Kremlin critic and defence counsel to the jailed oligarch Mikhail Khodorkovsky, has some trenchant views on the danger the EU runs if this unequal relationship with its near neighbour is not addressed. He catalogues how the state-owned Russian gas monopoly Gazprom, which harbours ambitions of swallowing up our own Centrica, uses its market power to divide and rule, cultivating certain countries such as Germany along with their political leaders, banks and utility companies and penalising others by withholding supplies - as it did with Lithuania as punishment for selling an oil refinery to Poland.

The EU’s energy policy is still unconvincing

By Derek Brower and Tom Nicholls, in Brussels

The European Commission said today that it wants to create a single voice for European energy policy. But there was little in its new Energy Review to suggest that will happen soon.

This is what we've heard from the Russians today

The report was full of fine sentiments – such as how the EU can lead a “post-industrial revolution” to a low-carbon economy. But it was short on specifics, especially on how the EU would lessen its increasing dependence on energy imports.

The Commission said it wants to get serious about climate change, calling for 30% reductions in greenhouse gas emissions from developing countries by 2020. And to show its commitment to the cause, Commission president José Manuel Barroso said the EU would cut emissions by 20% by 2020, rising to 30% if other countries join in. That’s laudable, however 20% would only be a fraction higher than cuts already proposed for the next 13 years.

On the subject of liberalisation, many had hoped that Neelie Kroes, the Commissioner for Competition, would announce bold moves to stamp out market abuses in the EU’s horribly fragmented and uncompetitive energy markets, still often dominated by vertically integrated virtual monopolies. The Commission’s main recommendation for boosting competition is unbundling – breaking up vertically integrated companies. But it also offered another option for states that don’t like the sound of unbundling: allowing vertically integrated companies to retain ownership of network assets and receive a regulated return on them, but not to operate them. Kroes’ recommendations were greeted with some confusion, with many asking why the Commission had decided to give companies like RWE and E.On – considered to be two of the companies in the Commission’s sights – the option not to unbundle.

Achieving climate-change targets, according to Andris Piebalgs, the EU’s energy commissioner, will depend on setting up a proper internal energy market, achieving improvements in energy efficiency of 20% by 2020 and increasing the use of low-carbon energy sources such as renewables. To that end, the EU has proposed to increase renewable energy in the EU’s overall mix from less than 7% today to 20% by 2020. Again, this is laudable – and ambitious.

However, Commission officials ducked the question of whether more nuclear plants should be built – an important one over the next couple of decades, not least because many of the nuclear plants in operation today, supplying nearly a third of the continent’s power, will eventually need to be replaced with some form of generation. Even the most optimistic projections for renewables would not meet that gap.

Meanwhile, where energy security was concerned, the Commission called for new LNG terminals, especially in countries that are heavily dependent on one supplier. But there was no detail on how the construction of terminals can be encouraged.

Speaking about the show-down between Russia and Belarus earlier this week that had forced Poland and Germany to tap their strategic reserves, Barroso condemned Russia’s behaviour as “unacceptable”. “We have an addiction to energy,” he said. “And like any addiction, it is even worse when you depend on someone else.”

The Energy Review, though, predicts that the addiction will get worse. By 2030, gas imports will account for 84% of Europe’s demand. And some 93% of the EU’s oil will come from foreign suppliers.

How long will Lukashenko play foil to Vladimir Putin?

The Associated Press is reporting that the oil spat between Belarus and Russia may be coming to a close:

Russia, Belarus 'Settle Oil Row'

MINSK, Belarus (AP) -- January 10, 2007 - Russia and Belarus have reached a compromise on their dispute that has halted oil flows along a key pipeline to Europe after telephone talks between the two countries' presidents, the Belarusian presidency said.

"In the course of the conversation, a compromise was found which enables us to resolve the current deadlock, including concerning the transit of Russian oil to European countries through the territory of the Republic of Belarus," the presidency's press service told The Associated Press.

The press service added that Presidents Vladimir Putin of Russia and Alexander Lukashenko of Belarus had ordered their prime ministers to work out within two d