Jan 9, 2007

Its Official: Lukashenka is an Act of God, Etc.

What the hell is happening in Belarus?

At some point in the last 48 hours, Europe’s oil supplies via pipelines in Belarus stopped flowing, started flowing, then stopped flowing again. The problem: nobody could decide what was going on...

Dueling statements from various governments and ministers only served to muddle the picture. But what is clear, is that on January 5, Belarus introduced a sudden “transit charge” on Russian oil flowing thru pipelines in Belarus -- a retaliation for the sharp increase in the duties which Russia charges Belarus for oil.

In the last decade, Belarus’ inefficient BelNaftakhim refineries had been a model of post-Soviet rent-seeking, by re-exporting subsidized Russia oil to Western Europe. Without these subsidies, BelNaftakhim would promptly go out of business. Hence the draconian "transit fees." If Russia refused to pay, Lukashenka's officials stated they would "impound" Russian oil traveling thru Belarus. Russia cried, ‘Oh no you didn’t!’ and promptly shut off the oil.

That's when the real hilarity ensued.

It seems that Western Europe was a little miffed that the flow of oil suddenly stopped. 'But, we had a contract!' In response, “Moscow served notice that it will plead force-majeure, citing circumstances beyond Russia’s control, in the event of any shortfalls in oil deliveries to European countries,” notes Jamestown.

That's right, Lukashenka & Co. are officially on par with wars, natural disasters, disease, and other acts of God.

Yet, even with Lukashenka's recent upgrade to an act of God, the context for this fiasco is important, especially given Russia’s mantra of “energy security” at the most recent G-8 summit.

It seems that "energy security" has a completely different meaning when translated into Russian, and results in offering near monopolies to Kremlin-owned subsideraries in exchange for a "constant and reliable" flow of oil and natural gas. Russia's attempts to make Belarus knuckel under have created an unwanted case of blow-back and exposed the many pitfalls of relying upon Russia for this "security."

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