The Soviet-built Druzhba pipeline, Russia's main natural gas link to Europe, runs across the territory of Belarus
Once again Russia's state-owned natural gas monopoly Gazprom is making news, this time threatening to cut off 45% of gas supplies to Belarus, unless the two sides can reach an agreement by the end of today. Belarus' natural gas transport service, Beltransgaz, reportedly owes Gazprom $500 million. Minsk has fallen further behind on paying its debt to Moscow since Gazprom effectively doubled its prices on January 1, 2007, raising the rate from $45 per thousand cubic meters (tcm) to $100 (in comparison, Gazprom's main customers in Germany and the E.U. pay more than $200 per tcm). When it agreed to the new price hike, Beltransgaz also sold shares of its stock to Gazprom as collateral on its previous debt.
UPDATE: Beltransgaz made a down payment on its debt today to avoid any shut off, according to this press release from Gazprom.
A Russia Today TV video about Belarus falling behind on paying its gas bills
As a former close ally of the Kremlin, Belarussian President Alexander Lukashenko apparently thought last year that his country would continue to receive cheap Russian gas indefinitely. In fact, Russia's close relations with the authoritarian Lukashenko regime were one of the big complaints made by Western commentators about the Putin Administration.
Yet when Gazprom decided to change course and raise prices closer to European levels in December 2006, NBC Nightly News reported that Russia was punishing Belarus for "stepping out of line". Other commentators cited the dispute as yet another example of "Russian energy imperialism". Apparently when a Russian state-owned company does something, it can't possibly have anything to do with economics, it must always be about maintaining political control in Eastern Europe and the former Soviet Union. Even Russia's headlong plunge into the global economy, with some notable exceptions, has become a subject for consternation, with one writer for the Wall Street Journal recently titling his article "The Next Globalization Backclash: Wait Till the Kremlin Starts Buying Our Stocks".
Hopefully though today's story will drive home the point that if you want to understand where the New Russia is headed, follow the money, not ideology or Kremlinology.
Belarus is working out a deal with Russia to settle its gas debts
A Russia Today TV video about the European Union toying with "unbundling" regulations. Are such regulations necessary anti-monopoly measures or just bureaucratic waste?
Sovereign Wealth Funds: Healthy Globalization or Dangerous Development?
Some of our readers have expressed an interest in the growing controversy in America over the global clout of state-controlled sovereign wealth funds, including Russia's $120 billion Stabilization Fund. Here are a few recent articles expressing different points of view on this topic: