A golden opportunity we’re wasting in Belarus: The Minsk energy angle

By Suriya Evans-Pritchard Jayanti

The Western World is dropping the ball on Belarus.  In failing to tactically leverage energy over Minsk we are missing a historic opportunity to peel off a former Soviet satellite state, weaken Russia, and promote democracy.  The United States alone could do this almost exclusively with energy pressure, all while simultaneously advancing U.S. energy security and supporting American energy companies.  European cooperation would be nice, but time is of the essence.

Only amid the catastrophic madness of 2020 could the now nine weeks of pro-democracy demonstrations in Belarus, a geostrategically important Russian ally and critical European buffer state, have failed to attract salivating political attention.  In any other year, present American leadership notwithstanding, the United States and much of Western Europe would be laser focused on supporting the protestors in their effort to oust Kremlin-backed “President” Alexander Lukashenko and instill a western-style democracy.  Comparable uprisings get names like the Arab Spring, the Velvet Revolution, the Revolution of Dignity, and they usually enjoy staunch rhetorical, indeed material, support from the United States.  The current nationwide protests in Belarus, numbering as many as hundreds of thousands of people?  Muted response generally, and crickets from the Trump Administration.

Lukashenko, in power since 1994, so grossly stole the August 2020 Belarusian presidential election—claiming 80% of the vote—that even regime supporters reportedly found the official electoral result implausible.  On September 23, despite allegations of massive electoral fraud, mass demonstrations against him, and the refusal by numerous (but otherwise noncommittal) countries to recognize him as the legitimate Belarusian head of state, Lukashenko inaugurated himself for a sixth term as Belarus’ President.  He even resembles Dr. Evil with a henchman moustache and the habit of taking his mini me son and would-be successor to world functions.

Russian President (except when he’s Prime Minister) Vladimir Putin pledged financial and military support to Lukashenko, and said he had troops on standby to bail out his embattled neighbor.  At least 1,000 Russian troops are already in Belarus conducting joint military exercises, and others have infiltrated surreptitiously.  In some ways, this is a manifestation of a partially implemented 1999 Russia-Belarus agreement to unify social, economic, defense, and foreign policy.  So says Putin.

Russia’s interest in Belarus is far from benign, however.  Putin has been pressuring Lukashenko to form an ever closer alliance for years to advance a combination of Russian imperialism and anti-NATO revenge fantasy (for which Moscow has long wanted to have military bases in Belarus), plus constitutional shenanigans (giving Putin longer in power) and textbook autocratic fear of democratic movements so near its own border.

The principal pressure point has been energy; Putin has repeatedly leveraged Russia’s energy stranglehold on Belarus to force the issue. Because he can.

For decades, Belarus has been almost entirely—over 80%—dependent on its larger neighbor to satisfy its overall energy needs.  It imports 100% of its natural gas from Russia, approximately 20 billion cubic meters annually (bcma) for its own consumption with another 39 bcma transited to Europe.  And 90% of Belarusian electricity is generated from this imported Russian natural gas.  Russian crude imports exceed 18,000 million metric tonnes per year.  This petroleum relationship is reinforced by tax incentives and subsidies that allow Belarus to import Russian crude duty free, an over $5 per barrel discount on crude, with comparable savings on natural gas.  In the mid-2000s, the discount on Russian crude itself constituted over 10% of Belarus’ GDP (and in 2012 as much as 16%), although this number has dropped by more than half since, as has the size of the discount.  In 2012 Gazprom also acquired full ownership of Beltransgaz, Belarus’ gas transmission system, so Russia now functionally owns the entire Belarusian gas transmission system, too.  And this is not a comprehensive list.

For years Belarus has been trying to reduce Moscow’s energy dominance in order to curb its vulnerability to Russian pressure to form a disadvantageously closer alliance.  The 2011-2020 Belarusian energy strategy had a goal of reducing energy dependence on Russia.  Bless.  Belarus is about to fire up its first nuclear power plant, a key pillar of the energy strategy, but the 2400 MWe plant was 90% financed by Russia through a predatory $10 billion loan, and the nuclear fuel will be supplied by Russia, too.  Even once fully operational, the nuclear plant will only reduce the percentage of Belarusian electricity fueled by Russian natural gas to 55% in a best case scenario.

There’s more.  Belarus’s economy is also heavily dependent on Russian energy sources, putting it in the extraordinary position of having an essentially petroleum-based economy without any actual oil or gas reserves.  If that sounds like a losing position, it’s because it is.  That said, Belarus makes approximately $2.1 billion annually from its oil and gas transit to Europe plus its oil refining exports.  Its two refineries—Mozyr and Naftan—process Russian Urals crude for export, which constitutes up to 20% of the country’s export revenues (it used to be as high as 30%) and approximately 10% of its GDP.

This is no exaggeration:  On the basis of energy alone, Belarus is a Russian vassal state.

But so what?  Why should the United States care?

As Lukashenko himself has noted, Russia is afraid of losing Belarus because it has no other allies left. Anything Russia is scared of the United States should be pursuing doggedly.  (Obviously, this is a gross oversimplification, but it proves true more often than not.)  And Belarus is such low hanging fruit.  Let’s recap: Its people are uprising, its autocratic leader has lost domestic and international legitimacy, winter is coming, the European Union is overly cautious about engaging, and it has the softest of underbellies just waiting for us to tickle it: energy.

Belarus has also proven itself very willing to pivot to foreign sources of energy, and Lukashenko himself said earlier this year that he wanted to reduce Russia’s share of Belarus’ oil imports to 30-40%.  The 2019 crude dispute between Russia and Belarus (the latest episode after 2004, 2007, 2010) left the smaller country gasping for fuel for its refineries and making overt oil and gas overtures to numerous other countries, including the United States.  Yes, Russia turned the taps back on after a few months, and yes, Minsk secured an extremely good price—reportedly 480,000 barrels per day between $12 and $15.7/barrel.  But the political realities for Lukashenko haven’t improved from the Russian bailout now keeping him in power.  Whereas before he was a kid brother protected by Russian energy trade and subsidies just enough to hold onto power, now he is a serf to Russia whose own people are uprising.  Thus, whereas before the August elections aggressive U.S energy policy in Belarus may have helped bolster an underwhelming autocrat, the tipping point is now upon us; now replacing Russia as the source of energy would likely topple Lukashenko.

This is a golden foreign policy opportunity that has been offered to us on a silver platter, and which is being completely, utterly squandered by the United States.  And it’s not like replacing Russian energy supplies to Belarus would hurt the United States.  Au contraire.  The current situation in Belarus provides us a “five birds one stone” chance of a lifetime.  Yes, five separate foreign policy goals could be achieved if the United States began replacing Russian natural gas and Urals crude with discounted U.S. liquefied natural gas (LNG) or West Texas Intermediary (WTI) crude, among other energy diplomacy tactics.

First, helping instill a democratic regime in Belarus would be a triumph for western ideals and foreign policy.  All over the world, the United States has traditionally pushed for democracy and legitimate government.  Replacing Lukashenko is very much in line with this.  And if it undermines Putin, too, great.  That would also advance rule of law, democratic institutions, and accountable leadership.  And implemented correctly, supplying Belarus with alternate fuel sources would also buttress the new democratically elected leadership.

Second, severing—even simply hindering—Belarus’ energy relationship with Russia would be an extraordinary step forward in containing Russian aggression.  It would slash Russian revenues (the United States already has several sanctions in place, so this is in keeping with existing policies), isolate the great bear by peeling off its self-proclaimed last ally, and helping transform Belarus into a more robust buffer state to protect Europe from Russian aggression.

Third, it would help insulate Europe from energy insecurity born of over reliance on Russian natural gas and oil.  About 1 million barrels daily (40 million tonnes per year), 10% of Europe’s oil imports, transits Belarus via the Druzhba pipeline; and up to 20% of Europe’s natural gas consumption, 33 bcma, transits Belarus via the Yamal pipeline.  The United States is fighting tooth and nail to keep the Russian Nord Stream 2 gas pipeline from being completed precisely to prevent a deepening of European dependence on Russian hydrocarbons.  A less Russian fuel-dependent Europe is a Europe that is more likely to side with the United States on other issues.  Win win.

Fourth, the best way of getting U.S. crude to Belarusian refineries is through Ukraine, which means Ukraine would benefit financially, which would advance the U.S. policy of helping fortify Ukraine against Russian aggression so it, too, can be a robust buffer state between Europe and Russia.  There are several ways other than through Ukraine of getting fuel, whether gas or oil, into Belarus.  One approach could be reversing the flow on the Druzhba pipeline, but Polish energy authorities confirm this is not possible, although opinions differ.  Bringing crude by tanker to Odesa, however, is not only relatively easy but has recently been done.  In May 2020 a tanker (76,000 tons) of WTI was delivered to Ukraine in just this way.  Once in Odesa, it could transit through the Odesa-Brody pipeline straight to Mozyr refinery in Belarus.  (It is worth mentioning that adjustments would need to be made to Mozyr to account for the different density of WTI versus Urals.)  Moreover, with the COVID drop in oil consumption globally and the accordant collapse of oil prices, so much crude oil is already sitting in tankers on the high seas waiting for an opportunity to be sold that this would not even cost much.

For natural gas, it could move from Ukraine to Belarus, too.  However, the fifth U.S. foreign policy goal the United States could achieve by supplying Belarus is to give U.S. companies opportunities abroad and support them as they conduct business.  For this, U.S. LNG is the most advantageous option, and Lithuania already offered earlier this year to accept U.S. LNG shipments to its LNG terminal in Klaipeda for transit to Belarus.  It could be done with virtual reverse flows or “swaps” that allow for creative accounting to replace actual gas transit.

Of course, lower oil and gas prices would, in turn, mean Belarus would make less exporting the refined product, at least in the short term.  Belarus would continue to make transit-fee income from Russian gas headed to Europe, which has been $500 million annually.  In fact, the accordant drop in demand for Russian gas once Belarus has another source for its 20 bcma domestic consumption should make Russia more desperate to sell to the rest of Europe, and transit through Belarus will remain necessary without Nord Stream 2 up and running.

And yes, alternative sources of oil and gas would have to be offered to Belarus at or below Russian prices. While that’s definitely below market value in a normal year, 2020 is not a normal year.  Moreover, Russia has been raising prices on Belarus steadily for years, so the gap is smaller than it would once have been.  And while Russia could continue to slash prices to undercut the United States or other foreign suppliers, there’s not much lower the prices can go with a tanking global energy economy.  The United States could also subsidize U.S. companies sending fuel supplies to Belarus given the paramount foreign policy opportunity of getting Minsk out from under Moscow’s energy thumb.  The United States has pumped over $4 billion into Ukraine since 2014 for the same reason—containing Russian aggression—and Belarus is equally important for that task.

It goes without saying that there are technical issues, engineering complexities, diplomatic massaging, finances to be squared, et cetera.  There always are.  But the policy imperative is clear.  And the time is now.  Simply proclaiming U.S. support and pledging to start the process could be enough to affect the power balance in Belarus and reinforce the protestors.  This is an opportunity not to be wasted.

Suriya Evans-Pritchard Jayanti is an international energy policy expert with a focus on Eastern Europe. Until August she served as an energy diplomat with the U.S. Department of State, most recently as the Energy Chief at the U.S. Embassy in Kyiv, Ukraine. She now works as a U.S. international energy attorney-advisor, advising foreign governments on energy sector reform and restructuring. She holds a BA from Claremont McKenna College, a JD from American University, and an LLM in Energy and Environmental Law from Katholieke Universiteit Leuven, where she is reading a PhD in petroleum pipeline disputes. She has co-authored two textbooks (environmental and chemicals law), and published with CERES, as well as with Georgetown Environmental Law Review, Rutgers Law Review, International Energy Law Review, INECE, and American University Law Review.

* The opinions and characterizations in this piece are the author’s and do not necessarily represent those of the U.S. government.

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