Details on the compromise remain to be worked out. Belarusian prime minister Sergei Sidorsky said he would travel to Moscow for talks on the issue.

Russia’s state-run gas export company, Gazprom, has more than doubled the price of gas and oil to Belarus, Georgia, Moldova, and Ukraine, which are several of the countries belonging to the Commonwealth of Independent States. These former Soviet republics also include Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, and Russia.

The European Union and big-business dailies have taken advantage of the dispute to warn of a Russian threat to Europe’s energy security.

The government of Belarus, one of Moscow’s closest allies, previously paid $47 per thousand cubic meters (TCM) for Russian gas, well below the $230-$250 paid by countries in western Europe. It paid no customs fee to Russia for oil that Belarus refined and sold on the market at substantial profit.

The new trade deal doubled the gas price Belarus will pay to $100 per TCM and imposed a customs fee of $180 per metric ton on oil.

A series of tit-for-tat countermeasures followed. The Belarus government imposed a $45 per ton transit fee on Russian oil bound for Europe. Moscow refused to pay the fee, and shut off oil to the Belarus pipeline. Belarus then diverted 79,000 tons of the oil already in its pipeline as payment for the transit fee. During the dispute the Russian government also banned sugar imports from Belarus, which normally sells half its annual production of 770,000 tons to Russia.

A similar trade deal was signed with Moldova, at $170 per TCM of gas, and a pact for $235 per TCM with Georgia. Azerbaijan halted oil exports to Russia after Gazprom raised gas prices to around $230 per TCM. Previously Moldova paid $80 per thousand cubic meters, while Azerbaijan and Georgia paid $110.

The terms of the deal with Belarus also required it to sell a 50 percent interest in the country’s pipeline network, built when Belarus was part of the Soviet Union.

Moscow is using its vast gas and oil reserves as leverage to gain control of pipeline networks in Georgia, Ukraine, and Belarus through which its gas and oil is shipped to Europe.

A year ago the Kremlin cut oil and gas supplies to Ukraine until the government in Kiev agreed to pay a sharp price increase to $95 per TCM. The price was subsequently raised again, to $130.

Russia has the world’s largest natural gas reserves and is thought to be third in oil assets. Last year its average oil production of 9.2 million barrels a day was more than that of any other country, including Saudi Arabia, according to Investor’s Business Daily.

The European Union receives 25 percent of its gas and 30 percent of its oil from Russia. Half of that is shipped through Belarus.

Moscow is using that leverage to buy into pipeline networks across Europe. It purchased a 50 percent minus one share in Wingas, a joint venture with BASF that has 1,243 miles of pipelines in Germany and the largest underground gas storage site in Europe. Russia is building a pipeline under the Baltic Sea to ship directly to Germany.

In December, Royal Dutch Shell “was all but forced to cede control” to Gazprom of its exploration and production on Sakhalin Island, off Russia’s east coast, noted the Wall Street Journal.

“Three key issues are at stake,” said the Financial Times in a January 10 editorial on the trade dispute between Russia and Belarus—"energy security, the fate of Belarus, … and the response to Russia’s domineering behavior in the former Soviet Union.”  
 
 
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