16.11.2012 / 15:08

What Lurks Behind Taking Belarusian Export Away from Baltic Seaports?

Aliaksandr Lukashenka announced re-orientation of Belarusian export cargo streams from Latvian and Lithuanian ports to the Russian ports. The announcement came out on 9 November at the meeting with the Governor of Russia's Leningrad region.

Belarusian authorities started a new round of geopolitical game between the East and the West. On the one hand, Belarus shows its loyalty to Putin. On the other hand, it shows the importance of Belarus to Lithuania and Latvia. The experts say that this step will give no economic benefits to Belarus. Baltic ports suggest much better conditions with regard to prices, quality and speed, than Russia could ever provide.

Putin of course greets this statement of official Minsk. However, he knows Lukashenka too well to trust him. The Belarusian ruler promised democratisation to the West, and the Russian rouble introduction to the East, many times. They failed to keep both promises. Todays promise may also eventually turn out to be bluff.

No economic sense

Today, the Lithuanian port of Klaipeda and the Latvian port of Ventspils conduct most of transportation of Belarusian goods by sea. And it makes good economic sense.

First, the Baltic ports are situated closer to Belarus. Potassium fertilisers produced by Belaruskali pass 712 kilometres on their way from Salihorsk to Klaipeda. The distance between Salihorsk and St. Petersburg amounts to 998 kilometres.

Second, railway transportation of one tone of cargo is cheaper in Lithuania, than in Russia. Third, Lithuanian and Latvian railways offers better services. Fourth, additional logistic expenses always accompany any logistical re-orientation. And finally ports in Russia's Leningrad region freeze, which leads to bigger economic expenses.

Belaruskali which made 16% of the world's potassium production in 2010 used to take the decision on transportation through the Baltic ports by itself, basing on its own economic interests. It concluded long-term agreements with Lithuanian and Latvian ports, beneficial for both parties.

The Baltic region longs for cooperation with Belarus as Belarusians remains the main clients of their ports. If the decision on re-orientation is taken, it will greatly affect the economy of the Baltic States. For example, Latvia receives five-seven percent of its own GDP due to freight transportation of Belarus.

Today Latvians want to make further concessions to Belarusians. The Minister of Transport Aivis Ronis promises to create milder conditions for the purchase and lease of the port facilities. This may partially explain why Baltic States often stand against the European Union's economic sanctions with regard to Belarus.

Just politics

Lukashenka took the decision on re-orientation together with Putin and under his pressure. Lithuanian Minister of Transport and Communications Eligius Masulis said that Russia set certain conditions in return for aid and Belarus has nowhere else to go. Indeed, Putin has strong leverage against Lukashenka.

First, Belarus and Russia hold negotiations on prices for power resources for the next year. Minsk wants to get discounts as economic stability of Belarus depends on these prices. The Russians want Belarus to ship 2-2,5 million tonnes of oil products back to Russia rather than to the West. Belarusian oil processing plants can fulfil such task but they will have to work with no profit.

Secondly, Belarusian authorities hope to get another Russian loan. Belarus failed to fulfil Russias demands on liberalisation and privatisation, so, there may be no more loans. However in the Eastern politics, decision-makers rarely stick to the papers they signed. Re-orientation of export to the Russian ports may become an additional argument to help Moscow forget about older commitments.

Thirdly, the re-orientation may also be the payment for the deceitful schemes of oil products export. This year, Belarus exported under the guise of solvents. Thus Belarus avoided the obligation of paying the fees to the Russian budget. The Russians detected this scheme and demand that Belarus should pay pack $1,5 billion. Belarus has no money to do that.

On the other side, official Minsk shows its importance to the Baltic States. Lukashenka's statement appeared as a powerful message to remind Lithuania and Latvia that they should do their best to defend the mild approach of the EU to Belarus.

This spring, Belarus already threatened Lithuania and Latvia with freight transportation re-orientation in case the European Union imposed economic sanctions. Official Minsk wants the European Union to make concessions on democracy and political prisoners.

What decision will official Minsk take?

Even Lukashenka probably does not know yet whether Belarus will transfer the export to Russian Baltic ports. Belarusian analyst Valier Karbalievich recalls that ten years ago Lukashenka promised that Belarus would transfer its export to the ports of Kaliningrad. It remained an empty promise then.

Lukashenka likes to promise and not to keep his promises. Very few politicians in the world still trust his words, because of that. On the one hand, it would be logical if Belarus exported its goods through the Baltic ports as before. On the other hand, Belarusian authorities fully depend on Russia today and would do their best to make the Russian leaders like him.

Lukashenka stands out as the only politician in the world who can play games with Russian leaders so skillfully and openly. The Belarusian ruler has been manoeuvring between the EU and Russia for 18 years and he knows his stuff very well.

But this may not last long. Belarusian ruling elite must demonstrate its loyalty. Otherwise, they will have to release political prisoners and to improve relations with the West - something which they are very reluctant to do.

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