Lukashenko Set to Win Belarus Election After Oil Deal

Belarusian President Alexander Lukashenko, whose regime the U.S. dubbed the “last dictatorship in Europe,” is set to prolong his rule in a Dec. 19 election that may bind him more closely to Russia after overtures aimed at building ties with western Europe yielded little.

The Belarusian leader dropped his objections to further economic integration with Russia last week in exchange for duty- free oil. Prime Minister Vladimir Putin said yesterday that Russia will deliver as much as 21 million metric tons of crude to Belarus duty-free in 2011, costing Moscow $5.3 billion in lost revenue.

In recent months, Lukashenko engaged in a war of words with Russian President Dmitry Medvedev as the Belarusian leader courted the European Union as well as Russia for economic support. Disputes between the two countries have erupted regularly in recent years, mostly over energy supplies.

Lukashenko was playing a “rather risky game of chicken” with the Kremlin, Fyodor Lukyanov, an analyst at the Council on Foreign and Defense Policy in Moscow, said today by telephone. “He achieved what he wanted. He’ll become president again, of course, and then he’ll start another round of using political means to get economic preferences.”

Customs Union

Lukashenko, 56, has been in power since 1994 and is standing for another four-year term. His nine rivals have had little opportunity to campaign because the president dominates the state-run airwaves, according to the Brussels-based Office for a Democratic Belarus, a non-governmental organization that campaigns for free elections.

Belarus is part of a customs union with Russia and Kazakhstan. The three countries plan to create an economic union in 2012. Russia and Belarus are further joined by a “union state” agreement developed in a series of treaties in the 1990s.

The ex-Soviet republic of 10 million that borders Russia and three European Union states joined the EU’s Eastern Partnership to counter Russia’s influence. Another western institution, the International Monetary Fund, extended $3.5 billion in loans to help Belarus rescue its economy last year.

The EU extended the suspension of a travel ban aimed at Lukashenko and top members of his government in October, arguing that a policy of engaging Lukashenko is leading to limited human-rights improvements in Belarus.

‘Unscrupulous Lies’

The rhetoric between Minsk and Moscow heated up in October, when Lukashenko condemned the “flow of unscrupulous lies, disinformation and utter nonsense” about Belarus in Russian media, which he implied was ordered by Russia’s leadership to stoke tensions between the two countries.

Medvedev shot back, decrying Lukashenko’s “anti-Russian rhetoric” and “accusations and invective” that “go beyond not just the rules of diplomacy but also of basic human decency.” Lukashenko built his campaign for re-election on promoting the image of Russia as an “external enemy,” Medvedev said.

“He’s playing his old game,” Alexander Rahr, a Russia expert from the German Council on Foreign Relations, said by telephone. “Lukashenko knows how to deal with the Kremlin, how to create anger and even fear that he might go to the West.”

Both leaders put their acrimony aside to reach an energy deal on Dec. 9. Under the agreement, Russia will begin duty-free oil shipments to Belarus on Jan. 1, 2011, if Minsk ratifies a raft of documents on creating the economic union. Belarus committed to transfer all the export duties it collects on oil products to Russia.

Refinery Margins

“In the near-term, Belarusian refiners will come out as winners from this setup,” Artem Konchin, an oil and gas analyst at UniCredit SpA in Moscow, said by e-mail. “The difference between export duties on products and crude within the union borders will be apparently preserved, letting the Belarusian refiners earn margins similar to what Russian refiners earn.”

In 2007, Russia briefly halted natural gas deliveries to Europe through a pipeline that crosses Belarus. It reduced gas supplies in June this year in another spat. Russia supplies a quarter of Europe’s gas, sending about 20 percent via Belarus and the rest across Ukraine.

The EU needs to take a harder line with Lukashenko, a pro- EU and free markets opposition presidential candidate, Andrei Sannikov, said in an interview in Berlin on Oct. 27.

“Europe should proceed from the view that Lukashenko is the last dictator in Europe and nothing will change until he goes,” said Sannikov, 56, a former deputy foreign minister of Belarus who resigned his post in 1996.

For all its disagreements with Lukashenko over the years, Russia sees the fellow Slavic nation as an important economic partner and geopolitical buffer on its western flank, said Masha Lipman, an analyst from the Moscow Carnegie Center.

“There is no one else Russia can set against Lukashenko, so there is a realization that it will have to live with him for some time longer,” said Lipman.

To contact the reporters on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net; Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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