Russia not to surrender pipeline in Belarus - ambassador :: Charter'97 :: News

Russia is not going to surrender an oil products pipeline to Belarus despite a recent fine Belarus imposed on the pipeline operator, Russian ambassador to Belarus Aleksandr Blokhin has said in an interview to a Belarusian business newspaper. The pipeline is located on Belarusian territory but belongs to Russia under the Bishkek agreement on the division of Soviet property, Blokhin said. Speaking about the privatization of the state-owned gas distribution company Beltranshaz, he pointed out that Russia had never been willing to acquire it at a knock-down price, but insisted on a fair evaluation. The following is the text of Blokhin`s interview with journalist Natallya Hryb, entitled "Do not ask for our money and we won`t ask for yours", published by Belarusian newspaper Belorusskaya Delovaya Gazeta web site on 10 November; subheadings have been inserted editorially:

[Hryb] How would you describe the current state of relations between Russia and Belarus?
Russia will do nothing to hurt Belarus
[Blokhin] I would single out two key principles that underlie all the decisions that Russia makes in the context of integration with Belarus. First, Russia does not intend to railroad Belarus into adopting either economic or political decisions. Second, Belarusians should realize that Russia will do its utmost to shield Belarus from any negative consequences of the integration. Believe me everything Russia has done so far is motivated by the good will towards Belarus.
[Hryb] You were based in Azerbaijan for five years.
[Blokhin] I am grateful to my fate that brought me into contact with such a political heavyweight as [former Azeri president] Heydar Aliyev. We had a great deal of face-to-face meetings which I believed allowed us to weather a rocky period in Russian-Azeri relations. I would not like to overstate the role played by the ambassador, but I do believe that these meetings greatly benefited our countries. I have only fond memories of Azerbaijan.
[Hryb] Your emotions about Belarus are more subdued.
[Blokhin] That is true. Unfortunately, I cannot boast of meeting Alyaksandr Ryhoravich [Lukashenka] too often. We meet only when our governors visit Belarus. Apparently, Alyaksandr Ryhoravich believes that this is the best set-up.
Gas should be sold to Belarus at market price
[Hryb] You have recently met Anatoliy Chubays [head of the Unified Energy Systems of Russia company that manages Russia`s energy grid] who came to Minsk to take part in the Freedom of Speech TV programme. Why was acting Belarusian Deputy Prime Minister Uladzimir Syamashka so adamant about securing Chubays` consent regarding electricity imports from Lithuania?
[Blokhin] I do not know. Anatoliy Borisovich [Chubays] is a good manager and despite the fact that there is a great deal of outstanding issues in economic integration between Russia and Belarus, I know of no problems in the energy sector.
[Hryb] How are the gas negotiations going?
[Blokhin] The presidents have agreed to introduce market prices for gas and gas transit. Both parties are gradually realizing that these prices are both fair and make perfect economic sense. Gazprom cannot sell gas at a loss.
[Hryb] While addressing the Belarusian parliament, Syamashka said that Belarus and Russia had reached an agreement to set the price of gas at 44 dollars per 1,000 cubic metres. Is that so?
[Blokhin] I don`t know about any agreement being reached. It is hard for me to explain why Uladzimir Iliych [Syamashka] made such a statement. A large Russian delegation headed by Russian Minister of Energy Igor Yusufov is due in Minsk in the middle of November to discuss all energy issues. Gazprom will be represented by the deputy chairman of the board, Aleksandr Ryazanov. That is when all uncertainties might be cleared. I assume that Syamashka`s optimistic remarks were caused by the fact that Belarus had made an offer to Russia that it cannot turn down.
[Hryb] Do you mean the creation of a joint venture on the basis of Beltranshaz [the state gas distributor]?
[Blokhin] According to Syamashka, Belarus has not changed its stance on this issue. Russia finds these conditions unacceptable. I already said so in May. Russia wants a sensible price and a controlling stake. Alyaksandr Ryhoravich keeps saying that Russia wants to buy Beltranshaz for a song - its balance sheet value. Moscow approaches this issue differently. We do not insist on the balance sheet value. The price should be realistic. During the first round of talks in which I was involved, Russia offered to conduct an independent evaluation of Beltranshaz. Gazprom suggested that Belarus choose from a group of 22 reputable international companies and was prepared to pay the costs. Belarusians refused on the grounds that he who pays the piper orders the music. I regard these concerns as misplaced. A well-known company will never collude with its customer because it will ruin its reputation.
[Hryb] According to some media reports, the Belarusian government has apparently agreed to an independent evaluation.
[Blokhin] There was no mention of it in Syamashka`s report. No-one has communicated this to us. This is the primary condition on which further negotiations must be built.
[Hryb] Has the second round of the gas talks got off the ground?
[Blokhin] Not yet. Syamashka said that Russia had not given an official response. I do not agree with this statement. Russia said that the conditions put forward by Belarus were unacceptable. You have got to understand that neither Russia nor Gazprom is willing to punish Belarus for its unwillingness to set up a joint venture on the basis of Beltranshaz. Simply put, when Belarus bought gas at a discount price, Russia had the grounds to hope for special treatment when it came to the establishment of the joint venture. If Belarus takes issue with this arrangement, we will apply market prices.
[Hryb] Belarus insists on receiving all Russian gas at the price charged in the fifth sector of Russia prior to the introduction of the Russian rouble. Does this demand make sense?
[Blokhin] I do not see how these two issues are linked. These are just political games. Minsk keeps voicing so many fears about the Russian rouble that it gives rise to a question whether the introduction of the Russian rouble is feasible. We believe that the Russian rouble will benefit Belarus. However, it is up to Belarus to decide.
Equal business conditions are a figment of imagination
[Hryb] What about the creation of equal operating condition for Russian and Belarusian companies?
[Blokhin] The meaning of this is beyond me. I fail to see equal operating conditions for Belarusian companies in Belarus. Alyaksandr Ryhoravich says that large enterprises should enjoy special treatment. Therefore, a farm in Zhdanovichy and a metallurgic plant have different operating conditions. In addition, banks have different interest rates on loans given to individual companies depending on the amount of risk. It is impossible to ensure equal operating conditions for Russian and Belarusian companies. One could say that we will not go forward due to the absence of equitable operating conditions. These conditions are impossible in principle. The only tack we should take is to harmonize legislation in our countries, which is different in terms of business regulation.
[Hryb] Payment of indirect taxes in accordance with the country-of-origin principle is costly for Belarus. Will Russia pay compensations of 800m dollars to Belarus in the next four years?
[Blokhin] This is a moot point. The country-of-origin principle is used for all trade with Belarus. When the Gorkiy-based lorry plant imports axles from Belarus, Belarus gets the VAT. The axles are shipped to Russia and the plant assembles lorries for export. Russia gets no VAT. Belarus is losing money because it has a negative trade balance with Russia. If Belarus had a positive trade balance with Russia, Russia would be out of the pocket.
[Hryb] If I remember correctly, Belarus has promised to reimburse Russia for any losses if the foreign trade trend changes in favour of Belarus.
[Blokhin] If you do not ask for any compensation, we will not ask for one either. You should boost your exports. However, if the Russian rouble is introduced, Russia is prepared to reimburse Belarus for the tax losses for two previous years and annually onwards.
[Hryb] As you are well up on the integration process, do you think the Russian rouble will be introduced in a year`s time?
[Blokhin] I tend to use other notions. Belarusian business loses 150m dollars in conversion and banking fees. I do hope that Belarus will duly appreciate the benefits of this step.
Russia is not surrendering its property in Belarus
[Hryb] Is it true that Russia intends to control Belarusian exports of oil products next year?
[Blokhin] Of 17m tonnes of oil that will be processed in Belarus, 7m tonnes will be used for internal consumption and the rest will be exported. Up to now, exports were controlled by Belnaftakhim [state oil concern]. The jury is still out regarding what will happen next.
[Hryb] What stage are the talks regarding the pipeline of Zapadtransneftprodukt [Russian oil company] at?
[Blokhin] The pipeline is owned by Russia. This was unequivocally communicated to Belarus. Questioning the provisions of the Bishkek agreement is like redrawing borders in Europe. The stability of relations within the CIS rests upon this document.
[Hryb] Belarus is also invoking the Bishkek agreement.
[Blokhin] In this case, Belarus should not question the legality of this property. This dispute is groundless.
[Hryb] Belarus has proposed to establish a joint venture and use the pipeline jointly.
[Blokhin] This has been offered by Zapadtransneftprodukt on condition that the property be officially registered as belonging to Russia. Once this has been done, the joint venture can be set up. Belarus has a contribution to make in the joint venture.
[Hryb] The Druzhba pipeline, for example?
[Blokhin] Of course not.
[Hryb] 40 per cent of shares in the Mazyr-based oil refinery or the Naftan oil refinery?
[Blokhin] No. Belarus has other assets to contribute. However, I would like to reiterate that any agreement to this effect shall be conditional on acknowledging that the pipeline is owned by Russia and on registering Zapadtransneftprodukt as a Russian company. The way the situation is being handled is patently incorrect. In February 2003 we reached an agreement with the Belarusian government to the effect that the company would continue to operate until the issue is fully settled. Despite this agreement, the Belarusian tax inspection has recently slapped a fine of 12.5m dollars on Zapadtransneftprodukt. The case has been wrongly remitted to the Homel region economic tribunal. It is plainly wrong as the case revolves around the Russian property. Belarus also has assets in Russia, two sanatoriums, which were handed over to Belarus in accordance with the Bishkek agreement. Why is Belarus laying claim to the pipeline?
[Hryb] The Belarusian government says that Belarus was involved in its construction.
[Blokhin] All former Soviet republics were involved in its construction. If we had tried to estimate the individual contribution of each republic, we would have never been able to divide the Soviet legacy. Therefore, each republic kept the Soviet property that was located on its territory. Therefore, a portion of the Druzhba pipeline went to Belarus.
[Hryb] Similar pipelines reverted to the Baltic republics.
[Blokhin] This not entirely so. A joint venture was established in Latvia. The Latvian side contributed the pipelines and Russia chipped in oil products pipelines. Latvia holds a majority stake as the value of the pipelines is higher.
[Hryb] Is it an option for Belarus?
[Blokhin] Nothing is being offered to us. They just want to take away our property.
[Hryb] Why hasn`t Russia taken this case to the CIS economic tribunal? Is it afraid of loosing?
[Blokhin] We have nothing to be afraid of. The CIS economic tribunal`s rulings are recommendatory. I would like to reiterate that all negotiations should be based on the grounds that Zapadtransneftprodukt is the Russian property. Any other decision will be legally unfair.

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