Russia Grabs Belarus Gas System in Rescue Deal


Russia on Friday took control of the Belarus gas pipeline network in an economic rescue deal that will help Minsk survive isolation by the West and increase the Kremlin's influence over its neighbor.

Russian gas giant Gazprom said it would pay $2.5 billion to take the 50 percent stake it does not own in Beltransgaz in a deal easing pressure on the depleted treasury of Belarus President Alexander Lukashenko.

The agreement will see Russia establish a dominant presence in its neighbor's economy at a time when Lukashenko is being shunned by the West over the country's dismal rights record.

Moscow's injection of cash to a regime that was once labeled the last dictatorship of Europe by Washington came a day after Belarus jailed the respected rights campaigner Ales Beliatsky for 4.5 years.

"Perhaps last year, some people thought that our ties had gone bad and developed serious problems," Russian President Dmitry Medvedev said upon receiving Lukashenko at his suburban Moscow residence.

"Well, this year, they became more dynamic and substantial. And I will tell you honestly -- the Russian Federation is glad," Medvedev said.

Belarus imports almost all of its natural gas from Russia -- a dependence that could bring the economy in the nation of 10 million people to its knees should Moscow suddenly decide to hike up the price.

That possibility haunted Lukashenko last year when he resisted Russia's efforts to win tighter control of its smaller neighbor's industries.

But the tailspin the Belarus economy underwent this year and the lack of Western assistance helped bring forward a deal that Prime Minister Vladimir Putin said will see Minsk start paying Moscow domestic prices for gas in 2014.

The drop from the $244 per thousand cubic meters Belarus pays this year to $164 at the start of 2012 "is a substantial rebate. It will help to keep at least $2 billion in Belarus," Putin said in televised remarks.

"At the same time, we agree that the Russian company Gazprom is acquiring the entire 100 percent stake in Beltransgaz -- the gas transport system of Belarus."

Putin initially said Ukraine before quickly correcting himself. The slip ironically came as Moscow also presses ahead with efforts to win control of Ukrainian gas pipelines in exchange for cheaper shipment costs.

Russia in addition offered Belarus a $10 billion loan over 15 years for the construction of the country's first nuclear power plant since the 1986 Chernobyl accident in ex-Soviet Ukraine.

Moscow initially agreed to finance the project in June 2009.

The signature of the deals comes as Belarus struggles with a massive current account deficit that has forced it to devalue its currency by some 65 percent and sell stakes in its prized economic assets to Russia and other states.

The economic turmoil stoked protests against Lukashenko's 17-year old regime that led to the arrests of hundreds of demonstrators and convictions of top opposition leaders.

Russia has offered only mild criticism of Lukashenko's crackdown and is now securing economic deals that analysts say should afford Minsk at least another year to deal with the economic crisis.

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