Poland, Belarus & Ukraine Report: January 27, 2004

RULING COALITION FACES TOUGH VOTE ON AUSTERITY PLAN. The ruling Democratic Left Alliance-Labor Union (SLD-UP) bloc on 24 January almost unanimously pledged support for the so-called Hausner plan, a set of budgetary cutbacks prepared by Economy Minister Jerzy Hausner to cut some 30 billion zlotys ($8 billion) in spending over the next four years to lower the budget deficit to levels allowing Poland to enter the eurozone. However, the upcoming parliamentary vote on the Hausner plan is expected to be contentious, since the SLD-UP minority government led by Prime Minister Leszek Miller controls just 206 votes in the 460-seat Sejm, which is 25 votes shy of the required majority.

The SLD-UP has so far won key votes with the backing of minor parties and independent deputies. But on 23 January, the Peasant-Democratic Party led by Roman Jagielinski refused to support an SLD-UP budget amendment intended to cut railway subsidies, and the ruling coalition lost the related vote. "Yesterday gave us a taste of what may come when we put cutback bills before parliament," Miller said on 24 January. "But this government will not bow to political blackmail, and we will remain open to cooperation in parliament."

Polish media reported last week that Jagielinski demanded posts in the government for his party in exchange for supporting Miller's cabinet in parliament. Jagielinski, whose Federalist Parliamentary Club in the Sejm consists of 15 deputies, has subsequently dismissed those reports. He has also pledged to support the Hausner plan. But he also told "Gazeta Wyborcza" on 26 January that his caucus has talked with the SLD-UP on forming a possible ruling coalition that could be supported by a majority in the Sejm. "It is obvious that the conclusion of such an agreement with the SLD-UP would be linked to assuming some [government] posts by our people," Jagielinski noted.

The SLD-UP, unpleasantly surprised by Jagielinski's backtracking last week, seems to be looking for support to the Hausner plan from the Civic Platform, the largest opposition group, which also sees the need for making fiscal reform. Civic Platform leader Donald Tusk called on 18 January for early parliamentary elections to be held in June (see "RFE/RL Poland, Belarus, and Ukraine Report," 20 January 2004). Since then, he has apparently changed his mind somewhat, because on 26 January he told journalists that his party will study Hausner's bill and back the budget cuts that are compliant with its own fiscal-overhaul plan.

Meanwhile, Jaroslaw Kaczynski, leader of the other major opposition group, Law and Justice, on 25 January called on the parliamentary opposition to reject the Hausner plan, dissolve the parliament, and hold early parliamentary elections in June, some 15 months ahead of schedule. The Peasant Party was the only party that responded to Kaczynski's appeal positively. The far-right, anti-EU League of Polish Families announced that it could hold talks with Law and Justice and the Civic Platform about early elections only if these parties change their positions with regard to Poland's entry into the European Union. And Civic Platform lawmaker Janusz Lewandowski called Kaczynski's appeal a "manifestation of political light-heartedness."

Thus, it should be expected that Miller in particular and the Democratic Left Alliance in general will now try to persuade the Civic Platform to back the Hausner plan. Even if they fail to do so, there still remains a chance of obtaining support from minors parties in the Sejm, including Jagielinski's group, since in the opinion of many Polish observers these small parties are rather unlikely to be re-elected and will therefore strive to keep their seats in the current legislature as long as possible. (Jan Maksymiuk)

A NEW ROUND OF RUSSIA'S 'GAS ATTACK' ON BELARUS. An announcement by gas traders Itera and Transnafta that they will halt deliveries of Russian gas to Belarus on 24 January was broadcast by Russian television networks on 22 January -- to the horror of Belarus and its ruling elite. The situation is exacerbated by the fact that Belarus still has no agreement with the Russian natural-gas monopoly Gazprom for supplies in 2004. Gazprom halted deliveries to Belarus on 1 January, leaving Itera and Transnafta as the country's only remaining gas suppliers. Their decision came after Gazprom refused to approve a contract between Itera and the Belarusian government concerning February gas deliveries. Gazprom holds nearly unlimited leverage over Itera and Transnafta due to its control of access to gas-transport networks.

Until this year, Belarus received gas from Gazprom at the price that Russia's western regions were charged. An agreement signed between the Belarusian government and Gazprom in April 2002 specified that Gazprom would be allowed to participate in the tender to privatize Beltranshaz, which operates Belarus's gas-transport and distribution network, as a condition for the continuation of cut-rate gas supplies to Belarus. Just 10 billion cubic meters (Gazprom's share) of the 18 billion cubic meters of Russian gas received by Belarus in 2003 was delivered at the discount price of $28 per 1,000 cubic meters. The remaining amount was supplied by the two independent traders at a price of $44-$50 per 1,000 cubic meters.

The Beltranshaz privatization collapsed in the summer of 2003 after Belarus valued the company at $5 billion and offered to sell just a minority stake (Gazprom was offering some $600 million for a controlling stake). This led Gazprom to announce in September that gas deliveries to Belarus would be carried out "on market principles." Gazprom also announced its withdrawal from talks over Beltranshaz, although that move was subsequently reversed under pressure from the Russian government, which had its own interest in keeping Minsk at the negotiation table over issues related to monetary union. Gazprom later declared that it would charge Belarus the same rate as European clients paid -- i.e., $80 per 1,000 cubic meters.

The threat of a skyrocketing gas bill forced the Belarusian government into hectic negotiations with the Russian government and Gazprom in the last quarter of 2003. However, no compromise was found despite frequent announcements from the Belarusian side that a deal was at hand. Facing the political and economic fallout from what might be described as a new "gas attack," official Minsk preferred to keep up appearances that everything was progressing well and in fact misinform the population by issuing optimistic and unwarranted reports in the media on purported details of the talks. The media thus announced in December that a compromise deal had been worked out to sell Gazprom a 50 percent stake in Beltranshaz in exchange for continuing to offer Russian gas at domestic prices. Meanwhile, Gazprom press releases effectively confirmed only that negotiations were continuing.

Belarusian television channels subsequently announced at the beginning of January that until the deal with Gazprom is finalized, Belarus will continue to receive gas at Russia's domestic rate. In fact, Gazprom has not resumed deliveries to Belarus since the beginning of the year. There is one interesting detail, however: Minsk considers last year's agreement with Gazprom to have been prolonged for this year, and on this basis siphons off gas from pipelines bound for Western customers without Gazprom's consent. Belarusian authorities have said they will pay Russia's domestic rate for that gas, as Gazprom has no contract for piping gas through Belarusian transport facilities in 2004.

Finally, Belarusian Prime Minister Syarhey Sidorski declared upon his return from Moscow on 15 January that deliveries of cheap gas would continue until a deal is worked out, adding that Russia retreated from the assumption that Beltranshaz would be sold according to its "balance [-sheet] value" of $600 million. In response, sources in the Russian government reportedly declared that the continuation of Gazprom deliveries at the 2003 price was "purely Sidorski's idea," while Gazprom said in a press release that the latest round of negotiations failed to produce a deal and confirmed that it has not supplied gas to Belarus since the end of 2003. To make matters worse, it turned out that Belarus had no agreements with Itera or Transnafta, as their gas deliveries were carried out according to protocols that expired on 16 January.

A temporary agreement signed on 23 January by Beltranshaz with Itera and Transnafta allows for gas deliveries to Belarus until 29 January, although the previous limits were reduced by one-third. But the dispute is far from over, and it leaves President Alyaksandr Lukashenka facing a tough choice: Either sell Beltranshaz at Gazprom's price or accept a significantly higher gas bill in 2004. (A third option is to continue siphoning off Russian gas, but this is a temporary solution that would merely heighten tensions.)

In the short term, the impending gas price hike threatens to ruin Lukashenka's grandiose economic plans for 2004 -- including 10 percent economic growth and wage hikes -- and make a laughing stock of his promise that monthly household gas bills would not grow by more than $4-$5 per month. The gas talks might have been slowed by Belarus in 2003 in an intentional bid to raise the issue just before the March 2004 presidential election in Russia -- and hence put the Kremlin in an awkward position in front of the electorate. However, the results of the December elections to the Russian State Duma left Lukashenka with no strong political partner to back his cause (a role generally played by the Communist Party) and freed the Kremlin of any need to play the Russia-Belarus integration card in order to boost Russian President Vladimir Putin's re-election bid.

In the longer run, Gazprom, which is currently diversifying its supply routes to the West (the construction of a new pipeline on the bottom of the Baltic Sea has just been launched), might ultimately lose interest in purchasing Beltranshaz. That would leave Belarus with little chance of seeing major revenues from privatization.

On the other hand, Belarusian authorities cannot expect the country's gas bill to remain the same, regardless of how the current impasse is resolved. Russia's domestic gas prices will rise by approximately 20 percent in 2004, and independent gas traders have already hinted that they will pass along the increase. The gradual convergence of Russia's domestic prices with global gas prices is likely to continue, as this remains a major condition for Russian membership of the World Trade Organization.

A new gas war between Belarus and Russia once again raises speculation about whether politics alone lies behind the standoff. At any rate, it is utterly unthinkable that gas traders -- including even Gazprom -- would decide to halt gas supplies to Belarus without the Kremlin's knowledge and prior consent. President Vladimir Putin's comments appear to confirm this supposition: Putin reportedly told Lukashenka in a telephone conversation on 24 January that his government cannot force independent companies to supply gas without a relevant contract with Minsk, adding that the Kremlin absolves itself of responsibility for any possible negative consequences of the dispute.

This report was written by Vital Silitski, a Minsk-based freelance researcher.

"In my opinion, the Our Ukraine bloc made a mistake by not treating the idea of constitutional reform sufficiently seriously in the beginning. The leadership of the bloc thought that the reform was a roundabout way, a deceptive maneuver intended to divert Our Ukraine from preparations for the [2004 presidential] election. We have realized belatedly that Kuchma's and Medvedchuk's intentions are serious." -- Our Ukraine lawmaker Taras Stetskiv in an interview with the "Glavred" website (http://www.glavred.info/) on 22 January.

"I assume that after the [constitutional reform] is passed with 300 votes, Leonid Danylovych [Kuchma] will solemnly declare his well-considered intention to meet halfway abundant suggestions from the working people (suggestions of the working people will be prepared by that time) that he remain the guarantor of stability and democracy.... I'm not so sure that a parliamentary election will be held [in 2004]. President [Kuchma] does not face the question of whether he is to remain in power or not. For him the question is in what manner he has to prolong his powers. All this fuss with the pseudo-reform allows Kuchma to keep several options in reserve. If he sees a chance to win in a ballot, he will take advantage of it. If such a chance fails to appear, he will prolong his powers until 2006.... For example, closer to the election date the situation in the country will become exacerbated, thus giving rise to an extreme need to introduce an emergency situation. Then the presidential election campaign may be postponed until the situation is stabilized. There is also another scenario. The progressive part of the public [the working people] may come up with a proposal to cancel the election. What the hell do we need to elect a president [in 2004] -- the public may ask -- if the Verkhovna Rada is going to re-elect him 18 month later? Let him be until 2006, then." -- Our Ukraine lawmaker and former parliamentary speaker Ivan Plyushch, in an interview with the 24-30 January issue of "Zerkalo nedeli."