BELARUS NEWS AND ANALYSIS

DATE:

01/01/2007

Belarus comes in from the cold

* Tony Halpin, Moscow

BELARUS averted a new year gas war with Russia yesterday after agreeing to a price deal hours before a deadline that would have cut supplies for 10 million people.

The deal - two minutes before the New Year began - came after energy giant Gazprom threatened to leave Russia's western neighbour in the cold in a dispute over the gas price for 2007.

The Belarus Prime Minister, Sergei Sidorsky, made a late-night dash to Moscow to sign the agreement to pay $US100 ($126) per 1000 cubic metres of gas, just below the $105 sought by Gazprom. The new price is more than double the amount paid by Belarus last year, but still below the full market rate.

"The Belarussian side, in a difficult atmosphere on the eve of the new year, signed an agreement on unfortunate terms," Mr Sidorsky said.

Gazprom's chief executive, Alexei Miller, said Belarus had been offered "the best conditions". In a rerun of Gazprom's gas dispute with Ukraine last January, the company had said supplies to Belarus would be switched off on New Year's Day unless it signed a new contract.

That would have left many of Belarus facing a cold start to the new year and dealt a severe blow to the country's Soviet-style command economy, which relies heavily on cheap energy.

The conflict also threatened to blow a chill wind over the EU, which receives 20 per cent of its Russian gas imports through pipelines that cross Belarus.

Belarus had warned it would halt the transit of the EU gas if Gazprom switched off its domestic supplies.

Mr Miller said that, as part of the agreement, Gazprom would gain a 50 per cent stake in Belarus's strategically important pipeline operator Beltransgaz, at a cost of $US2.5 billion ($3.17 billion) over four years.

The transit price paid to Belarus for Russian gas supplies to Europe will also nearly double to $1.45 per 1000cum travelling 100km.

Critics say Moscow is using energy as a weapon to enforce its dominance over its former Soviet satellites and extract concessions on strategically important infrastructure.

The deal is a blow to Belarussian President Alexander Lukashenko, who accused Russia of blackmail last week. Belarus and Russia are in a loose economic and political partnership that is supposed to lead to formal union, and Mr Lukashenko had argued that gas prices in both countries should be the same.

He now faces a possible economic slump triggered by the jump in fuel prices.

The EU had urged both sides to resolve the dispute quickly. Gazprom had warned its customers it would not be able to make good any shortfall if Belarus siphoned off gas from its pipelines to beat a blockade.

Source:

http://www.theaustralian.news.com.au/story/0,20867,21000400-2703,00.html