BELARUS NEWS AND ANALYSIS

DATE:

02/01/2007

Gas threat blows over as Belarus signs deal

MOSCOW: Belarus has agreed to more than double the price it pays for Russian gas, signing what it called an "unfortunate" deal two minutes before a midnight New Year's Eve deadline expired and narrowly averting a supply cut yesterday that could have hit deliveries to western Europe.Under the five-year contract, Belarus agreed to pay $100 per 1,000 cubic metres of natural gas it buys from Russia this year, a substantial increase from the $45 it has paid until now but short of the $105 sought by Russian gas monopoly Gazprom, officials said.

The contract calls for substantial increases for each of the four years after 2007 so that by 2011 Belarus will pay the same "market price" charged by Gazprom to its customers in Europe, Gazprom and Belarus government officials said. Most of those customers currently pay over $200.

The deal also spells out terms for Gazprom to purchase a 50-per cent stake in the Belarus state gas pipeline operator, Beltransgaz, and for an approximate doubling of the price Gazprom pays for transit rights to pump gas to European markets through Belarus territory, officials said.

"Gazprom is absolutely satisfied" with the deal, spokesman Sergei Kupriyanov said on Echo Moscow radio yesterday.

"We would have had no basis for delivering gas as of January 1 ... and for this reason we were fairly active in calling on our Belarussian colleagues to finish negotiations by year's end," Kupriyanov said.

But speaking to journalists in Moscow early yesterday shortly after the deal was signed, Belarussian Prime Minister Sergei Sidorsky did not hide his disappointment.

"The Belarussian side, in a difficult atmosphere on the eve of the New Year, signed an agreement on unfortunate terms," he said.

Gazprom had warned it would cut off its exports to Belarus on New Year's Day unless the country accepted a new gas supply deal at higher prices. Belarus had threatened in response to disrupt Russian supplies to Europe which pass through its territory.

This had caused concern in the European Union, which imports five per cent of its gas supplies through Belarus from Russia -- most of it delivered to Germany and Poland - and revived memories of gas shortages this time last year caused by a dispute between Ukraine and Russia.

Coming in the wake of a recently announced hike in Russian duties on oil exports to Belarus, the new deal appears to mark the end of an era of cheap energy supplies from Russia that have subsidized the Belarussian economy since the collapse of the Soviet Union in 1991.

Sidorsky said he hoped to meet his Russian counterpart, Mikhail Fradkov, to discuss a a 50pc reduction in newly imposed duties on Russian oil imports. There was no confirmation from the Russian side that a meeting would occur.

Following are key facts about the Belarus-Russia gas deal.

GAS PRICE: Belarus will pay $100 per 1,000 cubic metres of natural gas from New Year's Day, up from $46. The country buys around 21 billion cubic metres (bcm) of Russian gas every year, so its gas bill will rise to $2.1bn a year from around $1bn before.

GAS TRANSIT: Gazprom, which supplies a quarter of Europe's gas needs, ships around 80pc of that gas via Ukraine and the rest via Belarus. Under the deal, Gazprom will almost double transit payments to Belarus. The new fee will be $1.45 for every 1,000 cubic metres of gas pumped 100 km. Up to now, Belarus has charged Russia $0.75. Belarus had wanted Gazprom to pay $1.65.

BELARUS PIPELINES: Gazprom already owns all of Belarus' transit pipelines but also wants a share of the country's local pipelines. The two sides have agreed Gazprom would pay $2.5bn for ownership of 50pc of Belarus's state-run firm Beltransgas.

The money is to be paid in cash over four years. Gazprom had initially valued the firm at less than $1bn.

OIL DELIVERIES: Belarus refines around 400,000 barrels per day of Russian crude. Until this year, the crude was shipped to Belarussian refineries without any export duty. Russia has said it will impose an export duty of $180 per tonne on supplies to Belarus from this year, while Minsk has said it would scrap all import deals with Russian oil firms in 2007.

Source:

http://www.gulf-daily-news.com/Story.asp?Article=166112&Sn=BUSI&IssueID=29288