BELARUS NEWS AND ANALYSIS

DATE:

03/01/2007

Year of Gazprom

FIKRET ERTAN

Russian giant Gazprom's decision to stop natural gas to Ukraine for a few days marked the last days of 2005 and early 2006. There was a chance the same would happen the first days of this year.

This time, Gazprom would have shut down the Belarusian natural gas line. Gazprom's decision was caused by the deadlock in the negotiations held between Gazprom and Belarus to increase natural gas prices.

Luckily the last-minute negotiations resulted in agreement between the parties, preventing another shutdown. The deal that Belarus has long opposed to accept undoubtedly means the submission of Belarus to Russian demands and to the conditions dictated by Gazprom.

Under the agreement, starting from 2007 Belarus will be required to purchase natural gas from $100 per thousand cubic meters instead of the old price of $46. The price will be gradually increased until 2011 at a pace to reach the current European market rates. In this case, Gazprom made a slight concession from its earlier offer of $105. As already noted, this clearly shows that Belarus submitted to the conditions imposed by Gazprom.

In return for this insignificant concession, Gazprom secured a much more substantial one from Belarus. It will materialize when Gazprom acquires a 50 percent share of Beltranzgaz transit natural gas line carrying gas through Belarus and on to Europe.

Belarus is the last country to which Gazprom dictated its terms in 2006. Gazprom signed several other similar agreements with other countries, including Ukraine, Moldova and Georgia.

Throughout 2006, Gazprom has not only protected its interests through gas price increases but also made remarkable moves in other fields. Among these, perhaps the most important one is acquiring a majority of the shares of the Sahalin-2 project, the most important and largest liquefied natural gas project in world. Gazprom, acting jointly with the Russian government, acquired the shares of the Dutch Shell and two Japanese companies in the Sahalin-2 in return for a payment of $7.45 billion.

In addition, Gazprom reinforced its presence and influence in the European natural gas market where it already controls 25 percent of the sales and flows. To this end, it extended its natural gas agreement with the French company Gaz de France from 2015 to 2030. Under the new agreement, Gazprom is entitled to have direct access to natural gas consumers of the French market and sell the natural gas to the houses and business establishments.

Last year, Gazprom signed a similar agreement with Italy. According to this agreement, in return for the extension of the previous agreement from 2017 to 2035, Gazprom was recognized by the Italian government the right to make direct sales to the Italian household consumers.

Looking at all the moves briefly described above, we could say that 2006 was the year of Gazprom.

Source:

http://www.zaman.com/?bl=columnists&alt=&trh=20070103&hn=39680

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