By Courtney Weaver in Moscow
Dmitry Medvedev, Russia's president, ordered statecontrolled Gazprom to cut gas supplies to Belarus yesterday after debt talks between the Russian gas monopoly and Beltrangaz, its Belarusan customer, broke down.
Alexei Miller, Gazprom's chief executive, told Mr Medvedev that Gazprom would immediately cut 15 per cent of its supply to Belarus and then continue reducing supply on a step-by-step basis by as much as 85 per cent.
Mr Miller said in his televised discussion with the president that while Belarus had finally admitted to owing Gazprom $192m (?156m, ?130m) in debt, the two sides had been unable to come to an agreement during talks on Sunday.
Though the stand-off echoes previous disputes between Gazprom and Ukraine, analysts attributed the current spat to Russia and Belarus's disagreement about a planned customs union with Kazakhstan.
Belarus refuses to join the union until Russia removes duties on oil and petroleum products, a proposition Russia has yet to agree to.
"Holding up the customs union is the only leverage Belarus has against Russia . . . and now it's trying to put pressure on Moscow to agree to some form of financial subsidy going forward," said Chris Weafer, chief strategist at Uralsib Capital, the Moscow investment bank.
He said that while the dispute was unlikely to a pose problems for European gas customers, it would reflect badly on both Gazprom and Mr Medvedev, who has backed Russia's modernisation and will hold talks with Barack Obama, US president, in Washington this week.
Igor Sechin, Russia's deputy prime minister, insisted that the customs union and gas cut-off were "in no way connected".