BELARUS NEWS AND ANALYSIS

DATE:

22/06/2010

No need to worry about Belarus gas

Posted by Izabella Kaminska

Russia and gas disputes go hand-in-hand.

And the latest dispute of this nature is focused on Belarus.

Russia's Gazprom claims the country owes it $192m in unpaid gas payments. On Monday, therefore, the company decided to cut gas supplies to Belarus by 15 per cent in a bid to force its neighbour to pay-up.

When that didn't work, Gazprom upped the ante further. On Tuesday, the company's CEO said it would be cutting supplies to Belarus by 30 per cent as of 10am London time.

As Reuters explained, the row focuses on the following:

Gazprom says Belarus has been paying $150 per 1,000 cubic meters, instead of the $169.20 that the company charged in the first quarter and $184.80 in the second, which created the debt.

Belarus has said Moscow owes it $200 million for transit and Gazprom has long denied it.

On Monday, Gazprom acknowledged the debt existed but blamed Minsk for blocking payments.

But while Europeans will be cautious of eastern gas disputes spiralling out of control, most analysts will agree this is hardly comparable to the deadlock faced by western Europeans in January 2009, when Russia cut supplies to the Ukraine for almost two weeks. Or before that, in January 2006, when the Russian cuts famously impacted gas supplies coming into western Europe on an even greater level.

For one, it is now June - which means gas demand is significantly smaller than it is around January.

Secondly, gas prices are lower and Europe is more diversified.

JBC Energy sets out the situation plainly:

Even though the summer started on a chilly note in large parts of Europe, the latest sequence of the natural gas row between Russia and its neighbouring transit countries is set to have very limited repercussions for Europe.

Belarus owes close to $200 million in unpaid gas bills from the first half of this year, which has led to a suspension of up to 30% of the gas flow by now. Recent years have seen gradual increases in Russian gas prices to Belarus and by 2011 price discounts will be fully phased out.

The country is in a poor negotiating position and has to act carefully in order not to lose its lucrative transit business in the future, given Russia's massive investments in bypassing gas and oil pipelines such as Nord Stream or BPS-2.

Therefore we do not expect Belarus to cut off transit volumes to Europe. Even if it did so, the impact would remain limited as the huge majority of transits pass via Ukraine, European demand is at a seasonal low, LNG imports are available at competitive prices and storage filling could be easily delayed a bit. According to Interfax, Belarus' First Deputy Prime Minister Vladimir Semashko has already indicated that the debt will be paid within the next two weeks.

In other words, there's no crisis here.

We can move on . . .

Source:

http://ftalphaville.ft.com/blog/2010/06/22/267666/no-need-to-worry-about-belarus-gas/


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