By Courtney Weaver in Moscow and Roman Olearchyk in Kiev
Belarus announced yesterday it would cut off all gas transits to the rest of Europe as president Alexander Lukashenko warned a dispute between his country and Gazprom, the Russian monopoly, had escalated into a full-scale "gas war".
Mr Lukashenko's comments came hours after Russia increased the level of its gas cuts to Belarus from 15 to 30 per cent. Gazprom has said it would cut up to 85 per cent of supplies if Belarus did not pay the $192m it said it owed for gas deliveries.
Belarus and Ukraine provide the main transit routes for Russian gas destined for the rest of Europe.
Despite the escalation in the dispute, analysts said it was not as serious as Gazprom's two-week conflict with Ukraine in January 2009, because less gas was used during the summer and transit through Belarus accounted for 20 per cent of Europe's supply of Russian gas compared with Ukraine's 80 per cent.
Sergei Kupriyanov, Gazprom's spokesman, said the company would have no trouble fulfilling its contractual obligations thanks to European underground storage facilities and because Kiev had pledged yesterday to help compensate for any shortage by pumping more Russian gas to Europe.
"We have the capability to pump 15, 20, 30bn cubic meters more gas," Mykola Azarov, Ukraine's prime minister, said. "If there is such a need, the Ukrainian gas pipeline system will fulfil agreements on the supply of gas to Europe."
Belarus said it would not resume transit until Gazprom paid it $260m Minsk said it owed in transit fees.
"[Gazprom] for the past half-a-year has not paid us one kopek," the president told reporters in Minsk after a meeting with Sergei Lavrov, Russia's foreign minister. "We don't owe Gazprom. Gazprom owes us $70m," - the difference between the $260m and $192m - he said.
Mr Kupriyanov told reporters that the transit fees question was a "technical issue" that had been "raised by the Belarusian side to have leverage in the negotiations".
"We're trying to pay for the transit but all this time the Belarusian side is trying to increase the tariff outside the contract, which brings us to this kind of dead-end?.?.?.?we can pay but we cannot pay," he said.
Lilit Gevorgyan, a political analyst at IHS Global Insight, said that while Belarus typically acted as a close ally of Russia, Mr Lukashenko had politicised the current conflict to secure oil and gas subsidies from Russia on the eve of a planned customs union. "Belarus is essentially offering its political loyalty in exchange for energy discounts," she said.
Yesterday the Belarusian president accused Dmitry Medvedev, his Russian counterpart, of trying to "humiliate" Belarus by suggesting it was trying to pay for gas with "cheese and pancakes".
Mr Lukashenko added that Belarus had gathered the money it owed Gazprom from "strangers" yesterday, while Russia, its traditional ally, hadn't had the decency to "wait a little".
Ukraine insists it is neutral in the Moscow-Minsk spat, but it has simultaneously used the conflict to push Russia and Brussels to drop alternative pipeline projects that would bypass Ukrainian turf and instead invest more than $10bn into the yet-to-be built South Stream pipeline project stretching across the Black Sea.
"We have underlined for the Russian side that our gas pipeline system needs modernisation," Mr Azarov said on Tuesday. "We have, for example, offered a joint venture on equal terms, with the European side too."