Russia halves gas to Belarus, says full flow to Europe

MOSCOW, June 23 (Reuters) - Russia stepped up its gas tussle with Belarus on Wednesday, saying it had more than halved supplies to its neighbour, but added gas was flowing smoothly to Europe despite Minsk's threats to shut down transit pipelines.

On Tuesday, Belarussian President Alexander Lukashenko ordered the transit of Russian gas to Europe to be cut in a debt spat with Russia's gas export monopoly Gazprom (GAZP.MM), declaring the two nations were facing a fully fledged "gas war."

"I have two news for you - one good and one bad. Let's start with a good news - the transit of Russian gas through Belarus is taking place at full volume and Russian gas customers are having no problems with deliveries," Gazprom's head Alexei Miller told state television.

"The bad news is that the Belarussian side is not taking any steps to pay the debts for Russian gas supplies and from 10 am on June 23, 2010, we are introducing a limit on Russian gas supplies to Belarus by 60 percent," he added.

Russia, the world's largest energy exporter, supplies Europe with 25 percent of gas needs, with four-fifths of that flowing via Ukraine and one fifth via Belarus.

Ukraine has already promised to ship more Russian gas to Europe to help Moscow plug the potential gap in supplies via Belarus while analysts have said the impact on consumers should not be big given low gas consumption in Europe at the moment.


The close ties between Russia and Belarus have been increasingly strained as Lukashenko has sought to use Russia's eagerness to maintain an ally on its Western flank to persuade Moscow to leave Soviet-style economic subsidies in place.

Relations have also soured since they failed to agree on unified customs rules and Belarus gave refuge to ousted Kyrgyz President Kurmanbek Bakiyev, despite Moscow's support for the new Kyrgyz leadership.

Belarus pays the lowest price among Russian gas customers and has bridled at recent increases, saying it should pay less for oil and gas if Russia is serious about close relations.

Previous pricing disputes with Minsk led to oil supply cuts, with Poland and Germany being affected most as they receive large volumes of crude and gas from Russia via Belarus.

A similar standoff with Kiev halted the much larger Russian gas supplies across Ukraine for almost two weeks in January 2009, leaving many Europeans without fuel during a cold snap.

Russia and Ukraine have had two major gas face-offs since 2005 amid strained political relations between the Kremlin and Ukraine's former pro-Western President Viktor Yushchenko.

Bilateral ties have dramatically improved since Yushchenko was replaced by Viktor Yanukovich, seen as much more loyal to Moscow. He agreed new gas and military base deals with the Kremlin after taking power earlier this year.

During the current dispute with Belarus, Gazprom accuses Minsk of having amassed a debt of $192 million for gas deliveries since January.

Belarus for its part says Gazprom owes it $260 million for gas transit but Gazprom says Minsk had blocked payments. (Writing by Dmitry Zhdannikov; editing by James Jukwey)


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