BELARUS NEWS AND ANALYSIS

DATE:

03/08/2007

Gazprom May Cut Natural Gas To Belarus

Minsk agreed to a higher price in January but has yet to pay up, so the Russian state-owned giant may cut supply in half

Belarus is again facing another major cut in natural gas because of a price showdown with Russia: After agreeing to a higher price in January, Minsk still hasn't paid up. Russia says European supplies aren't threatened.

Russia's state-owned energy giant, Gazprom, will halve its gas flow to Belarus on Friday if the small country doesn't pay a $456 million (?350 million) outstanding bill. Gazprom tried to reassure European customers that their gas deliveries would be unaffected, although a fifth of Western Europe's Russian supplies travel along pipes through Belarus.

"We will cut supplies to Belarus by 45 percent if they don't find a way to pay for gas delivered in the past six months," said Ilya Kochevrin, Gazprom's head of communications. "However, we will make sure that all our (European) customers get all their gas in the full amount."

On Thursday, though, it looked like a resolution to the pending crisis might be close. "Today I ordered money taken from our reserves and payment of $460 million," Belarusian President Alexander Lukashenko said. He added that Venezuelan President Hugo Chavez might help Minsk foot the bill with a loan.

At the end of 2006, Belarus came within minutes of having its Russian gas deliveries stopped after it resisted a sudden doubling of Gazprom's price. In the end, though, Minsk agreed to start paying $100 per 1,000 cubic meters, compared with $47.

The current crisis began last week when a six-month grace period to pay the new price expired.

The threat of a cut in Belarusian gas recalls two previous problems with Russian energy supply -- notably when Russia cut off natural gas to Ukraine at the end of 2005. The crisis this year between Russia and Belarus also escalated in January when Belarus tried to levy a retaliatory tax on another Russian monopoly, Transneft, which manages Russian oil pipelines. Transneft briefly shut down the Druzhba pipeline -- which happened to carry 20 percent of Germany's oil imports from Russia.

Belarussian gas pipelines, similarly, handle about 20 percent of Gazprom's total gas exports to Europe.

"It doesn't matter who is right or who is wrong in this (current) dispute," said Vladimir Milov, president of an independent Moscow-based consultancy called the Institute of Energy Policy, according to the Financial Times. "The threat to cut off supplies will once again damage the image of Russia as a player on world energy markets."

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Source:

http://www.businessweek.com/globalbiz/content/aug2007/gb2007083_919713.htm?chan=globalbiz_europe+index+page_top+stories