BELARUS NEWS AND ANALYSIS

DATE:

01/08/2007

Gazprom to slash Belarus gas supply

Reuters, The Associated Press

MOSCOW: Russia's state-controlled gas monopoly said Wednesday that it would reduce natural gas supplies to Belarus by 45 percent as of Friday after Minsk failed to pay a $456 million energy debt.

Gazprom tried to allay fears that the decision could reduce gas shipments to Europe through a key transit pipeline that handles about 20 percent of Russia's gas exports.

"Gazprom will take all possible measures for the transportation of Russian gas through the territory of Belarus in full accordance with current obligations before European customers," a statement said.

The announcement came after Russia's former Soviet neighbor missed a July 23 deadline for payment of part of an outstanding gas bill.

Sergei Kupriyanov, Gazprom spokesman, said that the transit pipeline supplies customers in Germany, Poland, Lithuania and Ukraine as well as Russia's Baltic enclave of Kaliningrad.

"We will cut supplies by 45 percent but fully maintain our transit supplies to Europe via Belarus," Kupriyanov said.

"Belarus has so far offered nothing to resolve the debt issue, which we consider a violation of our previous agreements. They have the money to pay back the debt and we do not understand why they don't want to do it," he added. "We are acting in strict accordance with our contract."

Gas price talks between Russia and its neighbors have been closely watched in Western capitals after Gazprom's decision to raise gas prices in 2006 led to a brief cutoff of gas supplies to Ukraine.

Deliveries to Europe fell as Ukraine skimmed the gas it needed from a major export pipeline transiting its territory. Russia was widely perceived to have used the price increase to punish Ukraine's new Western-leaning leaders.

The incident also raised concerns in the European Union about its dependence on Gazprom, which meets a quarter of Europe's gas consumption.

Gazprom more than doubled prices at the start of the year after a long pricing dispute with Minsk.

That row was eventually resolved on terms that Belarus's long-serving president and, until recently, pro-Moscow loyalist, Aleksandr Lukashenko, has since fiercely criticized.

Belarus now must pay $100 per 1,000 cubic meters, or 35,314 cubic feet, of Russian gas - up from the old price of $46 that was heavily subsidized by Moscow - but was given a six month grace period during which it was allowed to pay half the price.

The prime minister of Belarus, Sergei Sidorsky, was in Moscow on Monday to discuss the terms of a Russian loan to help Minsk pay its gas bill. No agreement on the loan was reached, however.

Belarus also agreed to sell half of its national pipeline company Beltransgaz to Gazprom for $2.5 billion. Gazprom has so far paid $625 million of that, but the money has been transferred to the Belarus Finance Ministry, rather than being used to cover the bill.

The European Commission on Wednesday urged Gazprom and Belarus to resolve their dispute as soon as possible, saying it was taking the matter very seriously. "We take this development very seriously. We call on both parties to solve the issue," a commission spokesman said.

Source:

http://www.iht.com/articles/2007/08/01/business/gazprom.php

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