BELARUS NEWS AND ANALYSIS

DATE:

01/08/2007

Gazprom to Trim Gas Supplies to Belarus

By ALEX NICHOLSON

MOSCOW -

Gazprom, Russia's state-controlled natural gas monopoly, said Wednesday it will cut gas supplies to Belarus nearly in half on Friday after Minsk failed to pay in full for previous shipments.

As European officials expressed alarm, the world's biggest gas producer sought to allay fears the decision could reduce gas flowing through a pipeline that handles more than 20 percent of Russia's exports to Europe. Gazprom provides a quarter of the gas Europe uses.

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

The announcement came after Russia's former Soviet neighbor missed a July 23 deadline for payment of nearly $500 million. Talks in the past week between Belarusian officials and Gazprom have brought no results. Wednesday's announcement appeared to be a negotiating tactic by the gas monopoly.

"Belarus is currently preparing its proposals for Gazprom to resolve this situation," said Andrei Zhukov, an aide to the Belarus Energy minister.

"We take these developments very seriously," EU spokesman Martin Selmayr said. "We call on both sides to resolve the dispute without delay and to create conditions for the timely resumption of deliveries."

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

"Today is August 1st, but there is so far neither payment of the debt ... nor any guarantees the debt will be paid," Kuprianov said in comments outside Gazprom's towering suburban headquarters. "Starting at 10 o'clock on August 3rd gas deliveries to Belarus will be cut by about 21 million cubic meters a day, or 45 percent of Belarus' daily consumption."

The news prompted concern in Poland, which imports nearly 60 percent of its gas from Russia.

"We can't accept suggestions that our supplies could suffer due to a dispute between Gazprom and Belarus," Polish Economy Minister Piotr Wozniak told a news briefing Wednesday.

Russia's relations with Belarus soured over the New Year after Russia doubled the price Minsk pays for its gas.

Weeks later, a dispute over oil duties saw Russia temporarily halt crude supplies to Minsk, which led to brief shortfalls in Europe.

"Gazprom either wants to get the money or participate in the privatizations of the most important enterprises in Belarus," the country's former Prime Minister, Mikhail Chigir told The Associated Press. "Lukashenko doesn't plan to give up the former, and particularly the latter, without a fight."

Disputes over gas prices between Russia and its neighbors are closely watched in Western capitals.

Gazprom's decision to raise prices in 2006 led to a brief cutoff of gas supplies to Ukraine. Deliveries to Europe fell as Ukraine siphoned the gas it needed from a major pipeline transiting its territory.

The incident demonstrated to the European Union how dependent it was on Gazprom.

A similar incident appeared to be shaping up with Belarus at the end of last year. Just minutes before the New Year, Minsk agreed to pay $100 per 1,000 cubic meters of gas, compared to a previous price of $47.

To soften the blow for the Belarus economy, which has been heavily reliant on cheap energy from Russia, it was agreed that Minsk would pay just $55 per 1,000 cubic meters for the first half of the year with the difference of $456 million to be paid by July 23.

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

As part of the New Year's gas deal, Belarus 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. ___

Associated Press Writer Yuras Karmanau contributed to this story from Minsk.

Source:

http://www.forbes.com/feeds/ap/2007/08/01/ap3976180.html