BELARUS NEWS AND ANALYSIS

DATE:

01/08/2007

Gazprom to reduce gas supplies to Belarus unless bill is paid

By Andrew E. Kramer

MOSCOW: In the latest of its many disputes over payments with neighboring countries, the Russian energy giant Gazprom said Wednesday that it would reduce natural gas supplies to Belarus starting Friday, unless the former Soviet state paid an outstanding gas bill of $456 million before that time.

As in previous disputes, the tough tactics could affect Gazprom customers farther west along the pipelines. Poland, Lithuania and parts of Germany are supplied via the pipeline that crosses Belarus, Gazprom said.

The warning was the latest escalation in a string of such disputes between Russia and the smaller countries in Eastern Europe whose territory Russia uses to export oil and natural gas to lucrative Western markets.

In the case of Belarus, Gazprom is in a standoff for the second time in seven months, after narrowly averting a gas shutoff on New Year's Eve last year.

Gazprom, in a statement, said the national gas company of Belarus was now in arrears on payments agreed to during that Dec. 31 compromise deal. The Moscow-based company, which is controlled by the Russian government, issued a statement saying that if Belarus did not pay before the deadline, Gazprom would reduce by 45 percent shipments intended for Belarus's domestic market.

"There will be no more discussions," Sergei Kupriyanov, Gazprom's spokesman, said by telephone. "The Belarus side is not fulfilling its obligations, so we are going to take measures."

Gazprom took pains to emphasis that it would not reduce the volume of gas shipped via Belarus for export to Europe, it and suggested that any disruption in this supply should be blamed on the Belarus authorities.

"We have a clear contract saying how much they should pay and when," Kupriyanov said. "The Belarus side is in direct violation of the agreement."

By Wednesday evening, the Belarusian gas company, Beltransgaz, had not responded publicly to the ultimatum, Russia's Interfax press agency reported.

The dispute is reminiscent of Gazprom's demands in December 2005 that Ukraine pay roughly twice its previous rate for natural gas, just a year after street protests known as the Orange Revolution placed a pro-Western government in power in Kiev.

When the Ukrainian authorities balked at Gazprom's demands, Gazprom reduced the pressure in the Ukrainian pipeline system on New Year's Day, during a cold snap. Ukrainian gas customers, including municipal utilities heating homes, drew fuel from pipelines intended for export instead. Pressures dropped throughout the European gas pipeline system.

Any impact this time, however, would not be as great as during the January 2006 conflict - when jittery authorities in Italy, for example, implored customers to put lids on pots to reduce the energy needed to boil water. Less gas is shipped via Belarus than via Ukraine. Also, demand is at a seasonal low during summertime.

The dispute is the latest of dozens with former Soviet states since the breakup of the Soviet Union fragmented what had once been a single web of pipelines to export Siberian natural gas to Western Europe. It has led to a tangle of claims and contradictory interpretations of which nations deserve profits from energy exported via this system.

The small countries to Russia's west, called transit states, have bargained for a larger share of the profits created by the exports of energy over their territory, at a time of record world prices. Governments in transit countries have laid claim to a share of this profit, previously in the form of subsidized energy from Russia for their domestic markets, now as fees for transshipping natural gas.

Gazprom's position is different. It has dismissed their claims for a share the rents, or profits, from the Soviet natural gas infrastructure. It says its demands for higher payments are in line with rising world energy prices.

Belarus paid $47 per 1000 cubic meters until this year. Under the terms of the agreement reached Dec. 31, it would pay $100 this year, but defer the higher payments until July 23, when a single lump sum of $456 would come due, according to Gazprom. Also, under the deal, Gazprom would buy a 50 percent stake in Belarus's pipeline system. At issue now, Gazprom, says is that Belarus has failed to settle the July 23 payment.

Source:

http://www.iht.com/articles/2007/08/01/news/gas.php