BELARUS NEWS AND ANALYSIS

DATE:

02/08/2007

Russia Threatens Cut in Belarus Gas Supply

Associated Press

By ANDREW E. KRAMER

MOSCOW, Aug. 1 - In the latest of Russia's many disputes over energy payments with neighboring countries, the natural gas monopoly Gazprom warned Wednesday that it would reduce supplies to Belarus by 10 a.m. local time on Friday unless the former Soviet state pays an outstanding gas bill of $456 million.

The tough tactics could also affect Gazprom customers farther west along Europe's natural gas pipelines, again raising worries about the reliability of Russian supplies and the wisdom of Europe's growing dependence on Russian energy.

Poland, Lithuania and parts of Germany and Ukraine are supplied via the pipeline that crosses Belarus, Gazprom said.

The dispute is the latest in a long series over pricing with Ukraine and Belarus. For Belarus, the standoff is the second in seven months, after an agreement to raise prices narrowly averted a gas shutoff last New Year's Eve.

Gazprom said the national gas company of Belarus was in arrears on payments agreed to during that Dec. 31 compromise. The Moscow-based company issued a statement Wednesday that said it would reduce by 45 percent shipments of natural gas intended for the Belarusian domestic market if the payment was not received.

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

Gazprom took pains to emphasize that it would not reduce the volume of gas shipped via Belarus for export to Western Europe. "We have a clear contract saying how much they should pay and when," Mr. Kupriyanov said. "The Belarus side is in direct violation of the agreement."

By evening Wednesday, the Belarusian gas company, Beltransgaz, had not responded publicly to the ultimatum. If past practice is a guide, Russia will follow through on the threat if Gazprom is not paid.

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

When Ukrainian authorities balked, Gazprom reduced the pressure in the Ukrainian pipeline system on New Year's Day. Ukrainian gas customers, including municipal utilities that heat homes, responded by drawing down fuel from volumes in the pipelines intended for export. As a result, pressures dropped throughout the interconnected European gas pipeline system until Gazprom reversed its decision and restored the pressure two days later.

Any impact this time, however, would not be as great as during the January 2006 standoff because less gas is shipped via Belarus than via Ukraine and demand is low during the summer. In 2006, jittery authorities in Italy implored customers to put lids on pots to reduce the energy needed to boil water. The dispute is the latest of dozens between Gazprom and former Soviet states since the collapse of the Soviet Union fragmented control of the sprawling web of pipelines built in the 1960s to export Siberian natural gas to Western Europe.

On the level of economics, the breakup of that pipeline network has led to competing claims for the profits from energy exported via the system, played out in disputes over gas prices and transit fees. The disputes also have a political dimension, critics say. The price increases have affected pro-Western governments in the former Soviet Union like Ukraine and Georgia.

The small countries to Russia's west, called transit states, have bargained for a larger share of the profits at a time of record world prices. Governments lay claims to a share of that profit either in the form of subsidized energy from Russia for their domestic markets, or as fees charged for transshipping natural gas over their territory.

Gazprom's position is different. It says the demands for higher payments are in line with rising world energy prices.

Belarus paid $47 per 1,000 cubic meters of natural gas until this year, the lowest of any former Soviet state, reflecting once warm relations with Moscow that have since soured, partly because of disputes over energy prices. Belarus's current price, however, is still the lowest of any former member of the Soviet bloc.

Under the terms of the agreement reached Dec. 31, Beltransgaz agreed to pay $100 per 1,000 cubic meters of gas this year, but would defer the higher payments until July 23, when a lump sum of $456 million would come due, Gazprom said. It is that sum that Gazprom says Belarus has not paid.

Source:

http://www.nytimes.com/2007/08/02/world/europe/02russia.html?ref=europe