BELARUS NEWS AND ANALYSIS

DATE:

02/08/2007

Belarus Pledges to Pay Russian Gas Debt

By Yuras Karmanau, Associated Press Writer

Belarus President Pledges to Pay US$460 Million Gas Debt to Russia

MINSK, Belarus (AP) -- Belarus will pay $460 million to settle its gas debt to Russia in the next few days, and Venezuela's president may help pay the bill, Belarus' president said Thursday.

"I gave the order for the money to be taken from our reserves and for the payment of $460 million to be made," Alexander Lukashenko said. "Let them live in peace."

On Wednesday, Gazprom threatened to cut natural gas supplies to Belarus by nearly half unless a $456 million debt was repaid by Friday. The announcement raised fears that gas flows through a transit pipeline to European customers could be affected.

"Yes we will return the money, we will be left without reserves, but our good friends including (Venezuelan President) Hugo Chavez have promised to provide a credit on favorable terms," he said. He added that Western banks were also prepared to provide funds and the reserves would be replenished in a month.

Gazprom's announcement had triggered bitter memories of a pricing dispute with Ukraine that saw supplies to the EU drop in the first days of 2006 as Ukraine siphoned gas from a transit pipeline after Gazprom halted direct shipments.

Gazprom supplies a quarter of the gas used by Europe, and the incident drove home Europe's dependence on Russia for energy.

In a statement Thursday, the European Commission called on Russia and Belarus to come quickly to a settlement and "not to disturb, neither directly nor indirectly, the gas supply to EU member states."

More than 20 percent of Russia's gas supplies to Europe go through Belarus, reaching buyers in Germany, Poland, Lithuania and Ukraine as well as Russia's Baltic enclave of Kaliningrad.

The gas standoff grows out of a hard-fought deal signed in the last minutes of 2006 that obliged Belarus, to pay $100 per 1,000 cubic meters of gas instead of $46.

The agreement allowed Minsk to pay $55 per 1,000 cubic meters for the first half of the year, but required payment of the balance of $456 million to Gazprom by July 23.

As part of the 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 Belarusian Finance Ministry, rather than being used to cover the bill.

Some observers have suggested that Gazprom is hoping to acquire further assets against Minsk's gas bills. On Thursday, Lukashenko lashed out at the apparent aspirations.

"They want to privatize the whole country," he said.

Source:

http://biz.yahoo.com/ap/070802/russia_gazprom.html?.v=2

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