BELARUS NEWS AND ANALYSIS

DATE:

03/08/2007

Lukashenko Angrily Agrees to Pay

By Anna Smolchenko
Staff Writer

A day ahead of a Gazprom deadline, Belarussian President Alexander Lukashenko on Thursday pledged to settle his country's gas debt, but accused Moscow of wanting to take over his country's economy and vowed he would never "kneel down" before the Kremlin.

Lukashenko said he would pay the debt, $460 million, from government reserves in the next few days. He added that he had been promised loans from, among others, his ally Venezuelan President Hugo Chavez and from Western banks.

Lukashenko's comments came a day after Gazprom threatened to cut gas supplies to Belarus by 45 percent from Friday if the debt was not paid.

A Belarussian delegation headed by Vladimir Mayorov, the acting general director of Beltransgaz, the company that owes the debt to Gazprom, left for last-minute talks in Moscow on Thursday, company spokesman Vladimir Chekov said.

Gazprom spokesman Sergei Kupriyanov said Lukashenko's pledge to pay was encouraging and added that Belarus should settle the debt before the deadline expires at 10 a.m. Friday.

Kupriyanov said in televised remarks that there was time yet to solve the dispute, and added, "We'll continue our contacts with Beltransgaz tomorrow."

The European Commission issued a statement Thursday urging Gazprom and Belarus to "react in proportionate manner to disagreements and in any event not to disturb, either directly nor indirectly, the gas supply to EU member states."

Gazprom has insisted that its gas supplies to Europe will not suffer, but a European Commission spokesman said Thursday that the European Union planned to convene its Gas Coordination Group next week to discuss how it could lessen its future dependency on Gazprom.

Beltransgaz, Belarus' gas pipeline monopoly, owes the Russian state-owned giant $456 million for gas deliveries. The payment deadline passed July 23.

Lukashenko, until recently a close Kremlin ally, has been unhappy about Russia raising prices for oil and gas supplies to Belarus at the start of the year. In February, he raised a transit duty on Russian oil going to Europe across his country by more than 30 percent.

"Today I gave an order to take the money from our reserves and pay $460 million," Lukashenko told reporters Thursday in Minsk. "Of course, we are draining reserves but our good friends, and Hugo Chavez in particular, announced they were ready to extend a loan on advantageous terms," Lukashenko said, Interfax reported. Western banks, he added, were also ready to help out.

Anti-U.S. allies Lukashenko and Chavez have forged close ties recently, with Chavez calling the Belarussian leader a "brother-in-arms" on his latest trip to Minsk, last month.

Lukashenko also lashed out at Moscow in some of his harshest comments to date.

Belarussian Prime Minister Sergei Sidorsky's visit to Moscow earlier this week was humiliating, and the terms of a $1.5 billion loan Minsk was negotiating were "unacceptable," Lukashenko said, Interfax reported.

Russia wanted to charge 8.5 percent annual interest on the loan, he added.

"I told him not to go there any more," Lukashenko said of Sidorsky. "I also was given a tip that I had to go to the Kremlin and kneel down. I won't go and I won't kneel."

Lukashenko also said the Kremlin wanted to snatch control of the Belarussian economy.

"For the first time I'll allow myself to say it out loud: Russia wants not just to privatize enterprises, [but] to privatize them for free," Lukashenko said. "They would like to privatize the entire country."

Andrei Zhukov, aide to Belarussian Energy Minister Alexander Ozerets, suggested Lukashenko meant his government would tap into reserves to make the payment. He also expressed hope that the dispute would be settled Friday. "Since the president has sorted out the situation, the [negotiators] have a concrete mission," Zhukov said.

Yaroslav Romanchuk, head of the Minsk-based Mizes Research Center, said Lukashenko's remarks were aimed at his own population, as he was planning to hike tariffs and start socially unpopular reforms. "He showed the population where the threat was coming from," Romanchuk said.

Yury Korgunyuk, a political analyst with the Indem think tank, said such rhetoric could be expected from Lukashenko as long as he was in power. "He's all alone and has nobody to rely on, while one-third of Belarussian enterprises are openly losing money and can't survive without subsidies," he said.

But Sergei Musiyenko, head of Ecooom, a Minsk-based think tank, said Lukashenko was right to complain about Russia's economic ambitions in Belarus.

"A desire by Russian oligarchs to privatize our companies has never been a secret," Musiyenko said. Belarus' gas distribution network reached 87 percent of the population, he said, adding that the number was much lower for Russia.

Some observers have suggested that Gazprom, which earlier this year agreed to buy a 50 percent stake in Beltransgaz for $2.5 billion, has an eye on more assets in the company.

A Gazprom spokeswoman, Tatyana Golubovich, said Thursday that although Gazprom and Belarussian officials had discussed several options to settle the dispute, they had not talked about Gazprom acquiring more assets.

EU Energy Commissioner Andris Piebalgs is inviting high-ranking officials from EU member countries to a meeting of the Gas Coordination Council, said Commission spokesman Martin Selmayr, adding that such a meeting would most likely take place Wednesday.

"We've activated the network of our energy experts yesterday evening," Selmayr said. He declined to give a list of potential attendees, but said such meetings were usually well attended.

Lithuanian Prime Minister Gediminas Kirkilas on Thursday expressed hope that Belarus would allow gas flow to Lithuania, calling the situation "complex and rather worrying," Itar-Tass reported from Vilnius.

The EU has good reason to worry as the situation may indeed worsen in the future, said Vladimir Vedeneyev, an oil and gas analyst at Bank of Moscow.

"They are afraid that they will be dependent on Russia for one-third of their gas in the long term," said Vedeneyev. Gas supplies from Gazprom are expected to account for 34 percent of European gas by 2015, he added. Europe currently receives about 25 percent of its gas from Russia.

UralSib brokerage said in a note to clients Thursday it believed Gazprom would be able to resolve the conflict on a political level. "In the long run, the construction of two new major gas pipelines to Europe that bypass Belarus -- Nord Stream and South Stream -- should resolve the transit issue," it said.

Source:

http://www.themoscowtimes.com/stories/2007/08/03/002.html