Belarus sets up Stabilization Fund to deal with energy problems

MOSCOW, October 19 (RIA Novosti) - Belarus has set up a stabilization fund to deal with a possible hike in the price it pays for Russian natural gas, the head of the country's Central Bank said Thursday.

The price of gas sold to Belarus has not changed since 2004, and currently stands at $46.68 per 1,000 cubic meters. But Russia's natural gas monopoly Gazprom said it would pursue a European price formula for Belarus as of 2007, rising the price to around $200 per 1,000 cubic meters, a move expected to tear a hole of around $2 billion in the Belarusian budget.

But Petr Prokopovich, board chairman of the National Bank of the Republic of Belarus, said the increase would not affect the country's economy.

"This will by no means affect the economy as a whole, or the gold and currency reserves," he said. "We have to work hard to increase exports of Belarusian goods and services."

He said the Stabilization Fund will not draw on the country's gold and currency reserves, but will use only budget funds.

"The state budget is the sole source for the fund," he said. "As far as I know, the fund already totals more than 100 billion Belarusian rubles (about $50 million)."

Russian Prime Minister Mikhail Fradkov said in late September that the problem of Russian natural gas deliveries to Belarus and its transit via Belarusian territory in 2007 would be resolved by the end of 2006.

Gazprom is also seeking a stake in the Belarusian state pipeline company Beltransgaz, which owns pipelines leading to Europe. It has offered to partially compensate the Belarusian firm for the price hikes if Beltransgaz agrees to sell the Russian energy giant its main gas routes.

A source in the Russian government said earlier the two companies are in talks to create a joint gas transit venture. He said that a contract on gas deliveries to Belarus in 2007 should be signed by the end of the year.