BELARUS NEWS AND ANALYSIS

DATE:

30/11/2006

Gazprom Closing In on Belarus' Pipeline

By Miriam Elder
Staff Writer

Gazprom is close to reaching a final deal with Belarus that would give it partial control over the country's pipeline network in exchange for a lower gas price, officials in Moscow and Minsk said Wednesday.

After years of stalled talks between Gazprom and Belarussian state pipeline network Beltransgaz, a 50-50 joint-venture deal is due to be reached by Jan. 1, Belarussian Foreign Minister Sergei Martynov said.

Gazprom has long sought greater control of the pipelines that deliver gas through Belarus and on to Germany, Lithuania and Poland. The talks have stalled over differing valuations of Beltransgaz.

Minsk has said that Gazprom's attempts to raise drastically the price that Belarus pays for gas imports, along with brief cutoffs of supplies, are intended to pressure Minsk into accepting Gazprom's terms.

President Vladimir Putin said Tuesday that Moscow would "capitalize part of the gas price in the value of Beltransgaz" as part of the deal.

Dutch bank ABN Amro has finished an independent valuation of Beltransgaz. In the past, Gazprom has valued the company at about $1 billion, while Minsk says it is worth $5 billion.

The two sides had "earlier agreed that whatever the [independent] valuation would be, we would accept it," Putin said after the close of a Commonwealth of Independent States summit in Minsk on Tuesday.

Gazprom spokesman Sergei Kupriyanov declined to provide details, saying only that the company was studying documents presented by Beltransgaz. An ABN Amro spokeswoman declined to comment.

Gazprom has said that concessions on ownership of Belarus' pipeline network would prompt it to ease demands that the country pay $200 per 1,000 cubic meters of gas starting next year, a steep hike from the $47 it currently pays.

Kupriyanov said a price had been agreed upon, but refused to provide details until the official close of talks. When asked to name the price, Kupriyanov would only say: "It's a market price."

Gazprom has been steadily raising prices for former Soviet republics, hoping to bring them closer to the European market average.

"We will switch to market relations with all partners, with no exceptions," Putin said during Tuesday's summit.

Critics of the Kremlin's energy policies have noted, however, that Gazprom's price hikes often ride on the back of political crises.

Gazprom asked Georgia to pay $230 per 1,000 cubic meters, more than double the $110 it currently pays, after Tbilisi expelled four Russian military officers on spying charges in September.

Belarus, which enjoys good relations with Russia, currently pays the lowest gas price of all former Soviet republics.

"The price Belarus will pay for gas depends to a large extent on whether an agreement is reached on Beltransgaz," said Tanya Costello, a gas analyst at Eurasia Group. "Belarus is not only dependent on Russia for natural gas supplies, it is almost entirely dependent on Russia for its economic activity. It is Belarus that will have to compromise."

Source:

http://www.themoscowtimes.com/stories/2006/11/30/041.html

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