BELARUS NEWS AND ANALYSIS

DATE:

25/12/2006

Gazprom offers Belarus US$80 gas price on tough conditions, threatens cutoff if no deal

The Associated Press

MOSCOW: Russian state gas monopoly OAO Gazprom on Monday threatened neighboring Belarus over its refusal to agree to tough conditions on a natural gas price increase, saying its gas supplies could be at risk on Jan. 1.

Raising the specter of a repeat of last year's New Year gas dispute with Ukraine that saw supplies cut off briefly, Gazprom spokesman Sergei Kupriyanov said that Belarus was insisting on maintaining subsidized prices next year comparable to domestic tariffs inside Russia.

"The position which they have adopted today is absolutely irresponsible and threatens Belarus' energy supplies," he said in televised remarks. "The current contract for gas deliveries to Belarus expires in six days," Kupriyanov was quoted as saying by the Interfax news agency.

The Russian company has demanded that Belarus pay US$200 (around ?151) per 1,000 cubic meters, fourfold the current price.

Kupriyanov later Monday said that Gazprom would agree to a lower price of US$80 (around ?60) per 1,000 cubic meters if Belarus handed over 50 percent of its state-controlled gas transport network, the state RIA-Novosti news agency reported.

Kupriyanov said that Belarus was alone among other ex-Soviet republics in seeking to keep subsidized gas rates, which ran counter to Gazprom's policy of switching all its energy sales to a market basis.

Georgia, whose Western-leaning leadership has accused Russia of using its energy might to apply political pressure on it, agreed Friday to pay US$235 (?178) per 1,000 cubic meters for its Russian gas imports under threat of a gas freeze on New Year.

Belarus' president has warned that raising Belarus' gas prices fourfold, to US$200 (?151) per 1,000 cubic meters would be catastrophic for the country's Soviet-style, centrally planned economy.

In exchange for easing the higher prices, Gazprom has proposed taking a major stake in Belarusian gas transport network, Beltransgaz - whose pipeline network handles a significant part of Russia's European-bound gas exports.

But the two countries have disagreed sharply on a valuation for Beltransgaz.

Belarus is a traditional ally of Russia, but its authoritarian leader Alexander Lukashenko has fallen out with Russian President Vladimir Putin since refusing to incorporate his country into Russia under a union treaty the two states signed in the 1990s but never implemented.

The cutoff of Russian gas supplies to Ukraine - the major transit route for Russia's natural gas exports to Europe - also disrupted deliveries to several European countries.

This provoked major concern about Europe's reliance on Russian gas, which provides a quarter of European consumption.

A fresh energy dispute involving Belarus would heighten the EU's doubts about the reliability of Russia as an energy supplier.

Source:

http://www.iht.com/articles/ap/2006/12/25/business/EU_FIN_Belarus_Russia_Gas.php