BELARUS NEWS AND ANALYSIS

DATE:

27/12/2006

Belarus Threatens to Shut Off Gas Pipelines to Western Europe

The row over price hikes between Russia's Gazprom and Belarus is escalating. Now the Belarus government has indirectly threatened to block its pipelines for Gazprom's gas supplies to western Europe.

A Russian engineer checks valves at a gas storage facility near the town of Kasimov 198 miles south of Moscow.

Belarus has implicitly threatened to stop Russian gas deliveries through its pipelines to Western Europe unless Russia's gas monopoly Gazprom takes back its demand that Minsk pay steep price increases in 2007.

"We are inter-dependent. If I don't have a domestic gas supply contract, Gazprom won't have a transit deal," Belarus's Deputy Prime Minister Vladimir Semashko said at Minsk airport late on Tuesday after his return from failed talks in Moscow.

About 80 percent of Russian exports to Europe are pumped via Ukraine, with the rest going through Belarus. Russia supplies a quarter of Europe's gas to more than 20 countries.

Gazprom is demanding a four-fold hike in gas prices from 2007 and wants Belarus to hand over control of its pipelines to the Russian state-controlled company. The current gas supply contract expires at the end of the year.

Gazprom says it offered big concessions to Belarus on Tuesday such as lowering the proposed price to $110 per 1,000 cubic metres from the previous proposal of $200. On Wednesday, it lowered its offer still further to $105. Gazprom has also said the country could pay part of its bill in assets.

Belarus now pays $46.7, or as much as consumers in Russia. By comparison, Gazprom will charge Moldova $170 in 2007 and Georgia $235, while consumers in Europe pay over $250.

The threat is a reminder of gas cuts to Europe last year when Russia had a similar pricing dispute with Ukraine. But Belarus ships smaller volumes of gas to Europe via its territory and Russia said Europe was safe as Gazprom had stockpiled extra gas in Germany.

Belarus, whose President Alexander Lukashenko is accused in the West of breaching human rights, has long been a Russian ally but relations have soured over Belarus's Soviet-style economic policy and reluctance to share enterprises with Moscow.

Last year, Western governments accused Russia of using its gas supplies to exert political leverage following gas cuts to Ukraine. Some analysts say Moscow may decide against resorting to cuts this year given the Ukrainian experience and the growing importance of Germany as its top trade partner.

Source:

http://www.spiegel.de/international/0,1518,456749,00.html

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