BELARUS NEWS AND ANALYSIS

DATE:

27/12/2006

Russia warns Europe of gas row with Belarus

By Andrei Makhovsky and Dmitry Zhdannikov

MINSK/MOSCOW (Reuters) - Russia's state gas monopoly said on Wednesday it had warned European customers of possible cuts in supplies due to a bitter pricing row with Belarus.

Belarus had already threatened to disrupt the transiting supplies, reviving memories of gas cuts to Europe last year in a similar row with Ukraine, although Russia's Gazprom sends much smaller volumes of gas to the West via Belarus.

Gazprom said it had offered big price concessions to Belarus and could offer no more: "Gazprom is not Santa Claus and cannot give such presents to authorities in Belarus," a spokesman said.

The monopoly had said Europe was safe as it had stockpiled extra gas in Germany, but the firm's head Alexei Miller told state television he had warned Germany, Poland and Lithuania about Belarus' "destructive position" in talks with Moscow.

Belarus's contract expires on December 31 and a Gazprom source said some executives had been told to cancel New Year holidays, adding: "It looks exactly like one year ago with Ukraine." Gazprom shares were 1.5 percent down in London and up 0.6 percent in Moscow.

Belarus, whose President Alexander Lukashenko is accused in the West of crushing human rights, has long been a Russian ally.

"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.

Relations with Belarus have soured due what analysts say is Kremlin leader Vladimir Putin's distaste for Belarus's Soviet-style economic policy and its reluctance to share enterprises.

U.S. ACCUSATION

Semashko did not say whether Belarus was prepared to stop all gas transit via its territory.

Two years ago, Minsk took no such action in a similar dispute, but Gazprom accused it of taking gas from transit pipelines for its domestic needs. Gazprom said it viewed Semashko's latest comments as a new threat to steal gas.

The earlier row generated no major criticism of Russia in the West due to Lukashenko's poor political image.

But last year, Russia came under fire from politicians in the European Union and the United States following gas cuts to Ukraine. The dispute accentuated rocky relations between Moscow and Ukraine's pro-Western leadership, since tempered by the return of a prime minister friendlier to Russia.

The sniping reached a climax when U.S. Vice President Dick Cheney accused Russia earlier this year of using energy to intimidate and blackmail smaller neighbours.

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.

"Belarus has a very strong negotiating position with its gas transportation infrastructure and we believe that Gazprom will have to be very flexible with its Belarus pricing policy," said Yelena Savchik from Renaissance Capital brokerage.

Gazprom says it cut is proposal to $105 per 1,000 cubic metres on Wednesday from $200 previously, and offered to let Belarus pay part of the 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 customers in Europe pay over $250.

Source:

http://business.scotsman.com/latest.cfm?id=1919562006