BELARUS NEWS AND ANALYSIS

DATE:

28/12/2006

Belarus defiant over Russian gas threat

Russia and Belarus are digging in today in a deepening dispute over natural gas prices, as Russia's state-run gas monopoly Gazprom started the countdown towards a January 1 supply cut unless the neighbouring nation agreed to pay more.

Belarus, in turn, warned that a suspension of supplies could jeopardise deliveries of Russian gas across its territory to Gazprom clients in the European Union - a threat targeting Russian's concerns of a repeat blow to its image a year ago when a cut-off of deliveries to Ukraine led to brief supply disruptions in Europe.

Gazprom, which is demanding that Belarus pay more than twice the current price for gas next year and hand over a 50% stake in its gas distribution system, refused to back down despite the threat from Minsk.

"If a gas supply contract for next year is not reached, Gazprom will have no grounds for deliveries of gas to Belarus as of 10am Moscow time (7am Irish time) on January 1 2007," Gazprom chief Alexei Miller said in televised comments.

Belarus currently pays nearly ?37 per 1,000 cubic meters. Russia supplied gas to ex-Soviet states at below-market prices for years after the 1991 Soviet collapse, but now wants to sell all its gas at world prices.

Under Gazprom's offer, Belarus would pay ?58 per 1,000 cubic meters in cash and ?24 in shares of Beltransgaz in 2007.

The price would increase gradually and approach a market-style European price - minus transit fees and export tariffs - in 2010.

A higher price would be a blow to Belarus' Soviet-style state-run industries, whose financial health - and, in turn, a portion of long-time President Alexander Lukashenko's popularity - depends on cheap gas.

In addition to raising the price, Russia wants Belarus to give Gazprom a 50% stake in its gas distribution system, Beltransgaz.

Miller said Gazprom would supply gas for European consumers to the Russia-Belarus border in full compliance with its contracts. But he also said the company sent letters to Germany, Poland and Lithuania informing them about "the developing situation regarding gas supplies to Belarus", suggesting it may fear disruptions in deliveries to those countries.

About 30% of Russian gas supplies to Europe go through Belarus, much of it to Germany, Poland and Lithuania.

Gazprom chiefs had threatened to halt supplies meant for Belarusian consumption if no contract was signed before the existing one expired on December 31, but Miller's comments marked the first time the company named a specific hour.

He said fresh talks yesterday had failed, blaming what he called Belarus' "destructive position".

The remarks came after Belarusian first deputy prime minister Vladimir Semashko shrugged off the threat of a suspension, warning that Gazprom relied on Belarus for transit to Europe and could not risk the international criticism it faced during last year's Ukraine dispute.

Russia, the world's largest gas producer, provides a quarter of Europe's gas consumption.

"I don't think Gazprom will resolve to cut off gas to Belarus - they shouldn't step on the same rake twice," Semashko said.

"We are interconnected. I have no contract with Mr Miller on deliveries to Belarus from January 1, and Mr Miller has no contract on transit through Belarus."

Gazprom spokesman Sergei Kupriyanov said the company, which initially insisted Belarus pay ?156 per 1,000 cubic meters of gas next year, but is now asking for ?82, was not prepared to go lower.

"Gazprom is not Santa Claus," he said.

The head of Gazprom's export arm, Alexander Medvedev, said the company would seek to ensure that European customers would not face supply shortages if Belarus hindered the transit of Russian gas.

However, Interfax quoted him as saying that if Belarus were to siphon off the full amount it normally received for its own consumption, "it would be impossible to fully compensate : especially over a long period".

Russia supplies Belarus about 20 billion cubic meters of gas annually, and Semashko said that 44 billion cubic meters were expected to be sent through Belarus to Europe next year.

Early this year Gazprom had to pump additional gas to Europe to make up for supply shortages caused by its cut-off of gas to Ukraine, which was accused of skimming off westward-bound Russian gas.

Russia has supported the authoritarian Lukashenko in the face of severe Western criticism, but relations have been tense under Russian president Vladimir Putin, who angered Lukashenko a few years ago by suggesting an integration scenario under which Belarus would become little more than a Russian province.

Source:

http://www.irishexaminer.com/breaking/story.asp?j=4364340&p=4364355&n=4364432