BELARUS NEWS AND ANALYSIS

DATE:

28/12/2006

Feud over fuel chills Russia-Belarus ties

The longtime allies are at odds over the price of natural gas from Kremlin-run Gazprom, which may cut supply.

By David Holley, Times Staff Writer

MOSCOW - Russia and Belarus traded bitter words Wednesday in a dispute over natural gas prices that threatened to damage relations between the longtime allies and disrupt supplies to other European countries.

The Russian state-controlled gas monopoly Gazprom reiterated a threat to cut off natural gas for Belarus on Monday if no agreement on price was reached by then, and it accused the government in Minsk of planning to steal gas intended for European Union states by tapping into pipelines carrying Russian gas west.

That accusation came a day after the collapse of negotiations in Moscow aimed at reaching new contracts for 2007 for the sale of natural gas to Minsk and for the transit of gas across Belarus. The chief Belarusian negotiator had triggered the accusation by telling reporters that his country had leverage in the talks because of the transit pipelines, implying that Belarus might siphon gas or shut down the flow to other countries.

Gazprom is seeking to more than double the price of gas it sells to Belarus, although the new price would remain far below that which EU countries pay. Belarus, meanwhile, is demanding that Gazprom pay significantly higher transit fees, which would partially offset the gas price increase.

Gazprom insists that in the absence of a new contract, Belarus can receive no gas beginning Monday morning. But Minsk has said that if no agreement is reached by Monday, it would continue to receive gas at the current price until a new contract is signed. Gazprom spokesman Sergei Kupriyanov, in comments reported by the Russian news agency RIA Novosti, said Belarus' assertion showed that it "plans to tap Europe-bound gas in the absence of a contract."

Speaking on Russian state-run television, Kupriyanov accused Belarus of greed. "After all, Gazprom is not Santa Claus," he declared.

Parallel to Ukraine face-off

The standoff resembled a pricing dispute one year ago between Russia and Ukraine. In that case, Gazprom attempted to cut off natural gas supplies for Ukraine from Jan. 1 while continuing to pump gas across the country to other customers. But Ukraine continued to take gas until a compromise was reached. The standoff led to disruption in supplies to EU states as well as Ukraine, and growing European doubts about the wisdom of heavy reliance on Russian gas.

Critics of Kremlin policy charged a year ago that Gazprom was enforcing unfavorable terms on Ukraine, compared with other post-Soviet states, because of the Kiev government's turn toward pro-Western policies under President Viktor Yushchenko.

But this year, Gazprom's face-off with Belarus threatens to undermine what is still perhaps Russia's closest alliance.

Belarusian First Deputy Prime Minister Vladimir Semashko, who handled the recent negotiations in Moscow, said on his return late Tuesday to Minsk that there was no need to fear the threatened midwinter cutoff of supplies because Gazprom needed to send gas through pipelines across Belarus.

"Belarus will have gas on Jan. 1, 2007, because we are interdependent," Semashko said in comments reported by the Russian news agency Interfax. He implied that Gazprom could not simply cut off supplies to Belarus because it needed to ship gas to other European states through the Belarusian pipelines.

Gazprom has proposed that Belarus pay $105 for each 1,000 cubic meters of gas - $75 in cash plus $30 in shares of the Belarusian state-owned pipeline company, Beltransgaz. Over time, such a deal could give Gazprom control of the Belarusian pipelines, helping ensure Russian control over gas deliveries to the EU and undercutting Belarusian bargaining power in future negotiations.

Belarus has said it would be willing to pay only the $75 in cash, RIA Novosti reported.

Gazprom has been seeking to gradually raise the price of all exported gas, including that going to former Soviet states, to what it calls market levels. EU customers typically pay about $250 per 1,000 cubic meters for Russian gas.

Gazprom has demanded sharp price increases for gas supplied to some former Soviet states, adding to acrimony with neighbors such as Georgia and Azerbaijan.

The bitter Russia-Belarus spat carries dangers for both sides, even as each is motivated to exert maximum pressure to obtain the best possible terms.

Belarusian President Alexander G. Lukashenko has been widely criticized in the West as "Europe's last dictator," and he is heavily dependent on economic and political support from Moscow. In comments Tuesday reported by Interfax, Lukashenko said the gas negotiations "have been a very hard experience for us."

Though the Kremlin has at times shown frustration with Lukashenko's heavy-handed rule and preservation of a largely Soviet-style state-run economy, Russia and Belarus have maintained close ties and have engaged in much discussion about uniting into a single state, a prospect that looks increasingly dim.

'Creating chaos'

Critics said that by taking such a tough stance in price negotiations, Gazprom was again making a mistake that would hurt Russia diplomatically.

"Gazprom has declared this gas war in the entire post-Soviet space, and from a short-term perspective Gazprom can become richer," said Mikhail G. Delyagin, chairman of the Institute of Globalization Studies, a Moscow think tank. "But in the long term, it is creating chaos and instability in the post-Soviet space, and resulting in our friends turning into our enemies:. Thus, Gazprom is acting directly counter to the strategic interests of Russia."

Svetlana Kalinkina, editor-in-chief of the opposition Belarusian newspaper Narodnaya Volya, said she believed the display of growing anger between the two sides was partly a show designed to give Lukashenko political cover for eventually privatizing and giving up control of the state-owned gas pipeline network as a way to pay the country's gas bill.

Lukashenko "will have to give in eventually," she said. "But before he surrenders he will put up a show of brave but doomed resistance:. Lukashenko will do his best to portray Moscow as the guilty party in the conflict, and will explain that the privatization of Beltransgaz was done in the interests of his people under enormous and unfair pressure from Moscow."

Source:

http://www.latimes.com/news/nationworld/world/la-fg-gazprom28dec28,1,7111536.story?coll=la-headlines-world