BELARUS NEWS AND ANALYSIS

DATE:

28/12/2006

Gazprom warns Belarus not to siphon gas

By STEVE GUTTERMAN

MOSCOW

Russia's natural gas monopoly warned Belarus on Thursday not to siphon gas from the main pipeline leading across its territory to Europe if it goes ahead with a threatened supply cutoff on New Year's Day.

The European Union and Germany, meanwhile, urged the neighbors to resolve their price dispute quickly and guarantee supplies.

Belarus has refused the state-controlled Russian company OAO Gazprom's demand that it pay more than twice the current price for gas next year and hand over half of the shares in the nation's pipeline. Belarusian officials have suggested they would siphon Russian gas destined for Europe if the company carries out its threat to shut off supplies meant for Belarus.

The dispute echoes last year's conflict over gas prices with Ukraine, which led to brief supply shortages in some European nations after Gazprom suspended deliveries to Ukraine and accused it of siphoning gas meant for transit.

The gas war with Ukraine deepened European concerns about Russia's reliability as a key energy supplier, and Gazprom spokesman Sergei Kupriyanov said the company will do everything it can to fulfill its obligations to European customers.

He warned Belarus not to disrupt flows through the Yamal-Europe pipeline, which carries about two-thirds of the Russian gas that transits Belarus on the way to European countries -- mainly Germany, Poland and Lithuania.

"Yamal-Europe is exclusively an export pipeline" and belongs to Gazprom, he said, adding that any attempt to disrupt the flow in Belarus would be detected by the company.

"Gazprom will do everything to provide for the delivery of gas to European customers via the territory of Belarus in full volume," Kupriyanov said in televised remarks aimed to underscore Russia's commitment to ensuring supplies and blame any problems on Belarus.

Yamal-Europe currently carries about 28 billion cubic meters of Russian gas per year out of the total of 44 billion that transits the country, according to Beltransgaz, the Belarusian pipeline operator whose pipes carry the other 16 billion cubic meters.

While Gazprom owns Yamal-Europe, Beltransgaz handles the pipeline's day-to-day operation.

Kupriyanov said its connections with the rest of the Belarusian system are sealed, but Valery Nesterov, an oil and gas analyst at the Troika Dialog brokerage in Moscow, said the Belarusians could siphon off as much gas as they wanted to.

He dismissed Gazprom's statement as "propaganda."

Shaken by last year's dispute between Russia and Ukraine, the European Union called on Belarus and Russia to resolve their conflict as soon as possible and guarantee continued and adequate supplies to EU nations.

EU Energy Commissioner Andris Piebalgs said the EU was "following the situation very closely since it may affect gas supplies to the European Union," and called for a swift agreement "that does not put in question gas transits to the EU."

Piebalgs said he will discuss the Belarus-Russia dispute at a Jan. 4 meeting of the Gas Coordination Group, which was created after last winter's cutoff to Ukraine and deals with measures to safeguard security of supplies to EU nations.

German Economy Minister Michael Glos said Germany "views with concern the dispute ... and the delivery shortfalls for Europe that might be connected with it."

He urged the sides to "to reach a workable agreement as soon as possible ... and thus provide proof of their reliability as delivery and transit countries."

Glos' ministry said, however, that there was no threat to gas supplies in Germany, in view of gas companies' storage capacities and the fact that relatively little of Germany's gas -- about 30 percent -- transits through Belarus.

Russia provides for a quarter of Europe's gas consumption, with about 30 percent going through Belarus.

E.On Ruhrgas AG, Germany's largest importer of natural gas, said its reservoirs are full, and that most of its Russian gas comes through Ukraine.

Ukraine, eager to make an impression in Europe and mend troubled ties with Russia, offered Thursday to help Russia supply gas to European consumers by increasing transit volumes if deliveries are disrupted.

Belarus now pays US$47 (euro36) per 1,000 cubic meters of Russian gas and was expected to use 21 billion cubic meters next year. Gazprom, which has been raising prices closer to market levels after selling gas cheaply to ex-Soviet republics for years, is demanding Belarus pay US$105 (euro80) in 2007.

Under Gazprom's offer, the price would gradually increase, reaching close to European levels in 2010, and Belarus would pay part of the cost by ceding 50 percent of Beltransgaz -- giving Moscow more control over the exports and domestic use.

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

Source:

http://www.businessweek.com/ap/financialnews/D8M9UU8O0.htm

Google