BELARUS NEWS AND ANALYSIS

DATE:

28/12/2006

Belarus sees end to gas price war

Belarus has said that it expects a gas price dispute with Russia, which threatens to disrupt European supplies, to be resolved before the New Year.

Prime Minister Sergei Sidorsky said the price of Russian gas should be agreed by 1 January.

But he warned that Minsk would not allow the transit of gas to European consumers if a deal was not reached.

Russia's state-owned Gazprom has vowed to cut off gas to Belarus on 1 January unless a 134% price rise is accepted.

The EU called for an agreement and said it was monitoring the situation.

Russian gas passes through Belarus via a pipeline on its way to other parts of Europe, and a shutdown could put those supplies at risk.

Belarus has repeatedly said that its gas-pricing contract is entwined with its agreement to let Gazprom use its pipelines.

'Practically satisfied'

Belarus currently pays $47 per 1,000 cubic metres for the gas it imports from Gazprom, Russia's state-owned gas monopoly.

Gazprom wants to increase this to $110. It also wants Belarus to hand over a 50% share of the country's distribution network, including a valuable transit pipeline which supplies gas to Poland and Germany.

RUSSIAN GAS COSTS FOR 2007

Ukraine: $130 for 1,000 cubic metres (was $95)

Georgia: $235 ($110)

Moldova: $170 ($160)

Belarus: Gazprom wants $110 ($47)

Azerbaijan: Gazprom wants $235 ($110)

Prime Minister Sidorsky said he was "practically satisfied with the course of negotiations held by our experts, and with the fact that an agreement has been reached on the price of gas for Belarus at $75 per 1,000 cubic metres".

Referring to the talks regarding the share of the pipeline, Mr Sidorsky said that the sides were getting closer on reaching an acceptable price.

Gazprom wants the share of pipeline to go towards paying Belarus's gas bill, which the energy company wants to total $105 per 1,000 cubic metres.

Gazprom chief executive Alexei Miller has said that unless Belarus agrees, the firm will end gas supplies from 0700 GMT on New Year's Day.

The company added that it would do "everything possible to ensure deliveries to our European consumers in full".

'Strong-arm' tactics

Russia said its neighbours have been paying below-market rates and these now need to be brought into line with European prices.

A clash between Ukraine and Russia over pricing last winter was blamed for a surge in UK consumer gas bills.

The EU's Andris Piebalgs said Brussels was following the situation closely.

"I call on the two parties to reach as soon as possible a satisfactory agreement that does not put in question gas transits to the EU," said Mr Piebalgs, the EU's energy commissioner.

Last week, Georgia agreed to pay $235 for 1,000 cubic metres of gas, more than twice the previous price. Moscow has also renegotiated its contract with Bulgaria, which will see it pay up to 45% more for imports over the next five years.

Critics argue Moscow is using strong-arm tactics to strengthen its economic supremacy, at a time when high demand for energy and fears of supply shortages have strengthened its position as Europe's leading gas supplier.

The dispute has strained relations between Russia and Belarus, which are traditional allies.

Source:

http://news.bbc.co.uk/2/hi/business/6215767.stm