BELARUS NEWS AND ANALYSIS

DATE:

29/12/2006

Belarusians in talks with Gazprom

By STEVE GUTTERMAN

MOSCOW

Senior Belarusian energy officials held talks in Moscow late Friday to seek an agreement on a new supply contract for Russian natural gas, hoping to avert a threatened New Year's Day cutoff that could affect European deliveries, officials said.

Russia's state-controlled natural gas monopoly OAO Gazprom renewed its warnings to Belarus not to siphon gas from the main pipeline leading across its territory to Europe if it turns off the taps to the ex-Soviet republic of 10 million, whose leadership is resisting a a price hike that would hurt its Soviet-style economy.

The European Union and Germany, which receives some of its Russian gas via Belarus, have urged the neighbors to resolve their dispute quickly and guarantee supplies.

Belarusian Deputy Energy Minister Eduard Tovponets flew to Moscow in the afternoon for talks with Gazprom officials in the hope of signing a contract, his aide Andrei Zhukov said. "The price is what will be discussed at the talks," Zhukov said.

Hours after the talks began, Gazprom spokesman Sergei Kupriyanov said there was no result yet and "no convincing reason" for the company to make any new concessions. Earlier he said he was not confident a deal would be reached before the threatened cutoff at 10 a.m. (0700GMT) Monday, citing Belarusian statements he said did not bode well.

Minsk on Thursday repeated its threat to disrupt deliveries of Russian gas destined for Europe if Gazprom shuts off supplies meant for Belarus.

"We will not be able to deliver gas to Europe without a contract," Belarusian Prime Minister Sergei Sidorsky said.

Gazprom has demanded Belarus buy gas at more than twice the current price next year and pay for the increase in part by ceding a half-share of its own government-controlled pipeline operator. Belarus is ready to sell 50 percent of Beltransgaz but wants to keep the gas price lower.

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 provoked European concerns about Russia's reliability as a key energy supplier, and Gazprom has said the company will do everything it can to fulfill its obligations to European customers.

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

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

Speaking on Ekho Moskvy radio, he said that since connections linking the Gazprom-owned pipeline with the Belarusian gas transport system are sealed, any diversion of gas traveling though the pipeline would be "not just theft but burglary."

While Gazprom owns Yamal-Europe, it is under the day-to-day operation of Beltransgaz.

The head of Gazprom's export arm told the French daily Le Figaro that despite a buildup of underground reserves in European nations and the option of increasing the flow of gas exports through Ukraine, shortages could still occur in Europe.

If Belarus siphons off gas meant for Europe, Alexander Medvedev was quoted as saying in an interview released by the newspaper before publication Friday, "I cannot ... exclude any future forced rationing of our stocks and, therefore, shortages for our clients."

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 -- with about a third of the cost to be paid by ceding 50 percent of Beltransgaz.

Belarus now pays US$47 (euro36) per 1,000 cubic meters of Russian gas, and has offered to pay US$75 (euro60) -- US$45 (euro34) in cash and the rest in Beltransgaz shares.

Any higher price would hurt Belarus' state-run industries, whose financial health -- and, in turn, a portion of authoritarian President Alexander Lukashenko's popularity -- depends on cheap gas.

Shaken by last year's Russia-Ukraine dispute, the European Union and Germany called on Belarus and Russia on Thursday to resolve their conflict quickly and guarantee continued and adequate supplies to EU nations.

AP reporter Yuras Karmanau contributed to this story from Minsk, Belarus.

Source:

http://www.businessweek.com/ap/financialnews/D8MAL3000.htm