BELARUS NEWS AND ANALYSIS

DATE:

29/12/2006

Gazprom, Belarus downbeat as late gas talks start

By Dmitry Zhdannikov

REUTERS

MOSCOW - Belarus President Alexander Lukashenko said he would not tolerate Russian blackmail and vowed never to surrender as talks started in Moscow in a late attempt to settle a gas row that may disrupt supplies to Europe.

The European Commission and Germany have urged Russia and ex-Soviet neighbour Belarus to settle their differences quickly to avoid any chance of disrupting supplies to European consumers as happened last January in a similar row with Ukraine.

'I cannot say we are feeling more optimistic,' said Sergei Kupriyanov, chief spokesman for state-owned Gazprom GAZP.MM{QR}. Gazprom is seeking a share of Belarus' pipelines and higher gas prices from 2007.

'Belarus won't bow to Gazprom's blackmail. If they keep putting pressure on us, we will go down into the bunkers, but we will not surrender,' Lukashenko was quoted by Belarus' state news agency BelTA.

A Belarus Energy Ministry official told Reuters before a delegation left Minsk for the talks in Moscow: 'The aim is to sign a contract. We hope to do it before the New Year.' Gazprom's export chief Alexander Medvedev said no deal was reached on Friday and that talks would resume on Saturday at 0700 GMT.

Russia, with huge energy reserves, supplies a quarter of Europe's gas to more than 20 countries with about 80 percent of this going through Ukraine and the rest via Belarus.

Russia has threatened to cut off gas supplies to Belarus, which lies to its west, at 0700 GMT on Jan. 1. As the dispute has escalated, Belarus has threatened retaliation by disrupting supplies crossing its territory to Europe.

The threat was voiced by deputy energy minister Eduard Tovpenets who was heading the Belarus delegation to Moscow.

The row with Belarus, hitherto a loyal Kremlin ally even as other ex-Soviet republics sought to move out of Moscow's orbit, is part of a wider drive by Gazprom to bring its prices in the former Soviet Union closer to European levels.

Other price disputes with Ukraine and Georgia have been settled.

JOINT ECONOMIC ZONE

The official in Minsk declined to say whether Minsk was prepared to offer concessions to Gazprom, which said on Thursday it would not change its latest offer and wanted Belarus to pay $105 per 1,000 cubic metres from 2007, up from $46 now.

Minsk argues it should pay much lower prices because Belarus and Russia are part of a joint economic zone. By comparison, Gazprom's customers in Europe pay more than $250.

Moscow says Minsk has no right to take action against supplies to Europe since, unlike Belarus's local pipelines, the transit links to Europe belong to Gazprom.

Russia was heavily criticised by politicians in the European Union and the United States after last year's cuts to Ukraine.

Unlike the pro-Western leadership in Ukraine, Belarus's President Alexander Lukashenko, accused in the West of crushing human rights, has expressed loyalty to the Kremlin.

Relations have deteriorated as a result of what analysts say is Russian President Vladimir Putin's distaste for Belarus's Soviet-style economic policy and reluctance to share assets.

Gazprom also often seeks lucrative assets in neighbouring states and the dispute with Minsk has centred on Beltransgas, a local pipeline network.

The gas monopoly agreed to value the network close to Belarus's estimates of $5 billion and asked Minsk to pay $75 per 1,000 cubic metres of gas in cash with the rest being covered by half of Beltransgas's shares over four years.

But on Thursday the firm said getting half of Beltransgas was not crucial and it would also accept cash only.

Source:

http://www.signonsandiego.com/news/world/20061229-0947-russia-belarus-gas.html