BELARUS NEWS AND ANALYSIS

DATE:

29/12/2006

Belarus leader defiant ahead of gas talks

By Arkady Ostrovsky in Moscow

Alexander Lukashenko, the authoritarian Belarus leader, was on Friday defiant in the face of Russian threats to cut gas supplies to his country, just as his officials arrived in Moscow for last-minute talks aimed at resolving the dispute.

Gazprom, the Russian state-controlled energy group, has threatened to cut supplies to Belarus on January 1 if Minsk does not agree to a doubling of the prices it pays for gas supplied to Belarus.

A Belarus energy ministry official said ahead of last night's talks that the aim was to sign a contract. "We hope to do it before the new year," he said.

However, a spokesman for Gazprom said he was not feeling optimistic about a possible breakthrough in the dispute between the two countries. The European Commission said it was closely monitoring a situation that could affect gas supplies to member states, particularly Lithuania, Poland and Germany.

"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," Mr Lukashenko was quoted as saying on Friday by the official Belarus news agency.

He has for years relied on Russian gas subsidies that have allowed him to keep wages and living standards high. But he now faces a tough choice of giving in to Russia's demands for higher prices and losing face domestically or seeing severe gas shortages that could lead to unrest.

Belarus threatened to block transit of Russian gas to Europe unless Gazprom agreed to its terms. Belarus wants to pay prices that are several times lower than in other European countries. Gazprom has already set a lower price for Belarus of $105 (?80, ?54) per 1000 cubic meters but wants the country to pay part of this amount with shares in Beltransgaz, the pipeline operator valued at $5bn.

Andris Piebalgs, EU energy commissioner, has called a special meeting next week of the bloc's gas co-ordinating group. The EU receives a quarter of its gas from Russia and 20 per cent of Russia's gas exports goes through Belarus.

Gazprom fears Belarus will simply start siphoning off gas from its pipeline to Europe even if it does not have a contract for it. However, Gazprom says it has accumulated gas reserves in Germany and other countries that could last a few days.

The situation resembles last year's stand-off between Russian and Ukraine, which resulted in gas supply disruptions to other European countries. Gazprom said it would not make an improved offer to Belarus and would turn off gas at 10am Moscow time (7am GMT) on January 1 if Belarus did not sign the contract.

Source:

http://www.ft.com/cms/s/678370da-9778-11db-a680-0000779e2340.html