BELARUS NEWS AND ANALYSIS

DATE:

30/12/2006

Belarus says nears Russian gas deal, Gazprom denies

By Andrei Makhovsky

MINSK (Reuters) - Belarus said on Saturday it was close to resolving a gas price dispute with Russia that threatens to disrupt deliveries to western Europe from Monday, but Russia's giant gas monopoly said no deal was in sight.

The dispute between two former Soviet republics has revived memories of a similar Russian row with Ukraine last year that briefly disrupted supplies to Western Europe. That development stirred an intense debate in Western Europe about the wisdom of increasing dependency on deliveries of Russian gas.

Belarus's First Deputy Prime Minister Vladimir Semashko said Minsk had agreed to pay $100 per 1,000 cubic meters of Russian gas in 2007, up from $46 now; but Moscow insisted the agreement for next year be signed together with deals for 2008-2011.

"We are offering to sign the deal for 2007, but Russia is putting pressure to have a deal for all four years," he told a news conference.

Russia's gas monopoly Gazprom, seeking to bring prices paid by former Soviet neighbors closer to world market levels, demands Belarus to pay $105 from 2007.

Belarus had been offering $75 before Saturday.

In Moscow, Gazprom said there had been no agreement.

"We deny we have agreed this price and many other things, which were said at a news conference in Minsk. Unfortunately I cannot say we are nearing a deal," said Gazprom spokesman Sergei Kupriyanov.

Semashko also said Belarus wanted to spend more time on setting pricing details for future years. He said the deal for 2007 would imply Gazprom paying $2.5 billion to Belarus' budget in return for half of the local pipeline operator, Beltransgas.

Gazprom would also more than double payments for shipping gas to Europe via Belarus.

Semashko said he might fly to Moscow on Sunday morning. Kupriyanov also said talks might resume on Sunday.

Gazprom has threatened to cut gas supplies to Belarus, one of the transit routes for gas to European consumers, at 0700 GMT on January 1 unless Belarus agrees to pay more for gas, while Minsk has threatened to disrupt transit shipments.

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. Georgia, Moldova and Ukraine, all used to cheap fuel, have accepted higher prices.

The European Commission and Germany have pressed the two sides to reach an agreement quickly to end the dispute out of fear it could have an impact on supplies to European consumers as a similar row with Ukraine did last January.

Belarus, compared with Ukraine however, handles only a relatively small amount of Russian gas to Europe, with supplies going mainly to Germany and Poland.

Gazprom and Germany have said they stockpiled enough gas to cover initial shortages, but Gazprom has warned there might be problems if Belarus bit heavily into transit volumes.

The gas row has reflected on other industries in the past weeks, with Moscow slapping an export duty on crude oil exports to Belarus, thus threatening to undermine the neighbor's

economy by cutting profits of Belarus' state refineries.

Belarus state oil firm Belneftekhim said on Saturday it had scrapped all 2007 deals with Russian firms on imports of around 400,000 barrels per day of oil as those deals were loss-making.

Russian President Vladimir Putin had said Moscow was losing billions of dollars every year by allowing oil firms to send oil to Belarus's refineries, which were then re-exporting refined products to European markets.

(Additional reporting by Dmitry Zhdannikov and Dmitry Solovyov in Moscow)

Source:

http://today.reuters.com/news/articlenews.aspx?type=worldNews&storyID=2006-12-30T210321Z_01_L30849731_RTRUKOC_0_US-RUSSIA-BELARUS-GAS.xml&WTmodLoc=IntNewsHome_C2_worldNews-2