BELARUS NEWS AND ANALYSIS

DATE:

06/12/2007

Gazprom seeks 60 pct Belarus gas price hike-source

By Andrei Makhovsky

MINSK, Dec 6 (Reuters) - Russia wants to raise gas prices for Belarus by 60 percent in 2008, which Minsk considers too high, a source close to the government of Belarus said on Thursday, a week before Russian President Vladimir Putin visits.

The source said Russia's gas export monopoly Gazprom was seeking a price of $160 per 1,000 cubic metres following an increase in global energy prices, up from $100 now, the lowest price Gazprom charges its foreign customers.

Putin is due in Minsk late next week and talks with President Alexander Lukashenko are likely to focus on gas.

Analysts and market players follow closely energy disputes between Moscow and Minsk, as Belarus accounts for 20 percent of Russian gas transit to Europe, while the rest is shipped via Ukraine. Russia covers one quarter of Europe's gas needs.

"We (government of Belarus) have suggested $119.5... As far as I know, Gazprom is proposing over $160," said the source, one day after Belarus' first deputy Prime Minister Vladimir Semashko returned from Moscow.

Gazprom (GAZP.MM: Quote, Profile, Research) is seeking to switch to market prices with the former Soviet Union countries after having supplied them with cheap gas for almost 15 years.

Russian critics say Moscow often uses gas as a political weapon against unfriendly neighbours.

Two years ago, Gazprom's gas pricing dispute with Ukraine resulted in a brief cut in supplies to the continent, causing outrage in the European Union.

Things look smoother with Ukraine this winter after Gazprom agreed this week with Kiev to raise the price of gas next year to $179.5 from the previous $130.

By comparison, Gazprom charges European clients over $250 and the price is expected to rise to $350 next year.

Prices for Minsk stood at below $50 in 2006 and Gazprom's intention to raise prices at the start of this year to $100 was long severely opposed by Lukashenko.

The deal was signed hours before the New Year, but the dispute escalated to oil in the first days of January 2007, causing a several-day closure of the Russian pipeline to Germany and Poland, running via the territory of Belarus.

On Wednesday, Gazprom said Semashko had confirmed Belarus's intention to stick to a 2006 gas pricing deal, under which prices change under a formula pegged to global energy prices. (Reporting by Andrei Makhovsky, writing by Dmitry Zhdannikov; editing by Douglas Busvine)

Source:

http://uk.reuters.com/article/oilRpt/idUKL067919620071206