BELARUS NEWS AND ANALYSIS

DATE:

02/01/2007

Last-minute gas deal averts crisis in Belarus

AP, MOSCOW

Belarus and Russia's natural gas monopoly signed a five-year contract for gas supplies early yesterday, just hours before Russia had threatened to cut off supplies in a price dispute.

Under the agreement, Belarus will pay US$100 per 1,000m3 this year -- a reduction from the US$105 that Gazprom had demanded, according to Gazprom spokesman Sergei Kupriyanov. That is slightly more than double the US$47 Belarus paid last year.

The agreement came after days of increasingly heated discussions that culminated in a session lasting until nearly midnight on Sunday.

"There was a tense atmosphere among the Belarusian delegation since we have agreed to and signed a contract whose conditions for the delivery of gas are not at all favorable," Belarusian Prime Minister Sergei Sidorsky said at a news conference at Gazprom's headquarters.

It was not immediately clear why Gazprom agreed to the lower price for this year. But the contract locks Belarus into agreeing to pay increasing prices over the subsequent four years of the agreement.

The agreement also calls for Gazprom to purchase 50 percent of the shares in Beltransgaz, the Belarusian pipeline network, Kupriyanov said. Gazprom initially had stipulated that Belarus pay US$30 of the new price in Beltransgaz shares, but under the new contract Belarus will pay for all the gas in cash and Gazprom will buy the pipeline shares in cash.

The threatened Russian cutoff had raised concerns in Western Europe about a possible reduction in those countries supplies of Russian gas, much of which reaches Europe through pipelines that cross Belarus.

A similar dispute between Russia and Ukraine early last year resulted in temporary reductions of supplies to Western Europe and raised wide concern about Russia's reliability as an energy partner.

That dispute also brought criticism of Russia for allegedly using its natural resources wealth as a political weapon. But unlike Ukraine, whose president has annoyed the Kremlin by trying to tilt his country Westward, Belarus has had close relations with Russia.

Although the price demanded by Gazprom is well below world market prices for natural gas, it still is likely to be a tough blow to Belarus. The country retains a mostly centralized, Soviet-style economy, and its industries have depended on cheap Russian gas to be competitive.

Subsequent years of the contract are likely to be even tougher. Russia long provided gas to ex-Soviet republics much cheaper than world market prices, but the contract with Belarus locks that country into an obligation to pay gradually increasing prices that will be commensurate with the world market by 2011.

The EU and Germany, which receive some of their Russian gas via Belarus, had urged the neighbors to resolve their dispute quickly and guarantee supplies. Europe is wary of a repeat of the brief supply shortages that ensued when Gazprom halted deliveries to Ukraine during a similar dispute a year ago.

Source:

http://www.taipeitimes.com/News/worldbiz/archives/2007/01/02/2003343087