BELARUS NEWS AND ANALYSIS

DATE:

02/01/2007

Belarusian official says Russian gas price hike is manageable, urges rethink of oil duty

The Associated Press

MINSK, Belarus: A price increase for Russian natural gas will be painful, but manageable, a Belarusian official said Tuesday, and urged Moscow to scrap a new customs duty on oil exports to Belarus.

First Deputy Prime Minister Vladimir Semashko suggested Moscow's energy price hikes could damage relations between the neighboring former Soviet republics, saying that "from love to hate is just one step."

"The rise in energy prices for Belarus is a difficult test for the economy," Semashko said at a news conference, two days after his government averted a threatened gas cutoff by agreeing to pay the Russian state gas monopoly OAO Gazprom more than twice the 2006 price this year and even more in the future.

He said the gas price increase - from US$47 (?35) to US$100 (?75) - would likely nearly double the price Belarusian enterprises pay, but that the increase could be managed and would not lead to significant hikes in utilities costs for individuals.

"I think this is all manageable," he said.

Semashko stressed, however, that Belarus wanted Russia to reverse its decision to charge a customs duty of US$180 (?135) per metric ton of oil exported to Belarus as of Jan. 1, claiming it was imposed as a pressure tactic during the dispute over gas prices.

"The customs duty on oil must be removed," he said, adding that he expected the issue to be resolved favorably by Jan. 15 through talks with Russian officials. "Common sense and economic interests will win out," Semashko said.

Belarus has halted imports of Russian oil, saying the duty would end up being passed by Russian exporters to Belarus through price increases - depriving the Belarusian government of profits it has reaped by exporting oil products made from cheap Russian oil.

Two large Belarusian refineries are operating on reserves, and Semashko indicated it would hurt Belarus if they stopped operations altogether.

"Shutting down the refineries means shutting down a large number of enterprises with tens and even hundreds of thousands of jobs," he said.

Russian officials have said little about the issue and could not be reached for comment Tuesday, during more than a weeklong New Year's holiday. Semashko had said he hoped a resolution of the gas price dispute would help the sides address the oil customs duty.

Belarus is offering to share the income from oil sales if Russia scraps the customs duty, and Semashko said that Minsk was willing to discuss a 50-50 split. Earlier, the government had offered Russia only a 15 percent share.

Oil resale profits and the gas Belarus bought from Russian at bargain prices until Monday helped authoritarian President Alexander Lukashenko keep the country's Soviet-style, largely centrally planned economy running and, as a result, maintain his popularity and grip on power.

Belarus is a key Russian military ally and buffer against NATO, and the nations agreed a decade ago to form a close union. But the recent energy pressure suggests President Vladimir Putin's Kremlin is growing tired of supporting Lukashenko, who has resisted efforts to grant Moscow more control over his country's economy.

Source:

http://www.iht.com/articles/ap/2007/01/02/business/EU_FIN_Belarus_Russia_Gas_War.php