Gazprom Chief: Belarus Must Pay Euro Rates

By ALEX NICHOLSON, AP Business Writer Thu Mar 30, 12:06 PM ET

MOSCOW - Russia's natural-gas monopoly OAO Gazprom said Thursday that Belarus must pay European rates for its gas - an apparent bargaining ploy to win control over its neighbor's gas pipeline system and one that could stir trouble between the allies.

Gazprom said in a statement that its Chief Executive Alexei Miller had told the Belarusian energy minister and the head of its state gas company at a meeting in Moscow that Russian gas "must be supplied at prices equivalent to the European level."

Oil and gas analyst Oleg Maximov with the Troika Dialog investment bank in Moscow called Gazprom's stance a "bargaining chip" to acquire control over Belarusian pipeline operator Beltransgaz, which also carries Russian gas to lucrative Western markets.

"It's a political question. At the end of the day it will be decided between the two presidents at the political level," Maximov said.

Toward the end of last year, Russia renegotiated its gas contracts with its neighbors - bringing them closer to European prices, which have soared in line with record oil prices.

Meanwhile Belarus, which has close ties to Moscow, was allowed to keep an old 2004 contract in place. Its hardline president Alexander Lukashenko was re-elected with a landslide majority this month in an election international observers have called flawed.

A February 2004 dispute over gas prices saw Gazprom halt supplies to Belarus - a step Lukashenko called "terrorism" at the time. That dispute was diffused after Belarus agreed to raise the price it pays from $30 to the current rate. Gazprom is due to deliver 21 billion cubic meters of gas to Belarus this year.