Russia set to charge European rates for Belarus gas deliveries

In Short:

Belarus is facing a steep price hike on Russian natural gas - and analysts say this could hit the country's economy hard.

Brief News:

Effective 2007, Russia's natural gas giant Gazprom intends to raise gas delivery prices for Belarus to European levels. This, according to analysts, could mean a two-to-five-fold price increase. The final price is believed to depend on Gazprom's planned acquisition of a 50% stake in Beltransgas, the Belarusian company that exports Russian gas to Western Europe.

The announcement came days after the controversial re-election of Alexander Lukashenka as president of Belarus.

Belarus is the only former Soviet nation to have avoided a gas price increase. Based on a 2004 agreement, in 2006 Moscow delivers 21 billion cubic metres of natural gas to Belarus at a rate of 46.68 US dollars per 1,000 cubic metres. The gas price in Western Europe currently averages 235 US dollars per 1,000 cubic metres.

Under an agreement reached by the two countries' energy authorities, Belarus is expected to present its proposals for the terms of a new deal by 30 April.

Analysts say that the looming price hike would cripple the command economy of Belarus, which strongly relies on cheap Russian natural gas.

Gazprom is the world's largest exporter of natural gas, supplying some 25% of Europe's gas consumption.