BELARUS NEWS AND ANALYSIS

DATE:

18/05/2007

Belarus, Russia put gas transit deal on hold

(MINSK) - Belarus and Russia said they would not sign on Friday as planned a critical gas transit deal forged to avert export disruptions.

The decision underscores the dependence of Europe on energy supply arrangements in the former Soviet Union over which it has little control.

"Negotiations are continuing today and we will announce when the signature will take place depending on the result" of the talks, Belarus government spokesman Alexander Timoshenko told AFP.

A spokesman for Russian state-run gas behemoth Gazprom confirmed that the signature of the deal had been postponed.

"The signing of the Beltransgaz buy-sell share agreement will not take place on May 18 but later," Gazprom spokesman Sergei Kupriyanov said.

The deal was clinched shortly after a midnight deadline passed last New Year's Eve and only narrowly averted a cutoff of Russian gas supply to Belarus that could have hit deliveries to western Europe.

Kupriyanov downplayed the last-minute hitch and predicted that the agreement, under which Gazprom was to acquire a 50-percent stake in the Beltransgaz, Belarus' gas pipeline monopoly, would be inked no later than June 1.

"As you are aware, we observe an old tradition with our Belarus colleagues -- we agree on the very last details only on the 31st of the month," he said, referring to the deal reached last New Year's Eve.

The Russia-Belarus gas dispute came to a head late last year amid rancorous negotiations over Gazprom's decision announced earlier to increase sharply the price it charged Belarus for natural gas to bring them closer into line with world market rates.

In the end, Belarus agreed to pay 100 dollars per 1,000 cubic meters of natural gas it buys from Russia in 2007, a substantial increase from the hugely-subsidized 45 dollars it had paid until the end of last year.

The deal also spelled out terms for Gazprom to purchase the 50-percent stake in Beltransgaz, and for an approximate doubling of the price Gazprom pays for transit rights to pump gas to European markets through Belarus' territory.

Despite agreeing to the new terms, Belarus made clear within hours that it was not happy with the deal.

"The Belarussian side, in a difficult atmosphere on the eve of the New Year, signed an agreement on unfortunate terms," Belarussian Prime Minister Sergei Sidorsky told journalists in the early hours of January 1 shortly after the gas agreement was reached.

Analysts said the latest snag in the Russia-Belarus gas agreement should be a source of concern to countries in western Europe that rely on Russian gas exports.

"There is reason for Europe to worry," said Yevgeny Volk, an analyst in Moscow with the Heritage Foundation, a consertative US political think tank.

"Europe's dependence on this gas is very high. Any complications in these talks between Russia and Belarus could have an impact on energy shipments to Europe," he said.

News of the delay in the signing of the gas deal came as Russian President Vladimir Putin hosted German Chancellor Angela Merkel and European Commission President Jose Manuel Barroso near the Russian city of Samara for a tense EU-Russian where energy security was among issues expected to be addressed.

Source:

http://www.eubusiness.com/news_live/1179482414.5