BELARUS NEWS AND ANALYSIS

DATE:

23/05/2008

Russia may trim gas price, lend money to Belarus

By Denis Dyomkin

MOSCOW, May 23 (Reuters) - Russia could keep low gas prices for Belarus and lend low interest money if the former Soviet neighbour agrees to share more assets with Russian investors, a Russian government source said late on Thursday.

Gas pricing talks between Moscow and Minsk are closely watched in Europe, which gets a quater of its gas from Russia. A fifth of Russian supplies goes in transit via Belarus and one dispute has led to export disruptions a few years ago.

The issue is likely to be discussed on Friday, when Russian Prime Minister Vladimir Putin travels to Minsk to take part in a prime ministers meeting of the former Soviet countries.

Belarus, which enjoys the lowest price for Russian gas among foreign customers, is worried that the price may go up faster than expected following a further surge in oil prices, which hit another record over $135 per barrel this week.

"We understand that they are worried by oil price growth. We in Russia are worried too. But this is global trend and we must get ready for it," the source said.

After a gas pricing dispute with Russia in 2006, Belarus agreed with gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research) it will gradually switch to market prices by 2011, which would equal European prices minus transportation costs and taxes.

Russia plans to apply the same formula on its own territory from the same year, although some government officials have said the recent jump in global prices made the move impossible as it would badly hurt Russian industry.

European gas prices track refined oil products prices with a lag of six to nine months.

Russia is selling gas to Belarus at $128 per 1,000 cubic metres in the second quarter of 2008, up from $119 in the first quarter. Gazprom says it sells gas in Europe at around $400.

Belarussian president Alexander Lukashenko has repeatedly criticised Moscow for steep gas price rises from below $50 in 2006 as it pushed inflation up and hurt economic growth.

TRUCK PLANT

Last year, Russia agreed to lend Belarus $1.5 billion for 15 years at 0.75 percent over Libor to compensate for the gas price rise and Minsk said it wanted to borrow another $2 billion.

The source said Russia may disburse more money if Minsk agreed on certain conditions.

"It is important for us that the credit serves a goal of our economic integration."

"Let's take trucks and agricultural engineering as an example. Both Russia and Belarus have giant plants in these sectors and each of us is now trying to separately enter global markets," said the source, who requested anonymity.

"If we join our efforts, we will have good chances to become a key player on the global market."

Belarus wants to privatise a number of state firms including large truck producer, Minsk automobile plant. Russian truck producer Kamaz (KMAZ.MM: Quote, Profile, Research) and aluminium magnate Oleg Deripaska have expressed interest in the plant.

Russian firms also want to control Belarussian petrocheminal and refining plants. (Writing by Tanya Mosolova)

Source:

http://uk.reuters.com/article/oilRpt/idUKL2345668820080523

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