Belarus offers Russia pipe stake for lower natural gas prices

Belarus President Alexander Lukashenko late Thursday said he was prepared to offer a controlling stake in the country's gas pipeline company Beltransgaz to Russia in exchange for natural gas at Russian domestic prices. He would also consider selling stakes in the country's oil refineries to Russia in exchange for duty-free oil imports, as reported by Russia's RIA Novosti news agency. "I would not mind if the Russians...would provide Belarus with gas at domestic Russian prices in exchange for a controlling stake in Beltransgaz," Lukashenko was quoted as saying to students in the Belarusian city of Mogilev. Russian energy minister Sergei Shmatko said the same day that Russia was interested in the proposal but it requires "serious negotiations," according to RIA Novosti. At the same time, Russia's Kommersant daily said the parties could discuss the issue as soon as Friday. "[The] prime ministers of Russia and Belarus will meet late Friday in St Petersburg within a meeting on the Customs Union [and] will be able to discuss everything," Kommersant quoted Russian prime minister Vladimir Putin's spokesman as saying. Russia's gas giant Gazprom, which already owns a 50% stake in Beltransgaz, declined to comment when contacted. According to a contract signed between Belarus and Russia in December 2006, Belarus is contracted to pay 90% of the full European market price for Russian gas in 2010 and by 2011 pay the European market price. However, to date Belarus has kept prices at 2009 levels, paying $150/1,000 cubic meter. According to Gazprom, Belarus owed the Russian gas monopoly $192 million as of May 1. Gazprom completed the purchase of a 50% stake in Beltransgaz in February. In a deal signed in 2007, Gazprom bought the stake for $2.5 billion payable in four equal cash payments over four years. Gazprom supplies Belarus' domestic market with over 21 billion cubic meters/year of natural gas and sends around 50 Bcm/year to Europe via Belarus. OIL REFINERIES Lukashenko also noted late Thursday that Belarus was ready to sell stakes in its refineries but would not "give [them] away." "Cheap oil, good terms. We don't mind, but for a good price," Russia's Itar-Tass news agency quoted Lukashenko as saying in Mogilev. Belarus currently imports 25 million mt/year of Russian oil, Lukashenko said. Under a recent agreement, Belarus pays full export taxes on all Russian oil except for the 6.3 million mt/year it consumes domestically and therefore receives duty-free. Minsk and Moscow signed the deal in January, ending a standoff between the two countries that nearly led to a halt in supplies to the three Belarusian refineries which traditionally depend on Russian crude. Despite the agreement, Belarus has continued to fight to abolish the oil export duty it pays Russia in view of the anticipated Customs Union framework between the two countries and Kazakhstan. The united economic territory within the Customs Union between Russia, Belarus and Kazakhstan is expected to be functional from July, but supplies of gas, oil and products are supposed to be dealt with separately. Lukashenko Thursday reiterated that the current terms had made Russian oil refining unprofitable and had forced him to look to crude oil supplies from Venezuela. In March, Lukashenko and Venezuela's president Hugo Chavez agreed on supplies of 80,000 b/d of Venezuelan oil to Belarus, in a deal Chavez said was based on "socialist principles." The oil is to be refined in Belarus and sold in European markets. While Venezuela and Belarus jointly produce 20,000 b/d in Venezuela, Chavez did not say from where the additional 60,000 b/d to be sold to Belarus will come. --Jake Rudnitsky,


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