Russia hopeful of settling Belarus gas dispute

By Dmitry Sergeyev

ST PETERSBURG, Russia, June 19 (Reuters) - Russia said on Saturday it was hopeful of settling a gas dispute with Belarus that threatens to cut some supplies to Europe next week, but signalled it was not ready to compromise on price.

Europe pays close attention to Russia's gas price disputes with its neighbours after supplies to Europe were halted for almost two weeks in January 2009 while Moscow and Ukraine argued over prices and transit terms.

Russia has said it will cut 85 percent of gas supplies to Belarus from Monday if its ex-Soviet neighbour fails to pay $192 million it says it owes to Gazprom (GAZP.MM). Minsk disputes this year's price increases and says it owes nothing.

The two parties are due to meet on Saturday in a last-minute attempt to reach a deal.

"I think there is a big chance of a peaceful resolution and of the fulfilment of the contract conditions which were envisaged," Russia's Energy Minister Sergei Shmatko told reporters on the sidelines of the St Petersburg Economic Forum.

Any cuts, especially if they affect supply beyond Belarus, could further damage Russia's reputation as a reliable exporter at a time when Gazprom is facing falling demand from crisis-hit Europe and competition from U.S.-made shale gas.

The state-controlled behemoth supplies a quarter of Europe's gas needs and sends one-fifth of its total exports to the region -- expected to reach 160 billion cubic metres this year -- through Belarus, while the rest go through Ukraine.

Gas-hungry Poland, which is trying to secure additional volumes from Gazprom, receives about 8 billion cubic metres of Russian gas through Belarus.


Russian officials have said supply cuts to Belarus should not affect the rest of Europe. One option would be to compensate by shipping more through Ukraine.

Gazprom's export chief, Alexander Medvedev, told Reuters he saw a good chance of a resolution to the conflict.

Belarus President Alexander Lukashenko said on Friday he did not believe his country had any debts outstanding for Russian gas, for which it has asked to pay last year's lower prices, but would settle any disagreement over the issue.

Gazprom says Belarus has been paying $150 per 1,000 cubic metres of gas this year, instead of the $169.20 that Gazprom charged in the first quarter and $184.80 in the second, and could owe more than $500 million by the end of the year.

Analysts say low gas prices have been vital to sustaining President Alexander Lukashenko in power in Belarus, which the European Union and United States have long shunned, accusing Lukashenko of running unfair elections and suppressing dissent.

The dispute over energy prices has damaged relations between Moscow and Minsk and have cast a shadow over Russia's drive to create a customs union with Belarus and Kazakhstan.

Belarus hoped the union would free it from export duties on Russian oil but Moscow has refused to scrap the levies. As a result, the union appears set to go ahead without Belarus. (Reporting by Dmitry Sergeyev; writing by Vladimir Soldatkin; editing by Andrew Dobbie)


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