Kremlin reduces gas to Belarus over payment row

MOSCOW (AFP) - Russia reduced natural gas supplies to Belarus on Monday after Minsk failed to settle arrears, brandishing again the country's energy clout and raising the spectre of supply disruption to Europe.

President Dmitry Medvedev told the chief of Russian gas giant Gazprom, Alexei Miller, to close the tap on Russian gas supplies after Belarus failed to settle nearly 200 million dollars (160 million euros) in debt.

Belarus transports about 20 percent of Russia's western-bound gas exports but Gazprom has insisted the cut would not affect its European clients.

"The debt has not been paid," Miller said in televised remarks.

"From 10:00 am Moscow time (0600 GMT) on June 21, 2010, we are introducing a regime of limiting supplies of Russian gas to Belarus by 15 percent of the planned daily volume."

Miller said talks were continuing but that the gas cuts would be increased to 85 percent in the coming days if a solution to the conflict is not found.

The European Union closely watches gas disputes between Russia and its ex-Soviet neighbours after a row between Moscow and Kiev led to supplies of Russian gas to Europe via Ukraine being cut off for two weeks early last year.

That dispute remains firmly etched in the minds of European policy makers as it left several EU countries deprived of gas during a freezing winter.

Earlier Monday, Medvedev told Miller to start getting ready to limit gas supplies to Belarus after the Gazprom chief said Belarus, which is heavily dependent on Russian subsidies, had failed to come up with money and instead was offering equipment and machinery to cover the debt.

In a humiliating broadside at Belarus's maverick leader Alexander Lukashenko, Medvedev said he should come up with hard cash -- and not goods -- to pay the bill.

"Gazprom cannot accept anything towards the payment of the debt, neither pies nor butter not cheese nor other means of payment," Medvedev said.

He said in televised remarks Gazprom should continue talks with its Belarussian partner but start getting ready to reduce gas supplies.

Miller said gas supplies would be cut "gradually, day by day, proportionally to the volume of the debt."

Gazprom said last week Belarus owed it 192 million dollars in unpaid debts and gas exports would be reduced by 85 percent if the debt was not settled.

Belarus in turn accused Gazprom of owing it some 200 million dollars for gas transit to Europe.

Gazprom says Belarus unilaterally chose to pay for gas supplies at last year's prices and last week gave Minsk five days to pay off the debt.

Lukashenko, who was once seen as a unstintingly loyal ally of Moscow, says Belarus should pay less for oil and gas if the two countries are serious about ramping up economic cooperation.

He has irritated Moscow by dropping his dependable loyalty to Russia in favour of a quest for closer ties with the European Union. He also raised eyebrows by offering sanctuary to deposed Kyrgyz president Kurmanbek Bakiyev.

Russia and Belarus have been building a single customs bloc but Lukashenko stayed away from a key meeting last month, forcing Russia and Kazakhstan to launch the customs union without Belarus.


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