A new round of Russia-Belarus row over gas debts

Russia has cut its daily gas supplies to Belarus by 15 percent as of Monday, June 21. This new move taken in the Russia-Belarus row over gas debts is focused on the price of liquefied natural gas (LNG) and the related debt payments. In face of gas reduction measures imposed by the Russian side, Belarus has promised to settle the debts within two weeks. Media comments, however, say the feud between Moscow and Minsk will negatively impact the economic integration of Russia and Belarus.

Analysts here acknowledge that Europe will not suffer much as its demand is low. Russia cut back its gas supply to Belarus over the unpaid debts, raising fears of the disruption of European supplies: The capacity to reroute the European Union will nevertheless be less severe due to lower summer time needs. Meanwhile, the LNG supplies also have reduced demand for Russian pipeline gas. But the latest move would complicate the economic and trade ties between the two countries.

"Belarus plans to settle its gas debts with Russia within the next two weeks," First Deputy Prime Minister Vladimir Semashko said in a statement on Monday.

Russian President Dmitry Medvedev has ordered his country's gas monopoly Gazprom to begin cutting gas flow to Belarus, said Alexei Miller, the chief of the Russian gas giant Gasport, on Monday.

Medvedev met early Monday with Alexei Miller, who reported to the Russian President that Belarus refused to pay some 200 million US dollars owned to Russian over the gas supplies. As much as 85 percent of Russia's daily shipments to the neighbor may be halted. Miller also said that Belarus admitted having the debt and suggested repaying it by means of barter trade but the talks ended in failure.

Last week, President Medvedev warned Belarus that unless it pays off its debt for Russian gas within five days it will face cuts. He urged the national gas monopoly Gazprom to continue talks with Minsk and compel it to fulfill the Russia-Belarus contract.

"Belarus recognized the gas debt but offers to pay it back with machines, equipment and other commodities," Alexei Miller told President Medvedev after the talks, adding that Medvedev asked Gazprom to continue its talks with Minsk and the gas cut will be "gradual and proportional to the volume of debt.

Russia nevertheless does not rule out the possibility of legal action against Belarus over gas debts. President Medvedev said that stern measures will have to be taken if the debt is not paid off.

Belarus has its own reasons for explanation. During the course of talks with the Russian oil firm, Belorussia said that the Russian oil monopoly Gazprom owned to it more than 200 million US dollars for gas transit to Europe, but Gazprom rejected.

Moreover, Belarus, a country that enjoys close relations with Russia, has since the year 2000 contributed immensely to Russia's economic development, national defense and other fields, Belarusian President Alexander Lukashenko reminded his Russian friends. He also referred to a deal agreed early this year between Russian and Ukraine, where Moscow gave Kiev a 30 percent discount on gas price for Ukraine.

The flow of Russia gas to Europe via Belorussia was not immediately interrupted after the reduction, the Belarusian energy ministry noted. Meanwhile, Russian Prime Minister Vladimir Putin weighed it on the energy feud later Monday, calling Gazprom's moves "absolutely justified" and saying that gas supplies to Europe may be sent via Ukraine: However, analysts holds that the row dealt a heavy blow to prolonged efforts made by Russia for the Russian-Belarusian economic integration.

Belarus is expected to sign the documents for the Customs Union with Russia and Kazakhstan if Moscow cancels petroleum production duties now and oil duties from January 2011, said Belarusian President Lukashenko of late.

The Customs Union between Russia, Belarus and Kazakhstan formally came into existence on 1 January, 2010, but was unable to start working fully until disputes are resolved and the customs code comes into effect. The Customs Union is unable to start working fully unless the Russia-Belorussia dispute over the LNG debts are resolved and the customs code comes into effect. The current LNG debt crisis will undoubtedly add fresh variables to the Customs Union now underway.

By People's Daily Online and contributed by PD Tan Wujun


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