Belarus threatens to siphon off European customers' gas

President Medvedev has ordered Russia's state-owned gas producer to cut supplies to Belarus after Minsk failed to pay its debt. In response, Belarus is threatening to start siphoning off gas from the transit pipeline.

According to spokesman Sergey Kupriyanov, Gazprom has received a corresponding letter from Belarus' first deputy prime minister Vladimir Semashko. The letter does not yet contain "any concrete suggestions on paying off Belarus' debt," Kupriyanov added.

Earlier Belarus promised to pay up in two weeks. Moscow keeps insisting that Belarus pays off the debt as soon as possible.

"Nobody will wait for two weeks," Sergey Kupriyanov said.

The May payment deadline is June 23.

On Monday, the two sides met in Moscow in an attempt to reach an agreement. Belarus recognized its $200 million debt, but refused to repay the sum in cash, instead offering payment in machinery, equipment and other commodities.

The Russian president said such an offer was unacceptable and that a conventional payment must be made.

The cut started with a 15% reduction and will be raised to an 85% decrease in the supply volume. It currently sits at 30%.

"Belarus has taken no actions to clear the debt, so the company introduced restrictions starting 10:00 Moscow time [Tuesday], to 30% of daily supplies with further restrictions, in accordance with the outstanding debt," Gazprom CEO Aleksey Miller told Rossiya 24 news channel.

Aleksey Miller said that 15 per cent will enable Belarus to keep its gas pipeline network in a working condition until the debt is paid off.

Moscow says the restrictions will not affect its European consumers, as Gazprom has a reserve plan under which greater volumes of fuel may be pumped through Ukrainian territory.

Russian Prime Minister Vladimir Putin expressed hope that supplies to European countries will not have to be re-routed.

"Technically, Belarus would be able to siphon off the gas transited through its territory. In this case we are able to re-route these streams to other hubs, including Ukraine. But I hope we won't have to resort to that," Putin said.

Sergey Kupriyanov noted that the debt may increase rapidly, as Belarus pays just $150 per 1,000 cubic meters, while the contract price is $184. With the monthly export totaling around 1.4 billion cubic meters, the debt may reach $260-270 million by the end of June.

Belarus has also mentioned that Gazprom in turn owes it a comparable sum.

Gazprom's debt to Belarus for gas transit to Europe was created artificially because Belarus has not signed the gas transit act, Sergey Kupriyanov said on Monday.

"Yes, there is a debt. Belarus is not signing a document about completed work and this prevents us from paying off this debt," Kupriyanov admitted, adding that the debt itself is about $192 million.

Dmitry Aleksandrov from the Univer Investment Group says this dispute is unlikely to harm ties between Russia and the European Union.

''This dispute over the payment for gas will not affect relations between Moscow and Brussels. There is a stand-off towards Minsk from the European Union. Aleksandr Lukashenko failed to bring Belarus closer to the EU and this, to some extent, gives Moscow carte blanche to act strongly. Possibly, it's the reason the situation has become so tense,'' Dmitry Aleksandrov says.


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