Interrelated disputes over gas prices and transit fees have turned Gazprom into a net debtor to Belarus. As of mid-June, Gazprom's net debt to Belarus reached $260 million in unpaid transit fees since November 2009.
Gazprom itself acknowledged $228 million from this amount. Also by mid-June, Minsk's debt to Gazprom reached $192 million in arrears for deliveries of Russian gas in the same period. The Belarusian government acknowledged $187 million from this amount.
With each side seeking to collect the debt from the other, net debtor Gazprom initiated hostilities. After a series of public warnings by its top management during the third week of June, Gazprom started reducing gas deliveries at the Russia-Belarus border. The cuts amounted to 15 percent of the contracted by June 21, another 15 percent by June 22, and an additional 30 percent by June 23, for a total reduction of 60 percent of the contracted volume (Interfax, Belapan, June 21- 24).
The cuts threatened consumers in Belarus as well as the EU countries Lithuania, Poland, and Germany, which import Russian gas via Belarus. Lithuania and Poland began feeling the pinch before it reached Germany farther downstream.
On June 23 Belarus borrowed (from sources yet to be disclosed) $200 million, from which it transferred $187 million to Gazprom. The Russian side restored the full flow of gas deliveries to Belarus, and to EU countries via Belarus and on June 24.
Minsk, however, insisted on its due. First Deputy Prime Minister, Uladzimir Syamashka, demanded that Gazprom pay its debt the next day, failing which, Belarus would stop the transit of Russian gas to European countries.
On June 24, Gazprom nearly complied. It transferred $228 million to the Belarusian energy ministry, sticking however to its own interpretation of the amount it owed (Interfax, Belapan, June 24).
Minsk's interpretation of the debt figure reflects its claims to Russian fees for gas transit service, based on the letter of agreements signed in November 2009 with Gazprom. Under those agreements, Gazprom should have paid transit fees of $1.74 per thousand cubic meters (tcm) of Russian gas per one hundred kilometers of Beltranshaz pipelines in November-December 2009, and $1.88 per tcm for each hundred kilometers from January 2010 onward.
For its part, Moscow claims that Belarus is only entitled to a transit fee of $1.45 per tcm for every hundred kilometers of Beltranshaz pipelines. Such a low transit fee, however, was tied to the similarly "brotherly" price of $150 per tcm of Russian gas supplied to Belarus for internal consumption, in accordance with the December 2006 contract.
That price, however, rose as scheduled to $184 per tcm in the second quarter of 2010, and is scheduled to increase to $193.5 per tcm in the third quarter of 2010. The price increases are tied to the agreed increases in the transit fees under the same agreement.
Moscow introduced a further condition with the 2008 agreement on a partial takeover of Beltranshaz by Gazprom. It demanded that Beltranshaz add a mark-up to the price of gas supplied to Belarus consumers, by the equivalent of $10 per tcm in 2009 and the equivalent of $11 in 2010. The Belarusian side has not added these markups and the matter remains in suspension as a commercial dispute.
The Russian government does not seem to feel confident about its case in this dispute. Following Gazprom's June 21-23 supply cuts, the government seemed more concerned about Gazprom's reputation in Europe than Gazprom itself. Energy Minister, Sergei Shmatko, went out of his way to signal that "it would be inappropriate to describe the situation as critical. Our traditional customers in Europe are not raising the alarm, and we can go to spot markets to buy the necessary volumes [for offsetting the shortfall in supplies to Europe via Belarus]." In a similar vein, Foreign Minister, Sergei Lavrov, assured his counterpart German and Polish ministers, Guido Westerwelle and Radoslaw Sikorski, that Russia would promptly settle this dispute with Belarus (Interfax, RIA Novosti, June 23).
Gazprom CEO, Aleksei Miller, began issuing dire warnings that Belarus was siphoning off gas volumes destined to EU countries from the Beltranshaz pipelines (NTV, June 23). These warnings resembled Gazprom's political offensives against Ukraine in the January 2006 and January 2009 gas supply cutoffs by Russia. This time, however, the Russian government and its propaganda apparatus did not support Miller's allegations.