BELARUS NEWS AND ANALYSIS

DATE:

24/07/2007

Belarus asks Russia for more time to pay gas debt

MINSK/MOSCOW, July 24 (Reuters) - Belarus asked Russia on Tuesday for more time to pay a $500 million gas bill, even though economists and officials reckon Minsk has enough cash on hand to cover the cost of dearer energy imports.

Belarus, a key transit state for pipeline supplies of Russian oil and gas to Europe, missed a deadline on Monday to settle debts run up since Gazprom more than doubled prices at the start of the year.

A team led by Belarussian Energy Minister Alexander Ozerets held a second day of crisis talks at the Russian gas monopoly's headquarters in Moscow. The discussions adjourned without result and will continue on Wednesday in Minsk, Gazprom said.

"We are asking for a delay ... We will obviously have to pay a fine, which is also currently being discussed," Andrei Zhukov, a spokesman for Ozerets, told Reuters.

The dispute serves as a reminder to Europe of how vulnerable its supplies of Russian energy are, after a clash between Moscow and Minsk shut down pipeline deliveries of Russian crude to Poland and Germany for three days in January.

That row was eventually resolved on terms that Belarus' long-serving president and -- until recently -- pro-Moscow loyalist, Alexander Lukashenko, has since fiercely criticised.

Lukashenko has fired the head of the KGB security service and on Monday replaced the bosses of state energy firms, vowing to restore "iron order" over an industry whose profits have slumped since its supplies of duty-free Russian crude were cut.

CAN'T PAY? WON'T PAY

Economists say, however, that Belarus can afford to pay the full price of $100 per 1,000 cubic metres of Russian gas in force since the start of this year -- up from the old price of $46 that was heavily subsidised by Moscow.

Belarus has signed to import 21.5 billion cubic metres of gas from Russia this year, including 10 bcm in the first half.

Its economy continues to grow quickly, by 8.6 percent in the first half of the year according to official data. Foreign debt is low and currency reserves, while scanty, have actually risen even as the gas debt has mounted.

"Gazprom has again found out what it's like to do business, Belarussian style," said Yaroslav Romanchuk, head of research at the Mizes Fund in Minsk. "You have to pretend to be poor, sick and unfortunate -- and at the end of the day wangle some kind of advantage."

The central bank's reserves at the last count stood at nearly $3 billion, double year-ago levels. Of that, $625 million came from Gazprom when it paid for 12.5 percent stake in state gas pipeline firm Beltransgas.

"This is the behaviour of a poor relation who is pretending to be poorer than he really is to get some kind of present," said Leonid Zaiko, who heads the Strategia think tank in Minsk.

For now, a full-blown crisis appears unlikely, with Belarus playing for time and Gazprom reluctant to pick a fight while its chief executive, Alexei Miller, is undergoing hospital treatment for a kidney ailment.

"There really is no catastrophe and we do have money after all," said one Belarussian official, who requested anonymity. "The problem is that paying a sum of this size in one go is quite painful for us." (Additional reporting by Dmitry Zhdannikov in Moscow)

Source:

http://asia.news.yahoo.com/070724/3/359k1.html